As filed with the Securities and Exchange
Commission on ____________, 1999
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN TISSUE INC.
(Exact name of registrant as specified in its charter)
Delaware 2621 22-3601876
(State or other jurisdiction of (Primary S.I.C. (I.R.S. Employer
incorporation or organization) Code Number) Identification No.)
and the additional registrants listed on
Schedules A and B hereto, each a Subsidiary Guarantor
135 Engineers Road
Hauppauge, New York 11788
(516) 435-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
------------------------
Edward I. Stein
Executive Vice President
and Chief Financial Officer
135 Engineers Road
Hauppauge, New York 11788
(516) 435-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
copies to:
Nicholas J. Kaiser, Esq.
Mandel & Resnik P.C.
220 East 42nd Street
New York, New York 10017
(212) 573-0093
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
<PAGE>
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act Registration Statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
PROPOSED PROPOSED
MAXIMUM OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/2% Series B Senior
Secured Notes due 2006 $159,446,100 $966.34 $159,446,100 $44,326.02
- --------------------------------------------------------------------------------------------------------------------------------
Guarantees of 12 1/2%
Series B Senior
Secured Notes due 2006 N/A N/A N/A N/A(2)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of September __, 1999.
(2) The Guarantee by each of the Subsidiary Guarantors of the payment of
principal, premium, if any, and interest on the Notes is being registered
hereby. Pursuant to Rule 457(g), no registration fee is required with
respect to the Guarantees. The Guarantees are not traded separately.
------------------------
The registrants hereby amend this registration statement on such date or dates
as may be necessary to delay its effective date until the registrants shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
State or Other
Jurisdiction of Primary
Name of Registrant as Specified Incorporation or S.I.C. Code I.R.S. Employer
in its Charter Organization No. Identification No.
- ----------------------------------------------------- ------------------ ------------ --------------------
<S> <C> <C> <C>
American Tissue Corporation New York 2679 11-2581696
American Cellulose Mill Corp. New York 2621 14-1662473
American Tissue Mills of New Hampshire, Inc. New York 2621 11-3207742
American Tissue Mills of New York, Inc. New York 2621 11-3237164
American Tissue Mills of Oregon, Inc. New York 2621 11-3128800
American Tissue Mills of Wisconsin, Inc. New York 2621 11-3200361
American Tissue - New Hampshire Electric, Inc. New Hampshire 4911 02-0267018
Berlin Mills Railway, Inc. New Hampshire 6517 38-1906080
Gilpin Realty Corp. New York 6519 11-3307581
Tagsons Papers, Inc. New York 2621 11-3206044
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
State or Other
Jurisdiction of Primary
Name of Registrant as Specified Incorporation or S.I.C. Code I.R.S. Employer
in its Charter Organization No. Identification No.
- ----------------------------------------------------- ------------------ ------------ --------------------
<S> <C> <C> <C>
American Tissue Mills of Greenwich LLC New York 2621 11-3322564
American Tissue Mills of Neenah LLC New York 2621 13-3333241
Calexico Tissue Company LLC New York 2679 11-3358355
Coram Realty LLC New York 6519 11-3351366
Engineers Road LLC New York 6519 11-3301000
Grand LLC New York 6519 11-3078510
Hydro of America LLC Delaware 4911 11-3486634
Landfill of America LLC Delaware 4953 11-3486638
Markwood LLC New York 6519 11-3507579
100 Realty Management LLC New York 6519 11-3373587
Paper of America LLC Delaware 2621 11-3486633
Pulp & Paper of America LLC New York 2621 11-3485021
Pulp of America LLC Delaware 2611 11-3486632
Railway of America LLC Delaware 6517 02-0509929
Saratoga Realty LLC New York 6519 11-3378103
Unique Financing LLC New York 7359 11-3331213
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED _______________, 1999
================================================================================
Prospectus
___________, 1999
American Tissue Inc.
Offer for all outstanding 12 1/2% Series A Senior
Secured Notes due 2006 in exchange for 12 1/2%
Series B Senior Secured Notes Due 2006
The exchange offer will expire at 5:00 p.m., New York City time on _____________
unless extended.
- --------------------------------------------------------------------------------
We will not receive any proceeds from the exchange of these notes.
The Company:
o We are a leading integrated manufacturer of tissue products in North
America, with a comprehensive product line that includes jumbo tissue rolls
for converting and converted tissue products for end-use.
o American Tissue Inc.
135 Engineers Road
Hauppauge, New York 11788
(516) 435-9000
The Exchange Offering:
o Offer for $165,000,000 principal amount of outstanding 12 1/2% Series A
Senior Secured Notes due 2006 in exchange for the same principal amount of
Series B Senior Secured Notes due 2006
o The terms of the exchange notes are identical in all material respects to
the terms of the outstanding old notes, except for certain transfer
restrictions and registration rights pertaining to the old notes.
o This exchange offer will expire at 5 p.m., New York City time on
________________, unless extended.
Proposed Trading Format:
o The PORTAL MARKET or directly with qualified buyers.
Terms of the Exchange Notes:
o Maturity: July 15, 2006
o Interest Payments:
o Fixed annual rate of 12 1/2%
o Paid every six months in cash on January 15 and July 15, commencing
January 15, 2000.
o Guarantees: If we cannot make payments on the exchange notes when due, our
subsidiary guarantors must make them instead.
Redemption:
o We can redeem the exchange notes at any time on or after July 15, 2004.
o Prior to July 15, 2002, we can redeem up to 35% of the exchange notes with
the net proceeds from certain sales of our common equity.
o Holders of the exchange notes may also require us to redeem all or part of
such holders' exchange notes if we experience certain kinds of changes in
the control of our company or if we sell certain of our assets.
Security:
These exchange notes will be secured by:
o A first priority lien on, among other things, all of the paper mill plant
and property (including the Berlin-Gorham Mills) and substantially all of
the equipment, intellectual property and related general intangibles of our
subsidiary guarantors and all of the capital stock and membership interests
of our subsidiary guarantors
o A second priority lien on, among other things, certain of the other real
property, accounts receivable, inventory and related general intangibles of
our subsidiary guarantors.
Ranking:
These exchange notes and the subsidiary guarantees rank:
o Effectively ahead of all of our and our subsidiary guarantors' current and
future senior unsecured indebtedness.
o Effectively behind certain secured indebtedness of our subsidiary
guarantors (including the New Credit Facility) with respect to the assets
securing that indebtedness.
- --------------------------------------------------------------------------------
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 16.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the exchange notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT ARE NOT CONTAINED IN OR
DELIVERED WITH THIS PROSPECTUS. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE
FROM EDWARD I. STEIN, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER AT
AMERICAN TISSUE INC., 135 ENGINEERS ROAD, HAUPPAUGE, NEW YORK 11788, TELEPHONE
NUMBER (516) 435-9000. TO ENSURE TIMELY DELIVERY OF DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY ________________, ______.
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 16
The Exchange Offer........................................................ 28
Use of Proceeds........................................................... 38
Capitalization............................................................ 38
Unaudited Pro Forma Consolidated Financial Data........................... 39
Selected Historical Financial Data........................................ 48
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................... 50
Industry Overview......................................................... 63
Business.................................................................. 66
Management................................................................ 79
Principal Shareholders.................................................... 81
Certain Related Party Transactions........................................ 83
Description of Certain Indebtedness....................................... 86
Description of Exchange Notes............................................. 89
Certain United States Income Tax Considerations........................... 146
Plan of Distribution...................................................... 149
Legal Matters............................................................. 151
Experts ................................................................. 151
Independent Auditors...................................................... 151
Change in Certifying Accountants.......................................... 151
Available Information..................................................... 151
Index to Financial Statements............................................. F-1
MARKET AND INDUSTRY DATA
Market data and certain industry forecasts used throughout this prospectus
were obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified,
and we make no representations as to the accuracy of such information.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus are forward-looking in
nature. The occurrence of the events described, and the achievement of the
intended results, are subject to the future occurrence of many events, some or
all of which are not predictable or within our control. Therefore, actual
results may differ materially from those anticipated in any forward-looking
statements. Many risks and uncertainties are inherent in the paper industry;
others are more specific to our business. Many of the significant risks related
to our business are described in this prospectus, including risks associated
with the cyclical nature of the industry, fluctuation with supply and cost of
raw materials, the highly competitive industry and stringent environmental
regulations.
ii
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following is a summary of the more detailed information appearing
elsewhere in this prospectus. This prospectus includes specific terms of the
exchange offer and exchange notes we are offering, as well as information
regarding our business and detailed financial data. You should read the entire
prospectus, including "Risk Factors" and the financial statements (including all
the notes thereto) included herein.
Unless the context otherwise requires, "we," "our," or "us," as well as
"American Tissue," refer to American Tissue Inc. and all of our consolidated
subsidiaries. References to a "fiscal" year are to our fiscal year, which ends
on September 30 (e.g., "fiscal 1998" means our fiscal year ended September 30,
1998). The "LTM Period" refers to the 12 months ended March 31, 1999. References
to the "Transactions" are to the repayment of certain of our debt, our
acquisition of the Berlin-Gorham Mills and to the financing thereof pursuant to
the recently completed private offering of our 12 1/2% series A senior secured
notes, borrowings under our New Credit Facility and an equity contribution from
our direct parent. References to the "old notes" are to our outstanding 12 1/2%
Series A senior secured notes and references to the "exchange notes" are to our
12 1/2% Series B senior secured notes offered hereby. References to the "Notes"
are to the old notes and the exchange notes collectively.
THE OLD NOTE OFFERING
Old Notes.......................... We sold the old notes in a private
offering to the initial purchaser on July
9, 1999. The initial purchaser informed us
that it promptly resold the old notes to
qualified institutional buyers pursuant to
Rule 144A under the Securities Act.
Registration Rights Agreement...... We and the initial purchaser entered into
a registration rights agreement on July 9,
1999. This agreement grants exchange and
registration rights to holders of the old
notes. This exchange offer is intended to
satisfy these rights, which terminate upon
the consummation of the exchange offer.
THE EXCHANGE OFFER
Securities Offered................. Up to $165,000,000 principal amount of
12 1/2% series B senior secured notes due
2006. The terms of the exchange notes are
substantially identical to the old notes,
except that certain transfer restrictions
and registration rights relating to the
old notes do not apply to the exchange
notes.
The Exchange Offer................. We are offering to exchange the exchange
notes for the old notes. You may tender
your old notes by following the procedures
described in this prospectus under the
heading "The Exchange Offer."
Expiration Date.................... Our exchange offer will expire at 5:00
p.m., New York City time, on ___________,
unless we extend it.
Withdrawal Rights.................. You may withdraw your tender of old notes
at any time prior to the expiration date.
Any old notes not accepted by us for
exchange for any reason will be returned
to you without expense as promptly as
possible.
Conditions of the
Exchange Offer..................... The exchange offer is subject to customary
conditions, which we may waive. Please
read "The Exchange Offer - Conditions to
the Exchange Offer" section of this
prospectus for more information regarding
conditions of the exchange offer.
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<PAGE>
- --------------------------------------------------------------------------------
Procedures for
Tendering Old Notes................ Each holder of old notes wishing to accept
our exchange offer must either:
(a) complete, sign and date the
accompanying letter of transmittal, or
a facsimile thereof, and mail or
otherwise deliver the letter of
transmittal (or a facsimile), together
with your old notes and any other
required documents, to the exchange
agent at the address shown under "The
Exchange Offer - Exchange Agent;" or
(b) in connection with a book-entry
transfer of old notes, arrange for The
Depository Trust Company to transmit
the required information to our
exchange agent.
By tendering your old notes in this
manner, you will be representing, among
other things, that:
o the exchange notes being acquired by
you in the exchange offer are being
acquired in the ordinary course of
your business;
o you are not participating, do not
intend to participate, and have no
arrangement or understanding with any
person to participate, in the
distribution of the exchange notes
issued to you in our exchange offer;
and
o you are not our "affiliate."
Federal Income Tax
Consequences....................... Your exchange of old notes for exchange
notes in accordance with the exchange
offer should not result in any gain or
loss to you for federal income tax
purposes. See the "Certain United States
Tax Considerations" section of this
prospectus.
Consequences of Failure to
Exchange........................... Old notes that are not tendered or that
are tendered, but not accepted, will be
subject to the existing transfer
restrictions on the old notes after the
exchange offer. We will have no further
obligation, subject to certain exceptions,
to register the old notes. If you do not
participate in our exchange offer, the
liquidity of your old notes could be
adversely affected.
Procedures for Beneficial
Owners............................. If you are a beneficial owner of old notes
registered in the name of a broker, dealer
or other nominee and you wish to tender
your old notes, you should contact the
person in whose name your old notes are
registered and promptly instruct the
person to tender those old notes on your
behalf.
Guaranteed Delivery
Procedures......................... If you wish to tender your old notes and
time will not permit your required
documents to reach our exchange agent by
the expiration date, or the procedure for
book-entry transfer cannot be completed on
time, you may tender your old notes
according to the guaranteed delivery
procedures. See "The Exchange Offer -
Guaranteed Delivery Procedures."
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2
<PAGE>
Acceptance of Old Notes;
Delivery of Exchange Notes......... Subject to certain conditions, we will
accept old notes which are properly
tendered in our exchange offer and are not
withdrawn before the expiration date of
our exchange offer. The exchange notes
will be delivered as promptly as
practicable following the expiration date.
Use of Proceeds.................... We will not receive any proceeds from the
exchange offer.
Exchange Agent..................... The Chase Manhattan Bank is the exchange
agent for our exchange offer.
EXCHANGE NOTES
The terms of the exchange notes are identical in all material respects to
the terms of the old notes, except that the old notes differed with respect to
their transfer restrictions and registration rights.
Issuer............................. American Tissue
Total Amount of
Exchange Notes..................... Up to $165,000,000 aggregate principal
amount of our 12 1/2% series B senior
secured notes due 2006.
Maturity Date...................... July 15, 2006.
Interest........................... The exchange notes will bear interest at
the rate of 12 1/2% per annum, payable
every six months in cash on January 15 and
July 15, commencing January 15, 2000.
Optional Redemption................ We may redeem some or all of the exchange
notes, in whole or in part, on or after
July 15, 2004, at the redemption prices
set forth in the "Description of Exchange
Notes - Optional Redemption" section of
this prospectus, plus accrued and unpaid
interest. In addition, before July 15,
2002, we may redeem up to 35% of the
exchange notes and the old notes at
113.25% of the principal amount thereof,
plus accrued and unpaid interest, with the
net cash proceeds of certain sales of our
common stock. If less than 65% of the
exchange notes and the old notes will
remain outstanding immediately after such
redemption, we may not effect the
redemption. In addition, to effect such
redemption with the net cash proceeds of
an offering of common stock, we must
effect the redemption not later than 90
days after the consummation of any such
offering. See "Description of Exchange
Notes - Optional Redemption."
Repurchase Obligations............. If we sell certain of our assets or
certain change of control events occur,
each holder of the exchange notes may
require us to repurchase all or a portion
of its exchange notes at 101% of the
principal amount thereof, plus accrued and
unpaid interest. See "Description of
Exchange Notes - Certain Covenants - Asset
Sales" and "- Change of Control."
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3
<PAGE>
- --------------------------------------------------------------------------------
Subsidiary Guarantees.............. The exchange notes will be fully and
unconditionally guaranteed on a senior
secured basis by each subsidiary
guarantor. Each subsidiary guarantor is
our wholly-owned subsidiary. Certain of
our future subsidiaries may also be
required to guarantee the exchange notes.
If we cannot make payments on the exchange
notes, the subsidiary guarantors must make
them instead.
Certain of our subsidiary guarantors are
also jointly and severally liable on a
senior secured basis for obligations
arising under our New Credit Facility,
which obligations are secured by a first
priority lien in favor of the lenders
under the New Credit Facility in the
inventory, accounts receivable and the
related general intangibles of these
subsidiary guarantors, which assets will
also secure the exchange notes on a second
priority lien basis.
Collateral......................... The exchange notes will be secured by
first priority liens on, among other
things, all of the paper mill plant and
property (including the Berlin-Gorham
Mills), substantially all of the
equipment, intellectual property and
related general intangibles and all of the
stock and membership interests of each of
our subsidiary guarantors. In addition,
the exchange notes will be secured by
second priority liens on, among other
things, certain of the other real
property, accounts receivable, inventory
and related general intangibles of our
subsidiary guarantors. See "Business -
Appraisal," "Risk Factors - The Value Of
Your Security Interest In The Collateral
Is Uncertain" and "Description of Exchange
Notes - Ranking and Security."
Ranking............................ The exchange notes and the subsidiary
guarantees will be senior secured
obligations as to us and the subsidiary
guarantors (as are the old notes and the
related guarantees).
They rank:
o effectively ahead of all of our and
our subsidiary guarantors' existing
and future senior unsecured debt and
junior debt;
o to the extent permitted by the
indenture relating to the exchange
notes, effectively behind all of our
and our subsidiary guarantors'
existing and future secured debt to
the extent of any assets serving as
collateral for such debt;
o equal, in right of payment, with all
of our and our subsidiary guarantors'
existing and future unsubordinated
debt; and
o ahead, in right of payment, of any of
our or our subsidiary guarantors' debt
that is subordinated to the exchange
notes.
As of June 30, 1999, adjusted to give
effect to the Transactions, our total
debt, other than the old notes, would have
been approximately $32.8 million,
including $9.9 million under the New
Credit Facility (excluding unused
commitments of approximately $90.1
million) and $22.9 million of certain
mortgage and other debt.
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4
<PAGE>
- --------------------------------------------------------------------------------
Certain Covenants.................. The indenture governing the exchange notes
contains covenants that will, among other
things, limit our ability and the ability
of certain of our subsidiaries to:
o pay dividends on, redeem or repurchase
our capital stock;
o make investments;
o incur additional indebtedness;
o permit payment or dividend
restrictions on certain of our
subsidiaries;
o sell assets;
o create certain liens;
o engage in certain transactions with
affiliates; and
o consolidate, merge or sell all or
substantially all of our assets and
the assets of our subsidiaries.
All of these limitations are subject to
important exceptions and qualifications
described under "Description of Exchange
Notes - Certain Covenants."
Transfer Restrictions.............. The exchange notes are new securities, and
there is currently no established market
for them. We do not intend to list the
exchange notes on any securities exchange.
Original Issue Discount............ For U.S. federal income tax purposes, the
exchange notes will be treated as having
been issued with "original issue discount"
equal to the difference between the face
amount of the old notes and the issue
price of the old notes. See "Certain
United States Income Tax Considerations."
Use of Proceeds.................... We will not receive any proceeds from our
exchange offer. The net proceeds we
received from the sale of the old notes,
together with the proceeds of borrowing
under our New Credit Facility and the
proceeds of an equity contribution by our
parent, were used to
o acquire the Berlin-Gorham Mills;
o repay certain of our existing
indebtedness; and
o pay certain fees and expenses incurred
in connection with the Transactions.
AN INVESTMENT IN THE EXCHANGE NOTES INVOLVES A HIGH DEGREE OF RISK. FOR A
DISCUSSION OF CERTAIN MATTERS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE
EXCHANGE OFFER, PLEASE READ "RISK FACTORS."
AMERICAN TISSUE
We are a leading integrated manufacturer of tissue products in North
America, with a comprehensive product line that includes jumbo tissue rolls for
converting and converted tissue products for end-use. Since our inception in
1981, we have grown primarily through the opportunistic acquisition and
integration of
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
underperforming paper mills and converting assets. We currently operate a pulp
mill, six paper mills (including five tissue mills), seven converting facilities
and two printing/packaging facilities. During the LTM Period, we derived
approximately 72.5% of our net sales from sales of converted tissue products,
approximately 26.2% from sales of jumbo rolls and the remainder from sales of
equipment. Our converting facilities transform jumbo rolls into a wide range of
finished tissue products, such as bath tissue, paper towels, napkins and facial
tissue. We believe that our flexible manufacturing capabilities allow us to
offer a range of products that is broader than that offered by any other North
American tissue producer. In addition to selling tissue products, we use our
internal engineering expertise to recondition and sell used tissue converting
equipment which, in turn, supports our jumbo roll sales business. With the
acquisition of the Berlin-Gorham Mills, we became effectively 100% vertically
integrated with respect to virgin pulp, increased our toweling capacity by
approximately 17.7% and extended our product offering in the commercial market
with uncoated freesheet papers. For the LTM Period, on a pro forma basis, giving
effect to the Transactions, we would have generated net sales of approximately
$409.4 million and Adjusted EBITDA of approximately $57.2 million.
The U.S. tissue industry has among the highest profit margins and most
stable growth rates in the paper industry, according to industry sources. From
1984 to 1998, total annual shipments for the U.S. tissue industry increased from
approximately 4.9 million tons to approximately 6.7 million tons, a compound
annual growth rate of approximately 2.2%. In the last 15 years, total annual
shipments have declined only once.
Our principal tissue products and markets are:
o Away-from-home converted products (approximately 41.0% of LTM Period
net sales). We manufacture and market a broad line of converted tissue
products for the estimated $4.0 billion U.S. commercial
("away-from-home") market. We sell our away-from-home products
principally to mid-sized paper, foodservice and janitorial supply
distributors, who resell these products to hotels, restaurants,
offices, factories, hospitals, schools and government facilities.
Since we entered the away-from-home market in 1992, we have built our
away-from-home product line to include 141 product categories and 299
SKUs, ranging from economy and value grades to premium grades. This
has enabled us to provide our customers with what we believe to be the
broadest product offering in the North American tissue industry, an
increasingly critical selling point with customers seeking "one-stop
shopping." During the LTM Period, approximately 76.7% of our
away-from-home products were sold under our brand names, with private
label products (under distributor label) and products manufactured for
particular national accounts (under corporate label) constituting the
remainder. Our net sales in the away-from-home market have grown from
approximately $53.0 million in fiscal 1995 to approximately $96.8
million in the LTM Period, a compound annual growth rate of
approximately 18.8%. This growth was due to, among other things,
acquiring assets, expanding product lines and increasing market share
in certain segments.
o At-home converted products (approximately 31.5% of LTM Period net
sales). We manufacture and market a broad line of converted tissue
products for the estimated $7.0 billion U.S. consumer ("at-home")
market. Our at-home product strategy targets the estimated $1.1
billion private label segment of this market, for which we manufacture
products that range from economy to premium quality grades. As a
private label manufacturer, we generally seek to avoid direct
competition with larger branded consumer product companies, such as
Procter & Gamble and Kimberly-Clark. During the LTM Period,
approximately 82.1% of our at-home products were manufactured for
specific retailers for sale under private labels, with the remainder
manufactured for sale under our own brand names. Over the past several
years, the at-home private label market has expanded from economy
products to include an assortment of quality grades, and we have
responded by expanding the range and variety of printing, coloring and
embossing applied to our at-home products. We currently estimate
private label penetration to be only approximately
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
16.0% of the at-home market and industry sources estimate that the
growth of this segment was approximately 4.0% in 1998, as retailers
continue to extend their lines of tissue products from economy and
value grades to premium grades. We believe that this growth will
continue. Our net sales in the at-home market have grown from
approximately $61.3 million in fiscal 1995 to approximately $74.5
million in the LTM Period, a compound annual growth rate of
approximately 5.7%.
o Jumbo rolls (approximately 26.2% of LTM Period net sales). We
manufacture and sell standard and specialty grades of jumbo rolls
directly to converters of finished tissue products, such as
Kimberly-Clark, Georgia-Pacific and Fort James. The jumbo rolls we
sell are generally used by our domestic customers to manufacture
non-competing finished tissue products, such as branded at-home and
niche tissue products, including disposable diapers, feminine sanitary
napkins and disposable medical products. Our strategy is to emphasize
stable customer relationships to sustain a long-term market for our
premium quality and specialty grade jumbo rolls, which often sell at a
higher price per ton than commodity converted tissue products. Our net
sales of jumbo rolls have grown from approximately $24.7 million in
fiscal 1995 to approximately $61.8 million in the LTM Period, a
compound annual growth rate of approximately 30.0%, reflecting our
strategy of emphasizing jumbo roll sales.
Business Strategy and Competitive Advantages
Our business strategy and competitive advantages include the following:
o Opportunistic Acquisitions of Underperforming Assets. We benefit from
a senior management team experienced in acquiring underperforming
paper mills and converting assets at a substantial discount to
replacement costs, implementing strict cost reduction programs and
selectively making capital expenditures to increase capacity and
improve operating efficiency.
o Capitalize on Flexible, Efficient Manufacturing Capability. We
maintain a diverse array of manufacturing, converting and packaging
equipment and a skilled workforce, which we believe enable us to
respond to changes in market conditions and customer requirements more
rapidly than our competitors.
o Capitalize on Competitor Consolidation. We believe the continuing
trend of competitor consolidation has created marketing opportunities
for us. To capitalize on this trend and strengthen our position as an
alternative supplier in certain product areas, we have built a
comprehensive product line of premium, value and economy grades in
each product category and have increased our away-from-home
salesforce.
o Strategically Locate Our Manufacturing Facilities. We believe that our
tissue mills, converting facilities and distribution centers are
strategically located across North America. Since our inception, we
have had a strong presence in the Northeast, and more recently, we
have expanded our business westward. Our Mexicali, Mexico converting
facility and our Calexico, California converting facility enable us to
take advantage of the geographic diversity of our tissue mill
operations in Neenah, Wisconsin and St. Helens, Oregon. We believe
that the geographic diversity of our locations allows us to service
both national and regional accounts economically and efficiently.
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7
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o Continue To Expand Our Diverse and Broad Product Line. We believe that
our diverse product line, with over 200 product categories and over
780 SKUs, is the broadest in North America and represents a key
competitive advantage. Our broad line of converted tissue products and
our ability to respond quickly to customer requirements for
multiple-product orders, allow us to offer "one-stop shopping" to our
customers. This is particularly important given the trend toward
supplier consolidation. Our strategy is to continue to expand our
product line through the introduction of new or enhanced products.
o Diverse Customer Base. Our customer base is broadly diversified across
industries and geographic locations, greatly reducing our dependence
on any single customer or market.
o Grow Jumbo Roll Sales by Leveraging Equipment Sales Business. We
intend to leverage our expertise in buying, reconditioning and selling
used tissue converting equipment to increase our sales of jumbo rolls.
For example, we generally sell our tissue converting equipment to
tissue products manufacturers who sign multi-year jumbo roll purchase
contracts with us.
o Favorable Supply and Service Agreements. We have entered into supply
and service agreements which we believe are favorable to us. Our
supply agreement with Boise Cascade permits us to purchase slush pulp
from the integrated Boise Cascade pulp and paper mill in St. Helens,
Oregon that houses a tissue machine we acquired from Boise Cascade, at
a price which is substantially below the market price for baled virgin
pulp. In connection with our acquisition of the Berlin-Gorham Mills,
we entered into an agreement with Crown Paper Co., a subsidiary of
Crown Vantage, Inc., under which Crown Paper will purchase from us
annually 40,000 tons of pulp produced at the Berlin-Gorham Mills. We
have also agreed to outsource the sales and marketing of certain
grades of our uncoated freesheet papers to Crown Paper, which we
believe will afford us substantial savings over the Berlin-Gorham
Mills historical selling expense.
Acquisition of the Berlin-Gorham Mills
On July 9, 1999, we purchased from Crown Paper the fully integrated pulp
and paper mills located in Berlin and Gorham, New Hampshire and certain related
assets, with the exception of certain short-term assets. As consideration for
this purchase, we paid $47.1 million in cash, subject to adjustment, and assumed
certain ongoing contractual liabilities related to the assets we acquired.
The Berlin-Gorham Mills include the pulp mill at Berlin, New Hampshire and
the paper mill at Gorham, New Hampshire. The pulp mill has an annual capacity of
approximately 350,000 tons of northern bleached hardwood and softwood pulp and
produced approximately 280,000 tons in the LTM Period. The paper mill has four
paper machines and a toweling machine. The four paper machines have a total
annual capacity of approximately 179,000 tons of various grades of uncoated
freesheet papers and produced approximately 150,000 tons in the LTM Period. The
toweling machine has an annual capacity of approximately 39,000 tons of
commercial toweling and produced approximately 28,000 tons in the LTM Period.
The Berlin-Gorham Mills include electric generating facilities and a solid waste
landfill. In 1998, the electric generating facilities produced an average of 31
megawatt hours of electricity, representing approximately 82% of the
Berlin-Gorham Mills' requirements, at approximately 31% of the cost of purchased
electricity.
We believe that the acquisition affords us the following strategic
benefits:
o The Berlin-Gorham Mills enhance our vertical integration by giving us
control over a stable source of high quality pulp that we may either
use in our operations or selectively sell to third parties depending
on our internal requirements and market conditions. A stable source of
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8
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consistent, high quality pulp will enable us to optimize production
and insulate us from the effect of pulp market price fluctuations.
o The four paper machines at the Berlin-Gorham Mills allow us to further
diversify our product line by supplying our existing customers in the
away-from-home market with branded and private label value-added
uncoated freesheet paper products, such as colored reprographic and
bond papers for resale to the small office/home office market and
disposable foodservice papers for sale to the fast-food industry.
o The toweling machine at the Berlin-Gorham Mills enables us to increase
our tissue capacity from approximately 220,000 tons to approximately
259,000 tons, an increase of approximately 17.7%.
In connection with the acquisition, we have entered into certain agreements
intended to facilitate our entrance into the uncoated freesheet paper business,
facilitate the integration of the pulp and paper making operations of the
Berlin-Gorham Mills with our existing operations and give us sufficient time to
establish our own marketing capability in the uncoated freesheet market. Under
these agreements, Crown Paper will for three years: (1) continue to purchase at
least 40,000 tons annually of virgin pulp from the Berlin-Gorham Mills, at a
contractually determined, market-based price; and (2) bear all marketing costs
and selling responsibility for an annual minimum of 150,000 tons of certain
grades of uncoated freesheet papers produced by the Berlin-Gorham Mills at
market prices, in return for specified discounts or commissions. In addition,
Crown Paper has agreed not to compete with us, for three years following the
closing of the acquisition, in the manufacturing and marketing of tissue,
toweling and certain limited product categories of uncoated freesheet papers.
Cost Saving Initiatives at the Berlin-Gorham Mills
We believe substantial opportunities for costs savings and synergies exist
at the Berlin-Gorham Mills. Described below are certain cost saving initiatives,
some recently completed by Crown Paper and others that we are executing. We
cannot assure you that any of these initiatives will produce the desired cost
benefits. See "Risk Factors - We May Not Successfully Integrate The Operations
Of The Berlin-Gorham Mills With Our Existing Operations Or Realize Expected Cost
Benefits" and "Unaudited Pro Forma Consolidated Financial Data."
Pre-Acquisition Initiatives. In September 1998, Crown Paper replaced key
management personnel, including the resident manager of the Berlin-Gorham Mills,
and began the process of reducing personnel at the Berlin-Gorham Mills. The new
mill management team improved operating performance, increased production and
reduced fixed costs in the six month period from October 1998 to March 1999.
Over this six month period, fixed costs decreased approximately $5.5 million, or
approximately 14.5%, while paper production increased approximately 9,483 tons,
or approximately 11.2%, as compared to same period in the prior year. The
severance of 95 employees during the LTM Period, in addition to the 13 employees
who left in the first quarter of 1998, is estimated to result in approximately
$3.0 million of annual savings. Approximately $2.5 million of compensation costs
associated with the severed employees was recorded in the LTM Period and has
been reflected in Adjusted EBITDA for the LTM Period. Associated with the
reduction in personnel was a non-recurring severance charge of approximately
$1.9 million in the LTM Period. In addition, in February 1999, the City of
Berlin, New Hampshire settled its longstanding property tax dispute regarding
the Berlin pulp mill. Based upon the revised property assessment value and the
current property tax rate, we believe that we will realize approximately $2.0
million in savings for each of the next three years as a result of this
settlement, of which $0.6 million is reflected in Adjusted EBITDA for the LTM
Period. Also reflected in the results of the LTM Period is a non-cash write-down
in the value of the assets at the Berlin-Gorham Mills of approximately $159.8
million, $16.2 million of which resulted from Crown Paper selling these assets
to us at below book value.
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9
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Post-Acquisition Initiatives. In addition to the strategic advantages of
the acquisition, we intend to capitalize on a number of potential synergies and
cost savings which we expect to result primarily from:
o Reduction in Personnel Costs. We further reduced personnel by
approximately 6.8% at the Berlin-Gorham Mills by eliminating
approximately 53 hourly and salaried positions, which we believe will
result in annual savings of approximately $3.5 million. We expect to
realize additional annual savings of approximately $0.5 million by
conforming the compensation and benefits policies at the Berlin-Gorham
Mills to our existing policies.
o Elimination of Allocated Administrative Costs. Prior to the
acquisition, Crown Paper had allocated a substantial portion of its
corporate overhead expense to the Berlin-Gorham Mills and provided
certain administrative services to the Berlin-Gorham Mills, such as
legal and accounting services. For the LTM Period, these charges
totaled approximately $8.1 million. We believe that we can provide a
similar level of administrative services for approximately $1.7
million annually, which, on a pro forma basis, would have reduced
costs by approximately $6.4 million during the LTM Period.
o Substitution of Lower Cost Raw Materials. We are using our expertise
in tissue manufacturing to lower the cost of manufacturing toweling at
the Berlin-Gorham Mills by using lower cost paper manufacturing
by-products and double lined kraft (i.e., recycled corrugated
containers) in place of the significantly higher cost, internally
produced bleached virgin pulp historically used by Crown Paper. We
believe that these lower cost raw materials, which we use at certain
of our other facilities, produce toweling which is comparable in
quality to that produced using bleached virgin pulp. We estimate that
these substitutions would have lowered costs by approximately $6.8
million over the LTM Period. In addition, as a result of recycling
such paper manufacturing by-products, we will avoid the cost which was
previously paid by the Berlin-Gorham Mills for transporting these
by-products to our landfill, which we estimate would have lowered
costs by approximately $0.9 million over the LTM Period.
o Increase of Wet Lap Pulp Production Capacity. Prior to the
acquisition, Crown Paper, at our request, returned an existing wet lap
pulp machine to operation at the Berlin pulp mill. Wet lap pulp has a
high moisture content, making it uneconomical to transport over long
distances. While wet lap pulp could not be economically used by Crown
Paper because of its lack of nearby paper mills (other than the Gorham
mill, which uses slush pulp rather than wet lap pulp), we are
currently transporting the wet lap pulp produced at the Berlin-Gorham
Mills to our nearby tissue mills in Winchester, New Hampshire and
Greenwich, New York. We believe we would have realized savings of
approximately $3.7 million over the LTM Period as a result of the
difference between the cash cost to produce wet lap pulp and the
purchase price that our Winchester and Greenwich mills have
historically paid for virgin pulp over the same time period.
o Integration of the Acquisition with Existing Operations. We are
supplying our Neenah, Wisconsin tissue mill with virgin pulp from
excess pulp production at the Berlin-Gorham Mills. Previously, our
Neenah mill purchased its virgin pulp requirements in the spot market.
By supplying our Neenah mill's virgin pulp requirements from internal
sources, we believe that we would have increased our operating profit
by approximately $2.4 million in the LTM Period, based on the
difference between the lower realized market price for pulp that the
Berlin-Gorham Mills received during the LTM Period and the spot prices
paid by our Neenah mill.
o Execution of Favorable Market Pulp Sales Contracts with Crown Paper.
We entered into a three-year contract to supply certain of Crown
Paper's paper mills with a minimum of 40,000 tons per year of virgin
pulp from excess pulp capacity at the Berlin-Gorham Mills. The supply
contract is set at verifiable market pricing for similar quality
virgin pulp. We believe this contract
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10
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would have increased our operating profit by approximately $1.7
million during the LTM Period, representing the difference between the
implied higher market pricing had the pulp purchase contract been in
place compared to the net realized pricing at the Berlin-Gorham Mills
for spot market sales of market pulp.
o Execution of Favorable Marketing Agreements. We entered into
three-year marketing agreements with Crown Paper. Under these
agreements, Crown Paper will bear all marketing costs and selling
responsibility for at least 150,000 tons of certain grades of uncoated
freesheet papers which we will produce at the Berlin-Gorham Mills.
These uncoated freesheet papers will be sold by Crown Paper at market
prices, less specified discounts or commissions. If these agreements
had been in place over the LTM Period, we believe we would have
realized savings of approximately $2.0 million in the LTM Period,
based on the difference between the amount of discounts and
commissions that would have been paid to Crown Paper and the
historical selling and commission expenses of the Berlin-Gorham Mills
during the LTM Period.
THE TRANSACTIONS
The Transactions consisted of the repayment of certain of our debt, our
acquisition of the Berlin-Gorham Mills, the closing of the $100.0 million New
Credit Facility with LaSalle Bank National Association, an equity contribution
from our direct parent and the offering of the old notes.
The following table illustrates the sources and uses of funds in connection
with the Transactions.
Amount
Sources of Funds (in millions)
- ---------------- -------------
Old Notes................................................... $159.5
New Credit Facility......................................... 9.9
Equity Contribution......................................... 24.5
------
Total sources...................................... $193.9
======
Uses of Funds
Repayment of debt........................................... $138.5
Payment of the acquisition consideration.................... 47.1
Fees and expenses........................................... 8.3
------
Total uses......................................... $193.9
======
With respect to the foregoing table:
o the New Credit Facility consists of a five year $100.0 million
revolving credit facility. See "Description of Certain Indebtedness."
o The equity contribution consisted of $24.5 million contributed to us
by Middle American Tissue Inc., our direct parent, as common equity.
The source of $19.5 million of such contribution was the proceeds from
the sale by Middle American Tissue of its senior secured discount
notes and common stock purchase warrants to affiliates of the initial
purchaser of the old notes. See "Description of Certain Indebtedness -
Middle American Tissue Notes."
o Repayment of debt consisted of the payment of:
o approximately $32.3 million outstanding under a term loan
facility;
o approximately $6.9 million outstanding under certain other notes
and term loans;
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o approximately $67.2 million outstanding under a revolving credit
facility; and
o approximately $29.7 million outstanding under capital lease
obligations and approximately $2.4 million of related buyout
costs.
o Payment of the acquisition consideration consisted of the payment of:
o the $45.0 million cash consideration for the acquisition of the
Berlin-Gorham Mills;
o $1.6 million of certain mill costs; and
o $0.3 million of costs for the restoration of a wet lap pulp
machine and $0.2 million of other repairs which Crown Paper
caused to be made on our behalf in advance of the acquisition.
The cash consideration for the acquisition of the Berlin-Gorham
Mills will be reduced based on closing date inventory levels.
However, the amount of the reduction has not yet been agreed to
and is subject to negotiation. See "Business - Berlin-Gorham
Mills Acquisition."
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(dollars in thousands)
The following table sets forth for American Tissue and the Berlin-Gorham
Mills:
o summary unaudited pro forma consolidated balance sheet data at June
30, 1999; and
o summary unaudited pro forma consolidated operating data for:
o the fiscal year ended September 30, 1998;
o the nine months ended June 30, 1998 and 1999, respectively; and
o the 12 months ended March 31, 1999.
The pro forma consolidated balance sheet data at June 30, 1999 gives effect
to the Transactions as if they had occurred on June 30, 1999. The pro forma
consolidated operating data for the fiscal year ended September 30, 1998, the
nine months ended June 30, 1998 and 1999, respectively, and the 12 months ended
March 31, 1999 give effect to the Transactions as if they had occurred on the
first day of each of the respective periods.
The following information should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Data," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto of
American Tissue and the financial statements and notes thereto of the
Berlin-Gorham Mills, included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended 12 Months
Fiscal Year Ended June 30, Ended
September 30, ------------------------ March 31,
1998(1) 1998(2) 1999(2) 1999(2)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ................................. $390,037 $289,710 $ 316,108 $ 409,425
Gross profit .............................. 71,994 48,980 62,092 74,802
Selling general and administrative expenses 37,622 27,825 28,905 38,902
Operating income (loss) ................... 47,890 34,673 (117,663) (114,950)
Net income (loss) ......................... 31,800 15,750 (72,708) (66,238)
Other Data:
EBITDA(3) ................................. 51,872 32,084 44,340 54,044
Adjusted EBITDA(4) ........................ 57,039 36,530 44,991 57,155
Cash interest expense(5) .................. 22,906 17,145 17,177 22,525
Depreciation and amortization ............. 12,482 9,441 10,253 12,629
Capital expenditures(6) ................... 37,419 24,026 17,526 34,982
Adjusted EBITDA/cash interest expense ..... -- -- -- 2.5x
Total debt/Adjusted EBITDA ................ -- -- -- 3.4x
</TABLE>
As of June 30, 1999
-----------------------------------
Actual Pro Forma
-------------- ---------------
Balance Sheet Data:
Total assets................................. $369,702 $357,344
Total debt................................... 217,768 192,210
Stockholder's equity......................... 47,493 91,874
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- -----------
(1) The summary unaudited pro forma statement of operations data for the fiscal
year ended September 30, 1998 includes the fiscal year ended September 30,
1998 of American Tissue and the 12 months ended September 30, 1998 of the
Berlin-Gorham Mills.
(2) For the Berlin-Gorham Mills, the 39 weeks ended June 28, 1998 and June 27,
1999 and the 52 weeks ended March 28, 1999, as applicable.
(3) EBITDA is defined as operating income plus depreciation and amortization,
adjusted for the following non-cash and income items: with respect to
American Tissue, income items include rental income and income from
insurance claims; and with respect to the Berlin-Gorham Mills, non-cash
items exclude the asset impairment and net realizable value charges, the
property tax accrual reversal and the corporate overhead allocation, and
income items exclude the severance charge and the gain on timberlands sale.
Information regarding EBITDA is presented because management believes that
certain investors use EBITDA as one measure of an issuer's ability to
service its debt. EBITDA should not be considered an alternative to, or
more meaningful than, operating income, net income or cash flow as defined
by generally accepted accounting principles or as an indicator of an
issuer's operating performance. Furthermore, caution should be used in
comparing EBITDA to similarly titled measures of other companies as the
definitions of these measures may vary. See "Unaudited Pro Forma
Consolidated Financial Data" and the consolidated financial statements and
notes thereto of American Tissue and the financial statements and notes
thereto of the Berlin-Gorham Mills, included elsewhere herein.
(4) Pro forma Adjusted EBITDA represents pro forma EBITDA adjusted as follows:
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended June 30,
September 30, -------------------- 12 Months Ended
1998 1998 1999 March 31, 1999
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Pro forma EBITDA .............. $51,872 $32,084 $44,340 $54,044
Non-continuing employee
compensation expense .......... 2,489 2,215 738 2,537
Property tax savings .......... 2,678 2,231 (87) 574
------- ------- ------- -------
Adjusted EBITDA ............... $57,039 $36,530 $44,991 $57,155
======= ======= ======= =======
</TABLE>
(5) Cash interest expense represents total interest expense less amortization
of deferred financing costs and amortization of debt discount, on a pro
forma basis giving effect to this offering of Notes, borrowings of $9.9
million under the New Credit Facility and the application of the net
proceeds therefrom.
(6) Capital expenditures exclude portions attributable to capital leases of
American Tissue.
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SUMMARY HISTORICAL FINANCIAL DATA
(dollars in thousands)
Set forth below are summary historical consolidated financial data for
American Tissue and the Berlin-Gorham Mills. The results for the interim periods
set forth below are not necessarily indicative of the results to be expected for
the full year or any other future period.
The summary historical operating data of American Tissue for:
(a) the fiscal years ended September 30, 1994 and 1995, the nine
months ended June 30, 1998 and portions of the 12 months ended March 31,
1999 prior to October 1, 1998, reflect the unaudited operating results of
the American Tissue subsidiaries prior to the formation of a holding
company;
(b) the fiscal years ended September 30, 1996, 1997 and 1998, reflect
the audited operating results of the American Tissue subsidiaries prior to
the formation of a holding company; and
(c) the nine months ended June 30, 1999 and the 12 months ended March
31, 1999, respectfully, reflect the unaudited consolidated operating
results of American Tissue for the such periods.
The summary historical operating data of the Berlin-Gorham Mills for:
(a) the 52 weeks ended December 25, 1994 and December 31, 1995, the 26
weeks ended June 28, 1998 and June 27, 1999 and the 52 weeks ended March
28, 1999 reflect the unaudited operating results of the Berlin-Gorham Mills
for each such period and
(b) the 52 weeks ended December 29, 1996, December 28, 1997 and
December 27, 1998 reflect the audited operating results of the
Berlin-Gorham Mills for such periods.
You should read this information in conjunction with "Unaudited Pro Forma
Consolidated Financial Data," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto of
American Tissue and the financial statements and notes thereto of the
Berlin-Gorham Mills included elsewhere herein.
AMERICAN TISSUE
<TABLE>
<CAPTION>
Nine Months
Ended 12 Months
Fiscal Year Ended September 30, June 30, Ended
---------------------------------------------------- ------------------- March 31,
1994 1995 1996 1997 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(unaudited)(unaudited) (unaudited)(unaudited)(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ................................ $112,378 $138,933 $152,722 $197,596 $213,988 $152,681 $182,557 $236,214
Gross profit ............................. 22,026 22,527 30,449 45,026 38,905 27,814 40,019 45,242
Operating income ......................... 8,704 6,593 13,268 18,073 9,517 6,564 18,053 14,966
Other Data:
EBITDA(1)................................. $ 13,839 $ 9,281 $ 27,950 $ 27,427 $ 23,783 16,070 27,967 $ 29,876
Adjusted EBITDA .......................... 13,839 9,281 27,950 27,427 23,783 16,070 27,967 29,876
Depreciation and amortization ............ 3,993 4,092 5,593 8,282 10,585 8,018 8,830 11,327
Capital expenditures(2) .................. 4,463 24,192 40,933 29,172 27,566 19,178 12,607 25,805
</TABLE>
As of As of
September 30, June 30,
1998 1999
------------ ----------
Balance Sheet Data (unaudited)
Cash and cash equivalents.................... $ 1,480 $ 597
Working capital (deficiency)................. (48,748) (44,275)
Total assets................................. 270,819 288,422
Total debt................................... 188,861 188,013
Stockholders' equity......................... 33,644 42,350
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BERLIN-GORHAM MILLS
<TABLE>
<CAPTION>
26 Weeks Ended 52 Weeks
52 Weeks Ended December(3) June(4) Ended
----------------------------------------------------------- ---------------------- March 28,
1994 1995 1996 1997 1998 1998 1999 1999
--------- --------- --------- --------- --------- --------- --------- ---------
Statement of Operations Data: (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales .................... $164,733 $236,311 $177,916 $183,398 $ 174,423 $ 87,439 $ 86,372 $ 171,482
Gross profit (loss) .......... (15,263) 36,895 (11,257) 3,750 (13,329) (12,853) 3,104 (7,674)
Operating income (loss) ...... (23,701) 28,177 (20,367) 5,000 (173,880) (21,331) (12,590) (175,499)
Other Data:
EBITDA(1) .................... $ 3,901 $ 56,877 $ 9,106 $ 21,387 $ 3,414 (3,974) 1,087 $ 4,411
Adjusted EBITDA(5) ........... 8,566 62,328 15,025 27,788 7,696 (1,161) 2,054 7,522
Depreciation and amortization. 24,517 24,820 24,061 24,179 23,966 12,083 2,676 19,041
Capital expenditures ......... 16,524 13,165 10,872 13,084 9,146 2,812 3,211 9,177
</TABLE>
As of As of
December 27, 1998 June 27, 1999
----------------- -------------
(unaudited)
Balance Sheet Data
Cash and cash equivalents...... $1,753 $ 1,675
Working capital................ 7,684 14,236
Total assets................... 101,042 81,280
Total debt..................... 30,255 30,255
(1) See definition of EBITDA in note (3) of "Summary of Unaudited Pro Forma
Consolidated Financial Data."
(2) Excludes portions attributable to capital leases.
(3) The Berlin-Gorham Mills' fiscal year ends on the last Sunday of the month
of December (i.e., December 25, 1994, December 31, 1995, December 29, 1996,
December 28, 1997 and December 27, 1998).
(4) The Berlin-Gorham Mills' first fiscal quarter ends on the last Sunday of
the month of June (i.e., June 28, 1998 and June 27, 1999).
(5) Adjusted EBITDA for the Berlin-Gorham Mills represents EBITDA adjusted as
follows:
<TABLE>
<CAPTION>
26 Weeks Ended 52 Weeks
Fiscal Year Ended December June, Ended
------------------------------------------------------- -------------------- March 28,
1994 1995 1996 1997 1998 1998 1999 1999
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA ............................ $ 3,901 $56,877 $ 9,106 $21,387 $ 3,414 $(3,974) $ 1,087 $ 4,411
Non-continuing employee
compensation expense .............. 2,953 2,953 2,953 2,953 2,953 1,477 601 2,537
Property tax savings .............. 1,712 2,498 2,966 3,448 1,329 1,336 366 574
------- ------- ------- ------- ------- ------- ------- -------
Adjusted EBITDA ................... $ 8,566 $62,328 $15,025 $27,788 $ 7,696 $(1,161) $ 2,054 $ 7,522
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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RISK FACTORS
Before you invest in the exchange notes, you should carefully consider the
following factors, in addition to the other information contained in this
prospectus.
You Will Be Subject To Certain Adverse Consequences If You Do Not Exchange Your
Old Notes
If you do not exchange your old notes for the exchange notes pursuant to
the exchange offer, you will continue to be subject to the restrictions on
transfer of your old notes described in the legend on your old notes. The
restrictions on transfer of your old notes arise because we issued the old notes
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act of 1933 and applicable state securities laws.
In general, you may only offer or sell your old notes if they are registered
under the Securities Act and applicable state securities laws, or offered and
sold pursuant to an exemption from such requirements. We do not intend to
register the old notes under the Securities Act. In addition, if you exchange
your old notes in the exchange offer for the purpose of participating in a
distribution of the exchange notes, you may be deemed to have received
restricted securities. If so, you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent the old notes are tendered
and accepted in the exchange offer, the trading market, if any, for the old
notes would be adversely affected. If you are still holding any old notes after
the expiration date of the exchange offer and the exchange offer has been
consummated, subject to certain exceptions, you will not be entitled to any
rights to have such old notes registered under the Securities Act pursuant to
the registration rights agreement. See "The Exchange Offer - Consequences of
Exchanging or Failing to Exchange Old Notes."
You Will Be Responsible For Compliance With Exchange Offer Procedures
We will issue the exchange notes in exchange for your old notes pursuant to
this exchange offer only after we have timely received your old notes, along
with a properly completed and duly executed letter of transmittal and all other
required documents. Therefore, if you want to tender your old notes in exchange
for exchange notes, you should allow sufficient time to ensure timely delivery.
We are not under any duty to give notification of defects or irregularities with
respect to the tender of the old notes for exchange. The exchange offer will
expire at 5:00 p.m., New York City time, on ______________________, or on a
later extended date and time as we may decide. Old notes that are not tendered,
or are tendered but not accepted by us for exchange, will, following the
expiration date of the exchange offer and the consummation of this exchange
offer, continue to be subject to the existing restrictions upon the transfer
thereof.
You May Be Subject To Certain Restrictions On Transfer Of The Exchange Notes
Based on interpretations by staff of the Securities and Exchange
Commission, as set forth in no-action letters issued to third parties, we
believe that you may offer for resale, resell and otherwise transfer the
exchange notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, subject to certain limitations. These
limitations include that:
o you are not an "affiliate" of ours within the meaning of Rule 405
under the Securities Act;
o you acquire your exchange notes in the ordinary course of your
business; and
o you have no arrangement with any person to participate in the
distribution of such exchange notes.
However, we have not submitted a no-action letter to the Securities and Exchange
Commission regarding this exchange offer and we cannot assure you that the
Securities and Exchange Commission would make a similar determination with
respect to this exchange offer as in such other circumstances. If you are an
affiliate of
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ours, are engaged in or intend to engage in, or have any arrangement or
understanding with respect to, a distribution of the exchange notes to be
acquired pursuant to the exchange offer, you
o may not rely on the applicable interpretations of the staff of the SEC
and
o must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus meeting the requirements under the Securities Act in connection with
any resale of such exchange notes. The letter of transmittal states that by so
acknowledging and delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of the exchange notes where the
old notes exchanged for such exchange notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. We have
agreed to use our best efforts to make this prospectus available to any
participating broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the exchange notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
an exemption from registration or qualification is available.
We Are A Highly Leveraged Company
We have a high level of debt. As of March 31, 1999, adjusted to give effect
to the Transactions:
o we would have had approximately $192.3 million of indebtedness
outstanding (excluding unused commitments of $90.1 million under our
New Credit Facility); and
o after giving effect to the Transactions, for the LTM Period, our
earnings would have been insufficient to cover fixed charges by $160.5
million. However, the ratio of our earnings to fixed charges,
excluding asset impairment and net realizable value charges, the
property tax accrual reversal and the severance charge, would have
been 1.7 to 1. See "Unaudited Pro Forma Consolidated Financial Data."
Our significant indebtedness could have important consequences to you. For
example, it could:
o require us to dedicate a substantial portion of our cash flow from
operations to make payments of principal and interest on our
indebtedness. Our failure to generate sufficient cash flow to make
required payments could result in a default under such indebtedness
(including under the exchange notes);
o limit our ability to fund working capital, capital expenditures,
acquisitions and general corporate requirements;
o limit our flexibility to expand, fund capital expenditures and react
to changes in our business and the industry in which we operate;
o increase our vulnerability to general adverse economic and industry
conditions;
o place us at a competitive disadvantage to our competitors that have
less debt; and
o limit, among other things, our ability to borrow additional funds and
comply with the financial covenants relating to our existing
indebtedness. Our failure to comply with these covenants could
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result in an event of default which, if not cured or waived, could
have a material adverse effect on us.
See "Description of Certain Indebtedness" and "Description of Exchange Notes."
Our ability to satisfy our obligations pursuant to such indebtedness
(including the exchange notes) will depend upon our future performance which, in
turn, will be subject to management, financial, business, regulatory and other
factors affecting our business and operations. Many of such factors are not
within our control. We believe, based on our current level of operations, that
we will have sufficient capital to carry on our business and to meet our
scheduled debt service requirements. We cannot assure you, however, that future
cash flow will be sufficient to meet our obligations and commitments. If we are
unable to generate sufficient cash flow to meet our debt obligations, we may be
required to reduce or delay capital expenditures, restructure or refinance all
or a portion of such indebtedness (including indebtedness under the exchange
notes and the New Credit Facility), or sell assets or obtain additional
financing. We may not be able to implement any of these strategies on
satisfactory terms or on a timely basis, if at all. If we cannot satisfy our
obligations related to such indebtedness, substantially all of our long-term
indebtedness could be in default and could be declared immediately due and
payable, with potentially adverse consequences to you. To avoid a default, we
may need waivers from third parties, which may not be granted. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In addition, our direct and indirect parents are also highly leveraged. See
"Description of Certain Indebtedness."
We May Incur Additional Indebtedness
We may need to incur additional indebtedness to finance capital
expenditures at the Berlin-Gorham Mills and at our other facilities and to
fulfill our long-term business strategies. The terms of the indenture governing
the exchange notes and the terms of the New Credit Facility will permit us and
our subsidiaries to incur additional debt, subject to certain limitations. If
additional indebtedness is incurred, the risks associated with our highly
leveraged condition will increase. See "Capitalization," "Unaudited Pro Forma
Consolidated Financial Data," "Selected Historical Financial Data," "Description
of Certain Indebtedness" and "Description of Exchange Notes."
Our Debt Agreements Contain Operating And Financial Restrictions
The operating and financial restrictions and covenants in our existing debt
agreements, the New Credit Facility, the indenture governing the exchange notes
and any future financing agreements may adversely affect our ability to finance
future operations or working capital or to engage in other business activities.
Specifically, our debt agreements require that we maintain certain financial
ratios and restrict our ability to, among other things:
o declare dividends or redeem or repurchase capital stock;
o make certain loans and investments;
o incur additional indebtedness;
o permit payment or dividend restrictions on certain of our
subsidiaries;
o sell assets;
o enter into sale and leaseback transactions;
o create certain liens;
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o engage in certain transactions with affiliates;
o consolidate, merge or sell all or substantially all of our assets and
the assets of our subsidiaries; or
o prepay, redeem or purchase debt.
A breach of any of the restrictions or covenants in our debt agreements
could cause a default under the New Credit Facility, other debt or the exchange
notes. As a result, a significant portion of our indebtedness then may be
declared immediately due and payable. We are not certain whether we would have,
or be able to obtain, sufficient funds to make such accelerated payments,
including payments on the Notes. See "Description of Certain Indebtedness" and
"Description of Exchange Notes."
On January 22, 1999, we entered into an agreement with General Electric
Capital Corporation (relating to our then existing credit facility with such
lender) that (1) waived certain defaults under covenants relating to maintenance
of certain financial ratios, the incurrence of debt and the timely delivery of
financial statements and certain reports and notices and (2) amended certain
financial covenants. We also obtained a waiver from LaSalle National Bank of the
default under our then existing revolving credit facility with such lender
triggered by the default under our credit facility with General Electric Capital
Corporation.
The Value Of Your Security Interest In The Collateral Is Uncertain
Our obligations under the exchange notes will be guaranteed by all of our
domestic subsidiaries and will be secured by first priority liens on, among
other things, all of their paper mill plant and property (including the
Berlin-Gorham Mills), substantially all of the equipment, intellectual property
and related general intangibles of our subsidiary guarantors and all of the
stock and membership interests of our subsidiary guarantors. In addition, the
exchange notes will be secured by second priority liens on, among other things,
certain of the other real property, accounts receivable, inventory and related
general intangibles of our subsidiary guarantors. With respect to the lien on
our equipment located at Boise Cascade's St. Helens, Oregon mill facility, the
trustee for the exchange notes will have a first priority lien on such
collateral; except that the first $20.0 million of proceeds derived from the
disposition of such equipment must be shared with Boise Cascade on a
dollar-for-dollar basis. Borrowings under the New Credit Facility will be
secured by first priority liens on accounts receivable and inventory and related
general intangibles of certain of our subsidiaries and by second priority liens
on collateral securing the exchange notes on which the trustee for the exchange
notes has a first priority lien.
We cannot assure you that the net proceeds of a sale of the collateral
securing the exchange notes would be sufficient to repay all of the exchange
notes following a foreclosure upon such collateral or a liquidation of the
assets of ours or the subsidiary guarantors that have granted such security
interests. If the net proceeds received from the sale of the collateral (after
payment of any first priority security interests and expenses relating to the
sale thereof) are insufficient to pay all amounts due with respect to the
exchange notes, you would, to the extent of such insufficiency, have only an
unsecured claim against the remaining assets of ours and our subsidiary
guarantors (which currently secure indebtedness under the New Credit Facility
and certain other indebtedness). Moreover, the ability of the trustee for the
exchange notes to foreclose upon the collateral securing the exchange notes
would be delayed if our subsidiary guarantors were subject to proceedings under
applicable bankruptcy law.
We May Not Successfully Integrate The Operations Of The Berlin-Gorham Mills With
Our Existing Operations Or Realize Expected Cost Benefits
Prior to our acquisition of the Berlin-Gorham Mills, Crown Paper has
managed and controlled the operations of such mills. As a result, the discussion
under "Prospectus Summary - Cost Savings Initiatives at the Berlin-Gorham Mills"
and "Unaudited Pro Forma Consolidated Financial Data" of cost savings expected
to be realized as a result of the integration of the operations of the
Berlin-Gorham Mills with our existing
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operations and the implementation of our strategic plan may not reflect our
future financial position and operating results.
Our success will depend, in part, on our ability to integrate the acquired
operations of the Berlin-Gorham Mills and to fully implement our business and
operating strategies. We cannot assure you that we will be able to effectively
manage the operations of the Berlin-Gorham Mills or effectively integrate
operations of the Berlin-Gorham Mills with our existing operations. Moreover, we
cannot assure you that we will be successful in rationalizing certain functions
and implementing appropriate operational, financial and management systems and
controls to fully achieve the cost savings expected to result from the
acquisition. Our efforts to implement our strategy and to integrate the
operation of the Berlin-Gorham Mills could be affected by a number of factors
beyond our control, such as regulatory developments, general economic conditions
and increased competition. In addition, after gaining experience with operations
of the Berlin-Gorham Mills, our management may decide to alter or discontinue
certain aspects of the business and operating strategy discussed herein and may
adopt alternative or additional strategies. Any failure to integrate the
operations of the Berlin-Gorham Mills or to effectively implement our strategy
could have a material adverse effect on our business, financial condition and
results of operations and on our ability to service our indebtedness, including
the exchange notes.
The estimated cost savings described under "Prospectus Summary - Cost
Savings Initiatives at the Berlin-Gorham Mills," and "Unaudited Pro Forma
Consolidated Financial Data" represent the cost savings expected to result from
our acquisition of the Berlin-Gorham Mills and from the implementation of our
business and operating strategy, based on operating results in the LTM Period.
These estimated future cost reductions and savings are based upon a number of
assumptions, which may be inaccurate and relate only to estimated cost
reductions and savings on the items described. Accordingly, the expected cost
reductions and savings are not necessarily indicative of our pro forma or future
financial results, including EBITDA and net income, which may be affected by a
number of other factors, including demand and pricing for our products and other
costs associated with our production, distribution and other operations. In
addition, we cannot assure you that we will be able to fully realize any or all
of the operating and economic benefits expected to result from our acquisition
of the Berlin-Gorham Mills.
We Are Subject To Cyclical Industry Conditions
Tissue and Paper Products. The markets for our tissue and uncoated
freesheet paper products are characterized by periods of supply and demand
imbalance, with supply being added in large blocks and demand fluctuating with:
o changes in industry capacity, economic conditions (including in the
case of our uncoated freesheet paper products);
o the overall level of domestic economic activity; and
o competitive conditions (including, in the case of our uncoated
freesheet paper products, intensified competition from overseas
producers responding to favorable exchange rate fluctuations and/or
unfavorable overseas market conditions).
All of such conditions are beyond our control. An imbalance of supply and demand
can have significant effects on our selling prices and, therefore, our
profitability. Certain other factors may increase the cyclical nature of our
industry. Such factors include the substantial capital investment and high fixed
costs required to manufacture tissue and other paper products and convert tissue
products and the significant costs associated with reductions in manufacturing
capacity. In addition, because of such high fixed costs, many manufacturers
strive to maintain high levels of usage of their manufacturing capacity (i.e.,
operating rates) to cover such fixed costs. Accordingly, relatively small
changes in operating rates due to changes in domestic demand, capacity, levels
of imports or other circumstances may significantly affect prices. We cannot
assure you that:
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o the current price levels of our products will be maintained;
o any price increases that we may announce will be realized;
o the industry will not add new incremental capacity from new machines
or rebuilds of existing machines; or
o imports will not increase.
All of the foregoing would have a potentially negative effect on market
conditions. Such circumstances could have a material adverse effect on our
ability to maintain current sales and pricing levels. Prices for our products
may fluctuate substantially in the future. A significant downturn in such prices
could have a material adverse effect on our business, financial condition and
results of operations.
Tissue and Paper Manufacturing Raw Materials. Wood pulp, chemicals,
recycled paper pulp and waste paper are the principal raw materials used in the
manufacture of our tissue and uncoated freesheet paper products. Such materials
are purchased in highly competitive, price-sensitive markets. While we
anticipate that wood pulp produced by the pulp mill at the Berlin-Gorham Mills
should be sufficient to satisfy our requirements for wood pulp for our uncoated
freesheet paper operations (and a significant portion of our tissue operations),
the cost of recycled pulp and chemicals have historically exhibited price and
demand cyclicality similar to the cycles for paper products. In addition,
increased demand for paper and wood products has resulted in greater demand for
raw materials, which has recently translated into higher raw material prices for
the paper industry. Historically, price increases for our paper products have
lagged behind increases in raw material costs. We cannot assure you that the
prices of such materials will fluctuate in a similar cycle to paper products or
that all or part of any increased costs can be passed along to consumers of our
tissue or uncoated freesheet products directly or in a timely manner.
Pulp Manufacturing Raw Materials. Wood fiber is the principal raw material
used in the production of pulp at the Berlin-Gorham Mills. In connection with
our acquisition of the Berlin-Gorham Mills, we have effectively become a party
to certain long-term supply contracts with suppliers of wood fiber located in
close proximity to the Berlin-Gorham Mills. If for any reason such agreements
have not been assigned to us or are terminated by such suppliers, we would also
be subject to the cyclicality of the wood fiber market. The supply and price of
wood fiber is dependent upon a variety of factors, including environmental and
conservation regulations, natural disasters and weather, over which we have no
control. We can not assure you that we will not have difficulty obtaining wood
fiber in economic proximity to the Berlin-Gorham Mills. Moreover, there can be
no assurance that all or part of any increased costs can be passed along to
consumers of pulp and paper products directly or in a timely manner.
We Have No Experience In Manufacturing And Selling Uncoated Freesheet Paper
Products
Historically, the four freesheet paper machines at the Berlin-Gorham Mills
have been used by Crown Paper for the manufacture of uncoated freesheet paper
products, primarily for printing and publishing end-uses. We are not acquiring
any assets or marketing and distribution organizations from Crown Paper that
would permit us to market and distribute such paper products following the
consummation of our acquisition of the Berlin-Gorham Mills and we do not have
the knowledge, experience or organization that would permit us to successfully
market and distribute such products. Consequently, during the three-year period
following the consummation of the acquisition, we will be substantially
dependent on Crown Paper to market and distribute for us, pursuant to our paper
purchase and marketing agreements with Crown Paper, uncoated freesheet paper
products produced at the Berlin-Gorham Mills. Crown Paper will receive certain
discounts and commissions pursuant to such agreements.
According to Crown Paper's Annual Report on Form 10-K for its fiscal year
ended December 27, 1998 and its Quarterly Report on Form 10-Q for its fiscal
quarter ended June 27, 1999, Crown Paper had a high level of debt, net losses
and declining operating cash flows. Accordingly, there is a risk that Crown
Paper
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may not have the financial resources to permit it to perform its obligations
under our paper purchase and marketing agreements. Moreover, in order to
conserve cash to satisfy its debt service requirements, Crown Paper may be
required to restructure its operations or reduce or eliminate funding for
certain marketing and distribution activities, all of which could materially
adversely affect Crown Paper's ability to perform its obligations under such
paper purchase and marketing agreements. Any failure by Crown Paper to perform
its obligations under our paper purchase and marketing agreements could have a
material adverse effect on our ability to profitably market and distribute such
products.
Crown Paper May Not Be Able To Perform Its Obligations Under the Acquisition
Agreement
Under the asset purchase agreement relating to the Berlin-Gorham Mills,
Crown Paper has made certain representations and warranties to us which we
believe are typical in similar transactions, concerning its assets, liabilities,
business and affairs and has agreed, subject to certain limitations, to
indemnify and hold us harmless from certain liabilities, losses or damages that
we may suffer or incur as a result of Crown Paper's breach of any such
representation and warranty. Crown Paper's financial situation may significantly
impair its ability to meet its indemnification obligations under the asset
purchase agreement in the event we assert a claim for indemnification. To the
extent that we are unable to recover from Crown Paper for any loss or damages
that we may suffer or incur, we will be required to bear such loss or damages,
which could have a material adverse effect on our ability to pay interest on the
exchange notes and on our business, financial condition and operating results.
We Could Be Affected By Year 2000 Issues
The Year 2000 issue concerns the potential exposures related to the
erroneous generation of business and financial information resulting from the
fact that certain computer systems and software programs use two digits, rather
than four, to define the applicable year of business transactions. These
programs do not properly recognize a year that begins with "20" instead of the
familiar "19." These programs may process data incorrectly or stop processing
data altogether on January 1, 2000. We rely upon our own and vendor-supplied
technology and recognize the potential business risk to our assets and systems
associated with the arrival of the Year 2000.
We have substantially completed the process of identifying and remediating
Year 2000 compliance issues associated with our computer systems and software
programs. To date, we have spent approximately $600,000 in connection with our
Year 2000 compliance program, and this program is substantially completed. We
are in the process of identifying Year 2000 compliance issues associated with
our suppliers' products, services and operations. Our customers and suppliers
may not have management information systems that are Year 2000 compliant and
required systems modifications may not be completed by the Year 2000. Failure of
our customers and suppliers to be Year 2000 compliant could have a material
adverse effect on our business, financial condition and results of operations.
We are responsible for completing the remediation of any computer systems
and software programs at the Berlin-Gorham Mills which were not remediated by
Crown Paper as of the consummation of the acquisition. Crown Paper has
represented to us that it had in operation programs designed to identify and
remediate Year 2000 issues and that it estimated that the total cost to complete
its remediation program would not exceed $1.25 million. However, we cannot
assure you that the cost of remediating such systems and programs will not
significantly exceed such amount.
We May Be Unable To Implement Our Development And Acquisition Strategy
Our ability to successfully implement our growth strategy is subject to a
variety of risks, including changes in the competitive climate in which we
operate and our ability to obtain financing in a timely manner at reasonable
costs and on terms and conditions acceptable to us. We cannot assure you that
any planned capital investment program will take place as planned or that our
plan to expand products and services will generate positive cash flows or result
in profits.
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Our capital investment program involves strategic acquisitions of
underperforming and underutilized facilities. We cannot assure you that we will
be able to turn around any facilities that we may acquire.
Our ability to integrate acquired businesses may be affected by a number of
factors, including the ability of our existing management and systems
infrastructure to absorb the increased operations, the response of competition
and general economic conditions, many of which are not within our control. For
example, we cannot assure you that we will be able to integrate successfully the
operations of the Berlin-Gorham Mills with our existing operations. See "We May
Not Successfully Integrate The Berlin-Gorham Mills With Our Existing Operations
Or Realize Expected Cost Benefits." Acquisitions may also substantially increase
our indebtedness and obligations to make payments of interest and principal in
respect of such indebtedness. While growth through acquisitions is part of our
capital investment program, we cannot assure you that:
o suitable acquisitions will be available to us on acceptable terms;
o financing for future acquisitions will be available on acceptable
terms, or on any terms at all;
o future acquisitions will be advantageous to us; or
o the anticipated benefits of such acquisitions will occur.
We Operate In A Highly Competitive Industry
Tissue. The North American tissue industry is highly competitive. We
believe that competition is based principally on product quality, price and
customer service. Our competitors include Kimberly-Clark, Fort James, Procter &
Gamble, Georgia-Pacific, Wisconsin Tissue (a subsidiary of Chesapeake
Corporation), Potlatch, Marcal, Irving and Global Tissue (a subsidiary of
Kruger, Inc.). Some of our competitors are lower cost producers of tissue
products. Additionally, many of our competitors are large, vertically-integrated
companies that are more strongly capitalized than we are. Any of the foregoing
factors may enable such competitors to better withstand periods of declining
prices and adverse operating conditions in the tissue industry.
Uncoated Freesheet Papers. In the uncoated freesheet paper market, we
compete principally in North America, primarily with U.S. and Canadian paper
producers, but also with overseas producers. Similar to the tissue market, we
compete primarily on the basis of price, although quality and service are often
the determining factors in the choice of a supplier. In addition, we are
competing with integrated and non-integrated producers of paper products. We
believe we are a fully-integrated manufacturer. Fully-integrated manufacturers
(i.e., those whose requirements for pulp or other fiber are met fully from their
internal sources) may have certain competitive advantages relative to those that
are not fully-integrated manufacturers in periods of relatively high prices for
raw materials, in that the former are able to ensure a steady source of such raw
materials at costs that may be lower than prices in the prevailing market.
However, certain competitors which are less integrated than we are may have
certain cost advantages in periods of relatively low pulp prices in that they
may be able to purchase pulp at prices lower than our production costs.
Moreover, certain of our competitors are lower-cost producers than we are and
certain of our competitors have greater financial resources than we have. In
addition, many end-users of printing/writing/publishing products in recent years
have responded to changing economic conditions and paper prices by substituting
less expensive paper grades for use in their products, and this tendency may
benefit certain of our competitors which produce lower priced paper products.
We cannot assure you that we will be able to successfully compete in the
tissue or uncoated freesheet papers industry or that increased competition will
not have a material adverse effect on our business, financial condition and
results of operations.
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We Are Controlled By A Few Of Our Parent's Stockholders
Mr. Nourollah Elghanayan, our Chairman of the Board, and members of Mr.
Elghanayan's family, and Mr. Mehdi Gabayzadeh, our President and Chief Executive
Officer, and trusts for the benefit of certain members of Mr. Gabayzadeh's
family, collectively, indirectly beneficially own 100% of the outstanding shares
of our common stock, without giving effect to any warrants to purchase common
stock of our direct parent. As a result, Messrs. Elghanayan and Gabayzadeh and
their respective family members control, and are expected to continue to
control, our management, policies and financing decisions and, collectively,
have the power to elect a majority of the members of our board of directors and
control the vote on any matter requiring the approval of our stockholders,
including the adoption of certain amendments to our certificate of incorporation
and approval of mergers or the sale of all or a substantial part of our assets.
As a result, circumstances could arise in which the interests of these
stockholders could conflict with your interests as holders of the exchange
notes. In addition, these stockholders may have an interest in pursuing
acquisitions, divestitures or other transactions that, in their judgment, could
enhance their equity investment, even though such transactions might involve
risks to you, as holders of the exchange notes.
Additionally, in connection with their purchase of senior secured discount
notes of Middle American Tissue Inc., our direct parent, affiliates of the
initial purchaser of the old notes received, among other things, warrants to
purchase up to 12% of Middle American Tissue's common stock as of the issue date
of the old notes and the right to appoint one member of our board of directors
and the trustee for the Middle American Tissue senior secured discount notes was
granted a pledge of all of the common stock of American Tissue. Under the
circumstances described under "Description of Certain Indebtedness - Middle
American Tissue Notes," such affiliates of the initial purchaser or their
transferees could cause the trustee for these senior secured discount notes to
exercise its rights under the pledge agreement regarding the pledge of common
stock and such affiliates could thereby obtain control of American Tissue.
We Are Subject To Certain Labor Agreements
We have a collective bargaining agreement with the Paper, Allied-
Industrial, Chemical and Energy Workers International Union covering most of our
employees at our mill in Neenah, Wisconsin, which expires in May 2002. Our
tissue-making operation in St. Helens, Oregon, which is operated for us by Boise
Cascade, is staffed with Boise Cascade employees, most of whom are represented
by the Association of Western Pulp and Paper Workers. The collective bargaining
agreement between Boise Cascade and such union expires in March 2005. Moreover,
at the Berlin-Gorham Mills, the hourly production employees are represented by
the Paper, Allied-Industrial, Chemical and Energy Workers International Union
and hourly staff employees are represented by the Office and Professional
Employees International Union. The agreements governing such employees at the
Berlin-Gorham Mills expire in June and July 2002.
We cannot assure you that we will be successful in renegotiating the
agreements relating to unionized employees at any of our facilities, or that
Boise Cascade will be successful in renegotiating its agreement with the
Association of Western Pulp and Paper Workers upon its expiration. In addition,
we cannot assure you that we will not incur increased costs as a result of any
such negotiations.
An interruption of operations at any of our facilities could have a
material adverse effect on our ability to pay interest on the exchange notes, as
well as on our business, financial condition and results of operation.
We Are Dependent On The Continuing Operations Of Our Manufacturing Facilities
Our revenues depend on the continuing operations of our paper mills and
converting facilities. The operations of such facilities involve many risks,
including:
o the breakdown, failure or substandard performance of equipment;
o power outages;
o the improper installation or operation of equipment;
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o natural disasters; and
o the need to comply with directives of governmental agencies.
The occurrence of material operational problems could have a material
adverse effect on our business, financial condition and results of operations.
Additionally, under our agreement with Boise Cascade, the operate our
tissue machine for us, which is located on property that we lease from them at
their mill facility in St. Helens, Oregon. Under such agreement, Boise Cascade
makes available to us for purchase, wood pulp produced at its adjacent pulp mill
and uses such pulp in their operation of our tissue machine. This agreement
expires on December 31, 2022. A default by Boise Cascade or the early
termination of the agreement with Boise Cascade could have a material adverse
effect on our business, financial condition and results of operations.
Our Operations Are Subject To Comprehensive Environmental Regulation
Our operations are subject to comprehensive and frequently changing
federal, state and local environmental laws and regulations, including laws and
regulations governing emissions of air pollutants, discharges of waste water and
storm water, storage, treatment and disposal of materials and waste, remediation
of soil, surface water and ground water contamination and liability for damages
to natural resources. Compliance with these laws and regulations is an
increasingly important factor in our business. We will continue to incur capital
and operating expenditures, which expenditures may be material in relation to
our cash flow from operations, to comply with applicable federal, state and
local environmental laws and regulations and to meet new regulatory
requirements.
We are subject to strict, and under certain circumstances joint and
several, liability for the investigation and remediation of environmental
contamination (including contamination caused by other parties) at properties
that we own or operate and at properties where we or our predecessors have
arranged for the disposal of regulated materials. As a result, we are involved
from time to time in administrative and judicial proceedings and inquiries
relating to environmental matters. We cannot assure you that we will not be
involved in additional proceedings in the future and that the total amount of
future costs and other environmental liabilities will not be material.
We cannot predict what environmental legislation or regulations will be
enacted in the future, how existing or future laws or regulations will be
administered or interpreted or what environmental conditions may be found to
exist. Enactment of more stringent laws or regulations, or more strict
interpretation or enforcement of existing laws and regulations, could require us
to make additional expenditures, some or all of which could be material.
Our Compliance with U.S. Environmental Protection Agency "Cluster Rules" Could
Require Us to Make Significant Capital Expenditures In the Future
The U.S. Environmental Protection Agency has issued final rules known as
the "Cluster Rules" affecting pulp and paper industry discharges of wastewater
and gaseous emissions. The Cluster Rules apply to pulping from the initial
feedstock of wood and certain bleaching processes. The Cluster Rules require
changes in the pulping, bleaching and/or air emission and wastewater treatment
processes presently used in some U.S. pulp and paper mills, including the
Berlin-Gorham Mills. Based upon our understanding of the Cluster Rules, and
after consultation with independent environmental consultants, we estimate that
approximately $13 million of capital expenditures, within a range of plus or
minus approximately 25%, may be required to comply with the Cluster Rules, with
compliance dates beginning in 1999 and extending over the next two to five
years. There are risks and uncertainties associated with our estimate that could
cause total capital expenditures and timing of such expenditures to be
materially different from current estimates, including changes in technology,
interpretations of the Cluster Rules by government agencies that are
substantially different from our
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interpretations or other matters. The EPA has also proposed additional
requirements for the pulp and paper industry, which, if and when adopted, may
require additional material expenditures.
We May Be Required to Make Material Expenditures To Remediate Certain
Environmental Conditions at the Berlin-Gorham Mills
The Berlin-Gorham Mills have been in operation for many years and, over
such time, Crown Paper and other prior operators at the Berlin-Gorham Mills have
generated and disposed of wastes which are or may be considered hazardous. The
soil, groundwater and adjacent area remediation which is currently under
consideration with respect to the Berlin-Gorham Mills could, based upon
available information, cost up to $400,000 over the next two years. Included
among the waste materials generated by past operations are contaminants left in
the vicinity of a former chemical plant on the northern portion of the Berlin
pulp mill property, of which a small building known as the "Cell House" remains
standing. The procedures required to remove the Cell House building, to
encapsulate and seal off the affected areas and thereafter to monitor such areas
as required by current regulations are estimated to cost up to $2.3 million. In
addition, certain maintenance and repairs to the wastewater treatment plants at
the Berlin-Gorham Mills have been identified and are estimated to cost up to
$2.1 million.
The discovery of previously unknown contamination of property underlying,
or in the vicinity of, the Berlin-Gorham Mills could require us to incur
material unforeseen expenses for which we may not have any recourse against
Crown Paper or other prior operators. Occurrences of any of these events could
have a material adverse effect on our financial condition.
We Are Dependent On Our Key Personnel
We are dependent on the retention of, and continued performance by, our
executive officers, including Mr. Mehdi Gabayzadeh, our President and Chief
Executive Officer and Mr. Nicholas T. Galante, III, our Executive Vice President
and President and Chief Executive Officer of our subsidiary Pulp & Paper of
America LLC, which operates the Berlin-Gorham Mills. We believe that the loss of
the services of either Mr. Gabayzadeh or Mr. Galante could have a material
adverse effect on us. We do not have employment contracts with any of our senior
managers.
We Have Recently Made Changes In Our Financial And Accounting Department
In order to address certain deficiencies of our management information
systems and accounting systems, we have restructured our financial and
accounting department, including hiring a new chief financial officer, and
retained consultants who are working with us to install new management
information systems. We believe that such changes will be helpful in managing
our operations, including completing and delivering complete and accurate
financial statements in a more timely manner.
It is our intention to deliver financial statements and file reports with
the Securities and Exchange Commission within the required time periods of the
Commission and as required by the indenture governing the exchange notes and our
New Credit Facility. However, we can give you no assurance that we will be able
to effect such changes in our management information systems and accounting
systems in a timely manner or that any delay will not have a material adverse
effect on our business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We May Be Subject To Federal And State Fraudulent Transfer Laws
Under applicable federal or state fraudulent transfer laws, under certain
circumstances, the subsidiary guarantees of the exchange notes may be
subordinated to our existing or future indebtedness or the existing or future
indebtedness of our subsidiary guarantors, and the security interests in the
assets of our subsidiary guarantors then securing the exchange notes and
guarantees could be found to be void or unenforceable in accordance with their
terms. Under such laws, if a court were to find that, at the time the subsidiary
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guarantees were issued, and the security interests in certain of their assets
securing the subsidiary guarantees were granted, that a subsidiary guarantor
issued its subsidiary guarantee (1) with the intent of hindering, delaying or
defrauding creditors, or (2) received less than a reasonably equivalent value or
fair consideration in exchange for such obligation, and:
o was insolvent, or became insolvent, by reason of the sale of the Notes
or its subsidiary guarantee (and the application of the proceeds of
such sale);
o was left with an unreasonably small amount of capital; or
o believed that it would incur debts beyond its ability to pay such
debts as they matured, or, irrespective of any consideration received
or its solvency at such time, actually intended to hinder, delay or
defraud its present or future creditors;
such court could void such subsidiary guarantee and the security interest
securing such subsidiary guarantee, or subordinate such subsidiary guarantee to
all other indebtedness of such guarantor. In such event, we could not assure you
that any repayment of the exchange notes, either by us or the subsidiary
guarantors, could ever be recovered by you, as holders of the exchange notes.
For the purpose of the above discussion, the measure of insolvency varies
depending upon the law of the jurisdiction being applied. Generally, however, a
subsidiary guarantor would be considered to have been insolvent at the time the
exchange notes and the subsidiary guarantees were issued if the sum of its debts
were, at that time:
o greater than the sum of the value of all of its property at a "fair
valuation;" or
o if the then "fair saleable value" of its assets was less than the
amount that was then required to pay the probable liability on its
existing debts and liabilities (including contingent liabilities) as
they mature.
We cannot assure you as to:
o the standard a court would apply in order to determine whether any
subsidiary guarantor was insolvent as of the issue date of the
exchange notes and subsidiary guarantees; or
o that, regardless of the method of valuation, a court would not
determine that such subsidiary guarantor was insolvent on such date;
or
o that, regardless of whether the subsidiary guarantor was insolvent on
such date, the issuance of its subsidiary guarantee and the grant of
security interests constituted fraudulent transfers on another of the
grounds summarized above.
Moreover, the subsidiary guarantees may be subject to a claim that they
were issued for less than reasonably equivalent value or fair consideration,
because the subsidiary guarantees were issued by the subsidiary guarantors for
our benefit and only indirectly for the benefit of the subsidiary guarantors. As
described in the preceding paragraph, a court, therefore, could void the
subsidiary guarantees and security interests or subordinate them to other
obligations of the subsidiary guarantors.
Holders Of The Exchange Notes May Suffer Adverse Tax Consequences Because The
Old Notes Were Issued At A Discount From Their Principal Amount
Our old notes were issued at a discount from their principal amount.
Consequently, holders of the exchange notes generally will be required to
include amounts in gross income for federal income tax purposes before receiving
the cash payments to which such income is attributable. See "Certain United
States Income Tax
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Considerations" for a more detailed discussion of the U.S. federal income tax
consequences to the holders of the exchange notes of the acquisition, ownership
and disposition of the exchange notes.
If a bankruptcy case is commenced by or against us under the U.S.
Bankruptcy Code after the issuance of the exchange notes, the claim of a holder
of the exchange notes with respect to the principal amount at maturity thereof
may be limited to an amount equal to the sum of the initial offering price of
the old notes and that portion of the original issue discount that is not deemed
to constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code. Any
original issue discount that was not amortized as of any such bankruptcy filing
would constitute "unmatured interest." To the extent that the U.S. Bankruptcy
Code differs from the Internal Revenue Code in determining the method of
amortization of original issue discount, a holder of the exchange notes may
realize taxable gain or loss upon payment of such holder's claim in bankruptcy.
We May Not Be Able To Finance A Change Of Control Offer
Upon the occurrence of certain change of control events, the holders of the
exchange notes may require us to repurchase all of their outstanding exchange
notes. See "Description of Certain Indebtedness" and "Description of Notes -
Certain Covenants - Change of Control." However, it is possible that we will not
have sufficient funds at the time of such change of control or that restrictions
under the New Credit Facility or our other debt agreements will not allow such
repurchases. Moreover, under the New Credit Facility, certain change of control
events are events of default giving the lenders thereunder the right to
accelerate the maturity of borrowings thereunder. We cannot assure you that we
will be able to obtain the necessary consents from the lenders under the New
Credit Facility to permit us to repurchase the exchange notes pursuant to a
change of control offer or to repay or refinance all of the indebtedness under
the New Credit Facility. If we fail to make a change of control offer or pay the
required repurchase price when due, an event of default under the exchange notes
will occur.
The Exchange Notes Have No Public Market And You Cannot Be Sure That An Active
Trading Market Will Develop
The exchange notes are a new issue of securities with no established
trading market and will not be listed on any securities exchange. We have been
informed by the initial purchaser that it intends to make a market in the
exchange notes following the completion of this offering of the exchange notes.
However, the initial purchaser is not obligated to do so, and may discontinue
its market-making activities with respect to the exchange notes at any time
without notice. In addition, the liquidity of the trading market in the exchange
notes, and the market price quoted for these exchange notes, may be adversely
affected by changes in the overall market for high yield securities and by
changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, you can not be sure that an
active trading market will develop for these exchange notes.
You Should Not Rely On Forward-Looking Statements Contained In This Prospectus
This prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, in particular, the statements about our plans,
strategies and prospects under the headings "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Business." Although we believe that our plans intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
cannot assure you that we will achieve the plans, intentions or expectations.
Important factors that could cause actual results to differ materially from the
forward-looking statements we make in this prospectus are set forth below and
elsewhere in this prospectus. All forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained in this "Risk Factors" section. As used in this
"Risk Factors" section, unless the context otherwise requires, the terms
"Company," "American Tissue," "we," "our," "ours," and "us" refer to American
Tissue Inc. and all of its subsidiaries.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We sold the old notes to the initial purchaser on July 9, 1999 in a private
placement. The old notes were not registered under the Securities Act of 1933.
The initial purchaser has informed us that it promptly resold the old notes to
"qualified institutional buyers" in reliance on Rule 144A under the Securities
Act of 1933. When we sold the old notes to the initial purchaser, we entered
into the registration rights agreement, which requires that we file a
registration statement under the Securities Act of 1933 with respect to the
exchange notes to be issued in the exchange offer and, upon the effectiveness of
the registration statement, offer to you and all other holders of the old notes
the opportunity to exchange your old notes for a like principal amount of
exchange notes. These exchange notes will be issued without a restrictive legend
and, except as set forth below, may be reoffered and resold without restrictions
or limitations under the Securities Act. After we complete the exchange offer,
our obligations with respect to the registration of the old notes will
terminate, except as provided in the last paragraph of this section.
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Under existing interpretations of the staff of the Securities and Exchange
Commission contained in several no action letters to third parties, we believe
that the exchange notes to be issued in the exchange offer will be freely
transferable by a holder who receives them in exchange for the old notes,
without further registration under the Securities Act, provided that the holder
represents to us that:
(1) it is not an "affiliate" of American Tissue (such as a director,
executive officer or controlling stockholder of American Tissue or our
parent companies),
(2) it will be acquiring the exchange notes in the ordinary course of
its business, and
(3) it has not engaged in, does not intend to engage in, and has no
arrangement or understanding with any other person to participate in, a
distribution of the exchange notes.
However, we have not sought a no-action letter from the Securities and
Exchange Commission with respect to this exchange offer and we cannot assure you
that the Securities and Exchange Commission's staff would make a similar
determination with respect to this exchange offer. Any holder of the old notes
who is an "affiliate" of our company or who intends to participate in the
exchange offer for the purpose of distributing the exchange notes,
(1) will not be able to validly tender old notes in the exchange
offer,
(2) will not be able to rely on the interpretations of the staff of
the Securities and Exchange Commission, and
(3) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any offer or sale of
its the old notes, unless such offer or sale is made pursuant to an
exemption from those requirements.
In addition, each broker-dealer that receives exchange notes for its own
account in the exchange offer must acknowledge that it will deliver a prospectus
in connection with any resale of those notes. The letter of transmittal
accompanying this prospectus states that, by so acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is acting in
the capacity of an "underwriter" within the meaning of Section 2(11) of the
Securities Act. This prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of exchange
notes received in exchange for old notes acquired by that broker-dealer as a
result of market-making or other trading activities. Pursuant to the
registration rights agreement, we have agreed to make this prospectus available
to any broker-dealer for use in connection with any such resale.
If you are not eligible to participate in the exchange offer, you can
elect, by so indicating on the letter of transmittal and providing certain
additional necessary information, to have your old notes included within the
coverage of a shelf registration statement pursuant to Rule 415 under the
Securities Act. If we have to file a shelf registration statement, we will be
required to keep it effective for a period of two years or such shorter period
that will terminate when all of the old notes covered by that shelf registration
statement have been resold. Other than as set forth in this paragraph, holders
of the old notes will not have the right to require us to register their old
notes under the Securities Act.
Terms of the Exchange Offer
Upon satisfaction or waiver of the conditions of our exchange offer set
forth in this prospectus and in the accompanying letter of transmittal, we will
accept all the old notes that are validly tendered and not withdrawn prior to
5:00 p.m. New York City time, on the expiration date. After authentication of
the exchange notes by the trustee, we will issue and deliver $1,000 principal
amount of exchange notes in exchange for each $1,000 principal amount of
outstanding old notes accepted in the exchange offer. You may
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tender some or all of your old notes pursuant to the exchange offer in
denominations of $1,000 and integral multiples thereof.
By tendering the old notes in exchange for exchange notes and by executing
the letter of transmittal, you will be required to represent that:
(1) you are not an "affiliate" of our company,
(2) any exchange notes that you receive in the exchange offer will be
acquired by you in the ordinary course of your business, and
(3) you have no intention to distribute, and have no arrangement or
understanding with any person to participate in the distribution of, the
exchange notes you acquire.
The form and terms of the exchange notes will be identical in all material
respects to the form and terms of the old notes, except that:
(1) the offering of the exchange notes has been registered under the
Securities Act,
(2) the exchange notes will not be subject to restrictions on resale,
and
(3) certain provisions of the registration rights agreement relating
to our obligation to pay liquidated damages to holders of the old notes
under certain circumstances will become ineffective.
The exchange notes will evidence the same debt as the old notes and will be
issued under and entitled to the benefits of, the same indenture as the old
notes.
As of the date of this Prospectus, $165,000,000 aggregate principal amount
of old notes is outstanding. In connection with the issuance of the old notes,
we arranged for the old notes to be issued and transferable in book-entry form
through the facilities of The Depository Trust Company, acting as a depositary.
The exchange notes will also be issuable and transferable in book-entry form
through DTC.
Copies of this prospectus, together with the accompanying letter of
transmittal, are initially being sent to all registered holders of old notes as
of the close of business on __________, ____. The exchange offer is not
conditioned upon any minimum aggregate principal amount of the old notes being
tendered. However, the exchange offer is subject to certain customary conditions
which may be waived by us, and to the terms and provisions of the registration
rights agreement. See "- Conditions to the Exchange Offer" for a detailed
description of those conditions.
We will be deemed to have accepted validly tendered old notes when, as and
if we have given oral or written notice thereof to the exchange agent. The
exchange agent will receive the exchange notes from us for authentication and
will deliver them to the tendering holders.
If we do not accept any tendered old notes for exchange because of an
invalid tender or because the conditions to the exchange offer have not been
met, certificates for any such unaccepted old notes will be returned, at our
cost, to the tendering holder thereof as promptly as practicable after the
expiration date of our exchange offer.
Holders who tender old notes in our exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of their old notes
pursuant to the exchange offer. We will pay all charges and expenses, other than
certain applicable taxes, in connection with our exchange offer.
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Expiration Date; Extensions; Amendments
The term "expiration date," as used in this prospectus, means 5:00 p.m.,
New York City time, on _______, ____, unless we, in our sole discretion, extend
our exchange offer. If we extend our exchange offer, the term "expiration date"
will mean the latest date to which our exchange offer is extended. We may extend
our exchange offer at any time and from time to time by giving oral or written
notice to the exchange agent and by timely public announcement.
We reserve the right, in our sole discretion:
(1) to delay accepting any old notes for exchange;
(2) to extend our exchange offer;
(3) to terminate our exchange offer if the conditions set forth below
under "- Conditions to the Exchange Offer" have not been satisfied; and
(4) to amend the terms of our exchange offer in any manner.
We will notify the exchange agent of any delay, extension, termination or
amendment by oral or written notice. In addition, we will promptly notify each
registered holder of old notes of any amendment. We will give to the exchange
agent written confirmation of any oral notice.
We acknowledge and undertake to comply with the provisions of Rule 14e-l(c)
under the Securities Exchange Act of 1934, which requires us to pay the
consideration offered, or return the old notes surrendered for exchange,
promptly after the termination or withdrawal of the exchange offer.
Interest on the Exchange Notes
Interest on the exchange notes will accrue from the last interest payment
date on which interest was paid on the old notes surrendered in exchange
therefor or, if no interest has been paid on the old notes, from July 9, 1999.
Procedures for Tendering Old Notes
To tender old notes in our exchange offer, you must complete, sign and date
the letter of transmittal, or a facsimile thereof, in accordance with the
instructions contained below. You must then mail or otherwise deliver the letter
of transmittal (or a facsimile), together with the old notes to be exchanged and
any other required documents, to the exchange agent, at its address set forth
herein under "- Exchange Agent" and in the letter of transmittal. You may also
effect a tender of old notes pursuant to the procedures for book-entry transfer
as provided for herein and in the letter of transmittal.
We understand that, promptly after the date of this prospectus, the
exchange agent will make a request to establish accounts at DTC for the purpose
of facilitating the exchange offer. Subject to the establishment of those
accounts, any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of its old notes by
causing DTC to transfer those old notes into the exchange agent's account in
accordance with DTC'S procedure for such transfer. Although delivery of old
notes may be effected through book-entry transfer into the exchange agent's
account at DTC, the letter of transmittal (or a facsimile thereof) with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the exchange agent at its address set
forth herein (under "- Exchange Agent") prior to 5:00 p.m., New York City time,
on the expiration date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The exchange agent and DTC have confirmed that our exchange offer is
eligible for DTC's Automated Tender Offer Program. Accordingly, DTC participants
may electronically transmit their acceptance of the
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exchange offer by causing DTC to transfer old notes to the Depositary in
accordance with DTC's Automated Tender Offer Program procedures for transfer.
DTC will then send an "agent's message" to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the confirmation of a book-entry
transfer, which states that:
(1) DTC has received an express acknowledgement from the DTC
participant that is tendering the old notes which are the subject of the
book-entry transfer;
(2) the DTC participant has received and agreed to be bound by the
terms of the letter of transmittal; and
(3) we may enforce the terms of the letter of transmittal against the
DTC participant.
In the case of an "agent's message" relating to guaranteed delivery, the term
means a message transmitted by DTC and received by the exchange agent, which
states that DTC has received an express acknowledgement from the DTC participant
tendering old notes that such participant has received and agrees to be bound by
the notice of guaranteed delivery.
Notwithstanding the foregoing, in order to validly tender in the exchange
offer with respect to old notes transferred through the Automated Tender Offer
Program, a DTC participant using the Automated Tender Offer Program must also
properly complete and duly execute the applicable letter of transmittal and
deliver it to the exchange agent.
By the authority granted by DTC, any DTC participant which has old notes
credited to its DTC account at any time (and held of record by DTC's nominee)
may directly provide a tender as though it were the registered holder by
completing, executing and delivering the applicable letter of transmittal to The
Chase Manhattan Bank, as the Depositary for the old notes. DELIVERY OF DOCUMENTS
TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The tender by a holder and the acceptance of the tender by us will
constitute an agreement between the holder and us upon the terms, and subject to
the conditions, set forth in this prospectus and in the letter of transmittal.
Trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity
should indicate their capacities when signing the letter of transmittal or any
old notes or bond powers. Evidence satisfactory to us of their authority to so
act must be submitted with the letter of transmittal.
Only a holder in whose name old notes are registered may tender those old
notes in the exchange offer. To tender in the exchange offer, a holder must:
(1) complete, sign and date the letter of transmittal or a facsimile
thereof;
(2) have the signatures thereon guaranteed if required by the letter
of transmittal; and
(3) unless the tender is being effected pursuant to the procedure for
book-entry transfer, mail or otherwise deliver the letter of transmittal
(or a facsimile thereof), together with the old notes and other required
documents, to the exchange agent, prior to 5:00 p.m., New York City time,
on the expiration date.
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If less than all of your old notes are tendered, you should fill in the
principal amount of the old notes being tendered in the appropriate box on the
letter of transmittal. The entire principal amount of the old notes delivered to
the exchange agent will be deemed to have been tendered unless otherwise
indicated.
THE METHOD OF DELIVERY OF THE OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO US. YOU MAY REQUEST THAT
YOUR BROKER, OR A COMMERCIAL BANK, TRUST COMPANY OR NOMINEE, EFFECT THE TENDER
ON YOUR BEHALF, AS SET FORTH IN THIS PROSPECTUS AND IN THE LETTER OF
TRANSMITTAL.
If your old notes are registered in the name of a broker, commercial bank,
trust company or other nominee and you wish to tender those old notes, you
should contact the registered holder promptly and instruct the registered holder
to tender on your behalf. If you wish to tender on your own behalf, prior to
completing and executing the letter of transmittal and delivering your old
notes, you must either make appropriate arrangements to register ownership of
the old notes in your own name or obtain a properly completed bond power from
the registered holder. The transfer of record ownership may take considerable
time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a firm or institution that is a member firm
of the Medallion system, unless the old notes are tendered by:
(1) a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" of the
letter of transmittal or
(2) for the account of a member firm of the Medallion system.
If the letter of transmittal is signed by a person other than the registered
holder listed therein, the old notes that are the subject of that letter of
transmittal must be endorsed or accompanied by appropriate bond powers that
authorize that person to tender the old notes on behalf of the registered
holder. The endorsement or bond powers must be signed in the name of the
registered holder as it appears on the old notes.
All questions as to the:
o validity;
o form;
o eligibility (including time of receipt);
o acceptance of the tendered old notes; and
o withdrawal of the tendered old notes;
will be determined by us in our sole discretion. Our determination will be final
and binding. We reserve the absolute right to reject any and all old notes which
would be unlawful if accepted, in the opinion of our counsel. We also reserve
the right, in our sole discretion, to waive any defects, irregularities or
conditions of tender as to particular old notes. Our interpretation of the terms
and conditions of the exchange offer, including the instructions in the letter
of transmittal, will be final and binding on all parties.
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We intend to notify holders of defects or irregularities with respect to
tenders of old notes. However, neither we, the exchange agent nor any other
person will incur any liability for failure to give such notification. Tenders
of old notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
Any old notes received by the exchange agent that we determine are not
properly tendered or as to which the defects or irregularities have not been
cured or waived, will be returned by the exchange agent to the tendering holder,
as soon as practicable following the expiration date.
In addition, we reserve the right, in our sole discretion:
(1) to purchase or make offers for any old notes that remain
outstanding subsequent to the expiration date; and
(2) to the extent permitted by applicable law, to purchase old notes
in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
exchange offer.
Guaranteed Delivery Procedures
Holders who wish to tender their old notes but who cannot, prior to the
expiration date:
(1) deliver their old notes, the letter of transmittal or any other
required documents to the exchange agent; or
(2) who cannot complete the procedures for book-entry transfer,
may effect a tender if:
o they tender through an institution that is a member firm of the
Medallion system;
o prior to the expiration date, the exchange agent receives from an
institution that is a member firm of the Medallion system a properly
completed and duly executed notice of guaranteed delivery (by
facsimile transmission, mail or hand delivery) setting forth the name
and address of the holder, the certificate number(s) of the old notes
being tendered and the principal amount of those old notes, stating
that the tender is being made and guaranteeing that, within five New
York Stock Exchange trading days after the expiration date, the letter
of transmittal (or a facsimile thereof), together with the
certificate(s) representing those old notes (or a confirmation of
book-entry transfer of those old notes into the exchange agent's
account at DTC) and any other documents required by the letter of
transmittal, will be deposited by the member firm with the exchange
agent; and
o the exchange agent receives within five New York Stock Exchange
trading days after the expiration date:
(1) the properly completed and executed letter of transmittal (or a
facsimile thereof);
(2) the certificate(s) representing all tendered old notes in proper
form for transfer (or a confirmation of book-entry transfer of those old
notes into the exchange agent's account at DTC); and
(3) all other documents required by the letter of transmittal.
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Upon request to the exchange agent, we will send a notice of guaranteed
delivery to holders who wish to tender their old notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, holders may withdraw
tenders of old notes at any time prior to 5:00 p.m., New York City time, on the
expiration date. To withdraw a tender of old notes in the exchange offer, the
exchange agent must receive, by a telegram, telex, letter or facsimile
transmission, notice of withdrawal at its address set forth in this prospectus
prior to 5:00 p.m., New York City time, on the expiration date. A notice of
withdrawal must:
(1) specify the name of the person that deposited the old notes to be
withdrawn;
(2) identify the old notes to be withdrawn (including the certificate
number(s) and principal amount of those old notes, or, in the case of old
notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited);
(3) be signed by the holder of those old notes in the same manner as
the original signature on the letter of transmittal by which those old
notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the trustee with
respect to the old notes register the transfer of those old notes into the
name of the person withdrawing the tender; and
(4) specify the name in which any of those old notes are to be
registered, if different from that of the person who deposited those old
notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of notices of withdrawal. Our determination will be
final and binding on all parties. We will not deem old notes so withdrawn to
have been validly tendered for purposes of the exchange offer. We will not issue
exchange notes for withdrawn old notes, unless you validly retender the
withdrawn old notes. We will return any old notes which have been tendered but
which are not accepted for exchange to the holder of the old notes at our cost
as soon as practicable after withdrawal, rejection of tender or termination of
the exchange offer.
You may retender properly withdrawn old notes by following one of the
procedures described above under the heading "Procedures for Tendering Old
Notes".
Conditions to The Exchange Offer
Notwithstanding any other term of the exchange offer, we will not be
required to accept any old notes for exchange, or to exchange any exchange notes
for any old notes, and we may terminate or amend the exchange offer before our
acceptance of tenders of the old notes if:
(1) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to proceed
with the exchange offer or any development has occurred in any existing
action or proceeding which may be harmful to us or any of our subsidiaries;
or
(2) any law, statute, rule, regulation or interpretation by the staff
of the Securities and Exchange Commission is proposed, adopted or enacted,
which, in our sole judgment, might impair our ability to proceed with the
exchange offer or impair the contemplated benefits of the exchange offer to
us; or
(3) any governmental approval has not been obtained, which we believe,
in our sole discretion, is necessary for the consummation of the exchange
offer as outlined in this prospectus.
35
<PAGE>
If we determine, in our sole discretion, that any of the conditions are not
satisfied, we may:
(1) refuse to accept any old notes and return to the holders any old
notes that have been tendered, or
(2) extend the exchange offer and retain all old notes tendered prior
to the original expiration date of the exchange offer, subject to the
rights of the holders of those notes to withdraw them, or
(3) waive the condition and accept all properly tendered old notes
that have not been withdrawn.
The exchange offer is not conditioned on any minimum aggregate principal
amount of the old notes being tendered for exchange.
Exchange Agent
The Chase Manhattan Bank, the trustee under the indenture, has been
appointed as exchange agent for the exchange offer. In that capacity, the
exchange agent has no fiduciary duties and will be acting solely on the basis of
our directions. Completed and executed letters of transmittal and requests for
assistance and requests for additional copies of this prospectus or of the
letter of transmittal should be directed to the exchange agent addressed as
follows:
By registered or certified mail
or by overnight courier
or by hand delivery: The Chase Manhattan Bank
Corporate Trust Securities Window
Room 234, North Building
55 Water Street
New York, New York 10004
Facsimile transmission: (212) 638-7380 or (212) 638-7381
Information or confirmation
by telephone: Mr. Carlos Esteves, (212) 638-0828
or (212) 638-0454
Delivery to an address or facsimile number other than those listed above will
not constitute a valid delivery.
Fees and Expenses
We will bear the expenses of soliciting tenders. We are mailing the
principal solicitation. However, our officers and regular employees and those of
our affiliates may make additional solicitation by telegraph, telecopy,
telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer. We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. However, we will pay the exchange agent
reasonable and customary fees for its services and reimburse it for its
reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange
offer. These expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
Transfer Taxes
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. However, holders who
instruct us to register exchange notes in the name of,
36
<PAGE>
or returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax on that transfer.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the old
notes, as reflected in our accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by us as
a result of the consummation of the exchange offer. The expenses of the exchange
offer will be amortized by us over the remaining term of the exchange notes
issued in the exchange offer.
Consequences of Failure to Exchange
Holders of old notes who do not tender old notes in the exchange offer will
continue to hold those old notes and will be entitled to all the rights, and
subject to the limitations, applicable thereto under the indenture. All old
notes that are not tendered will continue to be subject to the restrictions on
resale set forth in the indenture. Accordingly, prior to the later of July 9,
2001 (two years from the date of original issue of the old notes) or two years
after those old notes were last sold by us or one of our affiliates, those old
notes may be offered and resold only:
(1) to us;
(2) pursuant to a registration statement that has been declared
effective under the Securities Act;
(3) in the United States to a "qualified institutional buyer" within
the meaning of Rule 144A in reliance upon the exemption from the
registration requirements of the Securities Act of 1933 provided by Rule
144A, based upon an opinion of counsel;
(4) outside the United States to a foreign person in a transaction
that complied with the provisions of Regulation S under the Securities Atc;
or
(5) pursuant to another available exemption from the registration
requirements of the Securities Act, based upon an opinion of counsel,
in each case in accordance with applicable state securities laws.
To the extent that old notes are tendered and accepted in the exchange
offer, the liquidity of the trading market for untendered old notes will be
adversely affected.
Shelf Registration Statement
If either of the following occur:
(1) the exchange offer is not permitted by applicable law or policy of
the Securities and Exchange Commission; or
(2) a holder of old notes notifies us that:
(A) the holder was prohibited by law or Securities Exchange
Commission policy from participating in the exchange offer;
(B) the holder cannot resell the exchange notes acquired by it in
the exchange offer to the public without delivering a prospectus and
this prospectus is not appropriate or available for such resales by
the holder; or
37
<PAGE>
(C) the holder is a broker-dealer and holds old notes acquired
directly from us or any of our affiliates
then, we will take the following actions:
(1) we will file a shelf registration statement under Rule 415 of the
Securities Act of 1933, relating to the notes; and
(2) use our commercially reasonable best efforts to cause such shelf
registration statement to become effective on or prior to the date that is
210 days after July 9, 1999.
USE OF PROCEEDS
We will not receive any proceeds from the exchange of the exchange notes
for your old notes. We used the net proceeds of the offering of the old notes,
together with borrowings under our New Credit Facility and the equity
contribution from our direct parent, to repay certain indebtedness (including
accrued interest through the date of repayment), to consummate our acquisition
of the Berlin-Gorham Mills and to pay related fees and expenses.
CAPITALIZATION
The following table sets forth our actual consolidated cash and
capitalization as of June 30, 1999 and our consolidated cash and capitalization,
as adjusted to give effect to the Transactions. This table should be read in
conjunction with "Unaudited Pro Forma Consolidated Financial Data," "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements,
including the notes thereto, included elsewhere in this prospectus.
38
<PAGE>
As of June 30, 1999
------------------------
Actual As Adjusted
------ -----------
Cash and Cash Equivalents ........................ $ 0.6 $ 0.6
====== ======
Debt (including current portion):
Old Notes ........................................ $ -- $159.5
Revolving Credit Facilities(1) ................... 67.2 9.9
Related Party Debt(2) ............................ 27.9 --
Mortgage and Other Debt(3) ....................... 62.6 22.9
Capital Lease Obligations ........................ 29.7 --
------ ------
Total Debt .................................. 187.4 192.3
Stockholder's Equity:
Common Stock ..................................... 1.6 1.6
Additional Paid-In Capital ....................... 7.7 60.0
Retained Earnings ................................ 33.0 31.4
------ ------
Total Stockholder's Equity .................. 42.3 91.9
------ ------
Total Capitalization ........................ $229.7 $285.3
====== ======
- -----------
(1) As of June 30, 1999, approximately $67.2 million was outstanding under a
revolving credit facility with LaSalle Bank National Association. As part
of the Transactions, we repaid all outstanding amounts under our then
existing revolving credit facility and entered into our New Credit
Facility. The New Credit Facility consists of a five year $100.0 million
revolving credit facility with certain lenders, for which LaSalle Bank
National Association acts as agent. We borrowed $9.9 million under the New
Credit Facility on July 9, 1999, the closing date of the Transactions. See
"Description of Certain Indebtedness."
(2) Related party debt consists of approximately $20.2 million of indebtedness
held by Mr. Nourollah Elghanayan and members of his family, approximately
$0.8 million held by Mr. Gabayzadeh, and approximately $6.9 million held by
affiliated entities, all of which has been assumed by our parent, Super
American Tissue Inc., and is held by Mr. Elghanayan, Mr. Gabayzadeh and
such affiliated entities, respectively.
(3) See notes (5) and (6)(d) and (e) to our consolidated financial statements
included herein. The "as adjusted" amount outstanding consists of a $0.7
million loan from Curtiss-Wright, approximately $0.4 million of secured
loans from Community Redevelopment Agency of Calexico, California and the
various other secured financing arrangements described under "Description
of Certain Indebtedness."
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL DATA
The unaudited pro forma consolidated financial data have been derived by
giving effect to the pro forma adjustments to our historical consolidated
financial statements and the historical financial statements of the
Berlin-Gorham Mills appearing elsewhere in this prospectus. The unaudited pro
forma consolidated balance sheet as of June 30, 1999 gives effect to the
Transactions as if they were consummated on June 30, 1999. The unaudited pro
forma consolidated statements of operations for
o fiscal 1998,
o the nine months ended June 30, 1998 and June 30, 1999, respectively, and
o the 12 months ended March 31, 1999
give effect to the Transactions as if they were consummated at the beginning of
each such period.
The pro forma adjustments are described in the accompanying notes to the
unaudited pro forma statements and are based upon the available information and
upon certain assumptions that management believes are reasonable. The unaudited
pro forma consolidated financial data and accompanying notes should be read in
conjunction with the historical consolidated financial statements and related
notes, and other financial information pertaining to us and the historical
financial statements and related notes of the Berlin-Gorham Mills, including
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
39
<PAGE>
The following unaudited pro forma consolidated financial data and
accompanying notes are provided for informational purposes only and are not
necessarily indicative of the operating results that would have occurred had the
Transactions been consummated on the dates described above, nor are they
necessarily indicative of our future results of operations or financial
position.
40
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Historical Historical Adjustments Adjustments
American Berlin-Gorham for the for
Tissue Mills Acquisition(a) the Offering(b) Pro Forma
---------- ------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............................. $ 597 $ 1,675 $ (1,673) $ -- $ 599
Accounts receivable, net .............................. 35,078 5,759 (5,759) -- 35,078
Inventories ........................................... 57,219 26,282 (4,696) -- 78,805
Equipment held for sale ............................... 3,322 -- -- -- 3,322
Prepaid expenses and deposits ......................... 3,860 386 (386) -- 3,860
--------- --------- --------- --------- ---------
Total current assets ............................... 100,076 34,102 (12,514) 121,664
Property, plant and equipment, net .................... 163,900 30,838 9,836 -- 204,574
Due from related parties .............................. 21,672 -- -- -- 21,672
Deferred costs, net ................................... 2,589 -- -- 6,660 9,249
Other assets .......................................... 185 16,340 (16,340) -- 185
--------- --------- --------- --------- ---------
Total assets ....................................... $ 288,422 $ 81,280 $ (19,018) $ 6,660 $ 357,344
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued expenses ................. $ 58,059 $ 19,866 $ (13,784) $ -- $ 64,141
Revolving line of credit .............................. 67,193 -- -- (57,580) 9,613
Notes payable ......................................... 7,616 -- -- (7,616) --
Current portion of long-term debt and
mortgage loans ........................................ 6,427 -- -- (5,752) 675
Current portion of capital lease and
financing obligations ................................. 5,055 -- -- (5,055) --
--------- --------- --------- --------- ---------
Total current liabilities .......................... 144,350 19,866 (13,784) (76,003) 74,429
Senior Secured Notes .................................. -- -- -- 159,446 159,446
Other long-term debt, less current portion ............ 27,637 30,255 (30,255) (26,345) 1,292
Mortgage loans, less current portion .................. 20,984 -- 20,984
Long-term capital lease and financing
obligations ........................................... 24,689 -- (24,489) (24,489) 200
Related party debt .................................... 27,912 -- -- (27,912) --
--------- --------- --------- --------- ---------
Total long-term debt ............................... 101,222 30,255 (30,255) 80,700 181,922
Accrued post-retirement benefits, other
than pensions ......................................... -- 24,337 (15,218) -- 9,119
Other long-term liabilities ........................... -- 2,179 (2,179) -- --
--------- --------- --------- --------- ---------
Total liabilities .................................. 245,572 76,637 (61,436) 4,697 265,470
Stockholder's equity .................................. 42,850 4,643 (4,643) 49,024 91,874
--------- --------- --------- --------- ---------
Total liabilities and
stockholder's equity .............................. $ 288,422 $ 81,280 $ (66,079) $ 53,721 $ 357,344
========= ========= ========= ========= =========
</TABLE>
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(dollars in thousands)
(a) Purchase accounting adjustments for the acquisition of certain assets and
assumptions of certain liabilities:
<TABLE>
<CAPTION>
Berlin-Gorham Net Assets Pro Forma
Historical to be Acquired Adjustments
------------- -------------- -------------
<S> <C> <C> <C>
Cash and cash equivalents ...................................... $ 1,675 $ 2 $ (1,673)
Accounts receivable ............................................ 5,759 -- (5,759)
Inventories .................................................... 26,282 21,586 (4,696)
Prepaid expenses and other current assets ...................... 386 -- (386)
Property, plant and equipment .................................. 30,838 40,674 9,836
Other assets ................................................... 16,340 -- (16,340)
------------- ------------- -------------
Total assets ................................................ 81,280 62,262 (19,018)
============= ============= -------------
Accounts payable and accrued liabilities ....................... 19,866 6,082 (13,784)
Long-term debt ................................................. 30,255 -- (30,255)
Accrued post-retirement benefits, other than pensions .......... 24,337 9,119 (15,218)
Other long-term liabilities .................................... 2,179 -- (2,179)
------------- ------------- -------------
Total liabilities ........................................... 76,637 15,201 (61,436)
------------- ------------- -------------
Net assets .................................................. $ 4,643 $ 47,061 $ (42,418)
============= ============= =============
</TABLE>
- -----------
(b) Gives effect to the following unaudited pro forma adjustments (1) the
issuance of $165.0 million of old notes, net of a discount of approximately
$5.5 million, borrowings of $9.9 million under the New Credit Facility, the
investment of additional equity in the amount of $24.5 million from American
Tissue's parent, the repayment of $138.5 million of certain existing
indebtedness, the payment of $8.3 million of fees and expenses related to the
Transactions and the amortization of $1.6 million of deferred financing costs
related to certain indebtedness that was repaid in connection with the offering
of the Notes; and (2) the assumption of $27.9 million of related party debt by
Super American Tissue Inc.
42
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
12 Months Ended September 30, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Historical
Historical Berlin- Adjustments Adjustments
American Gorham for the for the
Tissue Mills(1) Acquisition Offering Pro Forma
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ..................................... $ 213,988 $ 174,182 $ 1,867(4) $ -- $ 390,037
Cost of sales ................................. 175,083 180,094 (38,471)(5) -- 316,706
Severance charge .............................. -- 1,932 -- -- 1,932
----------- ----------- ----------- ----------- -----------
Gross profit .................................. 38,905 (7,844) 40,338 -- 71,399
Gain on timberlands sale ...................... -- 13,518 -- -- 13,518
Selling, general and administrative
expenses ...................................... 29,388 8,739 (505)(6) -- 37,622
Corporate overhead allocation ................. -- 6,729 (6,729)(7) -- --
----------- ----------- ----------- ----------- -----------
Operating income (loss) ....................... 9,517 (9,794) 47,572 -- 47,295
Interest expense .............................. 14,672 2,547 -- 7,389(8) 24,608
Other income, net
Rental income ................................. 1,215 -- -- -- 1,215
Other income .................................. -- 56 -- -- 56
Income from insurance claims .................. 2,466 -- -- -- 2,466
----------- ----------- ----------- ----------- -----------
3,681 56 -- -- 3,737
----------- ----------- ----------- ----------- -----------
Income tax benefit ............................ -- (4,766) -- -- (4,766)
----------- ----------- ----------- ----------- -----------
Net income (loss) ............................. $ (1,474) $ (7,519) $ 47,572 $ (7,389) $ 31,190
=========== =========== =========== =========== ===========
Other Financial Data:
EBITDA(2) ..................................... $ 23,783 $ 8,986 $ 19,103 $ -- $ 51,872
Adjusted EBITDA(3) ............................ 23,783 14,153 19,103 -- 57,039
Depreciation and amortization ................. 10,585 23,637 (21,740)(5) -- 12,482
Capital expenditures .......................... 27,566 9,853 -- -- 37,419
</TABLE>
43
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended June 30, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Historical Historical Adjustments Adjustments
American Berlin- for the for the
Tissue Gorham Mills(1) Acquisition Offering Pro Forma
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales .................................. $ 156,298 $ 131,746 $ 1,666(4) $ -- $ 289,710
Cost of sales .............................. 128,484 139,174 (28,860)(5) -- 238,798
Severance charge ........................... -- 1,932 -- -- 1,932
----------- ----------- ----------- ----------- -----------
Gross profit (loss) ........................ 27,814 (9,360) 30,526 -- 48,980
Gain on timberlands sale ................... -- (13,518) -- -- (13,518)
Selling, general and administrative
expenses ................................... 21,250 6,284 291(6) -- 27,825
Corporate overhead allocation .............. -- 4,737 (4,737)(7) -- --
----------- ----------- ----------- ----------- -----------
Operating income ........................... 6,564 (6,863) 34,972 -- 34,673
Interest expense ........................... 9,641 1,896 -- 6,885(8) 18,422
Rental income .............................. 661 -- -- -- 661
Other income ............................... -- 19 -- -- 19
Income from insurance claims ............... 827 -- -- -- 827
----------- ----------- ----------- ----------- -----------
Income tax benefit ......................... -- (3,391) -- -- (3,391)
----------- ----------- ----------- ----------- -----------
Net income (loss) .......................... $ (1,589) $ (5,349) $ 34,972 $ (6,885) $ 21,149
=========== =========== =========== =========== ===========
Other Financial Data:
EBITDA(2) .................................. $ 16,070 $ 3,978 $ 13,968 $ -- $ 32,084
Adjusted EBITDA(3) ......................... 16,070 8,424 13,968 -- 36,530
Depreciation and amortization .............. 8,018 17,690 (16,267)(5) -- 9,441
Capital expenditures ....................... 19,178 4,848 -- -- 24,026
</TABLE>
44
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended June 30, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Historical Historical Adjustments Adjustments
American Berlin- for the for the
Tissue Gorham Mills(1) Acquisition Offering Pro Forma
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales .................................. $ 183,487 $ 130,920 $ 1,701(4) $ -- $ 316,108
Cost of sales .............................. 143,468 129,809 (19,261)(5) -- 254,016
------------ ------------ ------------ ------------ ------------
Gross profit (loss) ........................ 40,019 1,111 20,962 -- 62,092
Adjustment to net realizable value ......... -- 16,175 -- -- 16,175
Property tax reversal ...................... -- 8,957 -- -- 8,957
Asset impairment charge .................... -- 143,632 -- -- 143,632
Selling, general and administrative
expenses ................................... 21,966 6,259 680(6) -- 28,905
Corporate overhead allocation .............. -- 6,211 (6,211)(7) -- --
------------ ------------ ------------ ------------ ------------
Operating income (loss) .................... 18,053 (162,209) 26,493 -- (117,663)
Interest expense ........................... 10,890 1,894 -- 5,669(8) 18,453
Other income, net
Rental income .............................. 900 -- -- -- 900
Other income ............................... 184 50 -- -- 234
------------ ------------ ------------ ------------ ------------
1,084 50 -- -- 1,134
------------ ------------ ------------ ------------ ------------
Income tax benefit ......................... -- (62,273) -- -- (62,273)
------------ ------------ ------------ ------------ ------------
Net income (loss) .......................... $ 8,247 $ (101,780) $ 26,493 $ (5,669) $ (72,709)
============ ============ ============ ============ ============
Other Financial Data:
EBITDA(2) .................................. $ 27,783 $ 3,388 $ 13,169 $ -- 44,340
Adjusted EBITDA(3) ......................... 27,783 4,398 13,169 -- 44,991
Depreciation and amortization .............. 8,830 8,536 (7,113)(5) -- 10,253
Capital expenditures ....................... 12,607 4,919 -- -- 17,526
</TABLE>
45
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
12 Months Ended March 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Historical Historical Adjustments Adjustments
American Berlin- for the for the
Tissue Gorham Mills(1) Acquisition Offering Pro Forma
------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ................................. $ 236,214 $ 171,482 $ 1,729(4) $ -- $ 409,425
Cost of sales ............................. 190,972 177,224 (35,505)(5) -- 332,691
Severance charge .......................... -- 1,932 -- -- 1,932
------------- ------------- ------------- ------------- -------------
Gross profit .............................. 45,242 (7,674) 37,234 -- 74,802
Adjustment to net realizable value ....... -- 16,175 -- -- 16,175
Asset impairment charge ................... -- 143,632 -- -- 143,632
Property tax accrual reversal ............. -- (8,957) -- -- (8,957)
Selling, general and administrative ....... 30,276 8,888 (262)(6) -- 38,902
expenses
Corporate overhead allocation ............. -- 8,087 (8,087)(7) -- --
------------- ------------- ------------- ------------- -------------
Operating income (loss) ................... 14,966 (175,499) 45,583 -- (114,950)
Interest expense .......................... 15,346 2,547 -- 6,298(8) 24,191
Other income, net
Rental income ............................. 1,417 -- -- -- 1,417
Other income .............................. 185 87 -- -- 272
Income from insurance claims .............. 2,166 -- -- -- 2,166
------------- ------------- ------------- ------------- -------------
3,768 87 -- -- 3,855
------------- ------------- ------------- ------------- -------------
Income tax benefit ........................ -- (69,048) -- -- (69,048)
------------- ------------- ------------- ------------- -------------
Net income (loss) ......................... $ 3,388 $ (108,911) $ 45,583 $ (6,298) $ (66,238)
============= ============= ============= ============= =============
Other Financial Data and Ratios:
EBITDA(2) ................................. $ 29,876 $ 4,411 $ 19,757 $ -- $ 54,044
Adjusted EBITDA(2) ........................ 29,876 7,522 19,757 -- 57,155
Depreciation and amortization ............. 11,327 19,041 (17,739)(5) -- 12,629
Capital expenditures ...................... 25,805 9,177 -- -- 34,982
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
12 Months Ended March 31, 1999 and September 30, 1998 and
Nine Months Ended June 30, 1998 and 1999
(dollars in thousands)
(1) The historical Berlin-Gorham Mills financial data represents their
unaudited results of operations for the 52 weeks ended September 27, 1998,
the 26 weeks ended March 29, 1998, the 26 weeks ended March 28, 1999 and
the 52 weeks ended March 28, 1999, as applicable.
(2) See definition of EBITDA in note (3) of "Summary Unaudited Pro Forma
Consolidated Financial Data."
(3) See definition of Adjusted EBITDA in note (4) of "Summary Unaudited Pro
Forma Consolidated Financial Data."
46
<PAGE>
(4) Reflects the following pro forma net sales increase:
<TABLE>
<CAPTION>
12 Months Nine Months Ended 12 Months
Ended June 30, Ended
September 30, --------------- March 31,
1998 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
a- Increase in net sales resulting from pulp
purchase agreement between American
Tissue and Crown Paper as compared to
Berlin-Gorham Mills historical selling
prices ...................................... $1,867 $1,666 $1,701 $1,729
====== ====== ====== ======
</TABLE>
(5) Reflects the following pro forma cost of sales savings:
<TABLE>
<CAPTION>
Nine Months Ended
12 Months Ended June 30, 12 Months Ended
September 30, ----------------------------- March 31,
Cash adjustments: 1998 1998 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
a- Salary and fringe benefit savings:
o Manufacturing personnel reduction .................... $ 3,450 $ 2,588 $ 2,588 $ 3,450
o Integration of existing American Tissue
compensation and benefit policies into
Berlin-Gorham Mills .................................... 460 377 395 513
------------ ------------ ------------ ------------
Total pro forma salary and fringe benefit
savings ................................................ 3,910 2,965 2,983 3,963
------------ ------------ ------------ ------------
b- Substitution of lower cost raw materials,
using double lined kraft paper and paper
manufacturing by-products instead of
internally manufactured slush pulp from
the Berlin-Gorham Mills ................................ 6,935 5,431 4,616 6,782
------------ ------------ ------------ ------------
c- Savings resulting from increased wet lap
pulp production capacity by the repairs of
an existing wet lap machine as required
by the asset purchase agreement ........................ 3,600 2,584 2,835 3,708
------------ ------------ ------------ ------------
d- Savings resulting from American Tissue
purchasing pulp from Berlin-Gorham
Mills as compared to third party suppliers ............. 1,103 629 1,654 2,405
------------ ------------ ------------ ------------
e- Cost savings resulting from the
termination of sludge hauling contract as
a condition of asset purchase agreement ................ 1,183 984 60 908
------------ ------------ ------------ ------------
Subtotal of Cash Adjustments ........................... 16,731 12,593 12,148 17,766
------------ ------------ ------------ ------------
Non-cash adjustments:
f- Savings resulting from decrease in
depreciation expense as a result of the
purchase price allocation to fixed assets of
the Berlin-Gorham Mills ................................ 22,335 16,267 7,113 17,739
------------ ------------ ------------ ------------
Total .................................................. $ 39,066 $ 28,860 $ 19,261 $ 35,505
============ ============ ============ ============
</TABLE>
(6) Reflects the following pro forma selling, general and administrative cost
savings:
<TABLE>
<CAPTION>
12 Months Nine Months Ended 12 Months
Ended June 30, Ended
September 30, --------------- March 31,
1998 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
a- Incremental American Tissue corporate
overhead to support the Berlin-Gorham
Mills operations............................... $(1,700) $(1,275) $(1,275) $(1,700)
b- Marketing expense savings resulting
from paper brokerage agreement
between American Tissue and Crown
Paper.......................................... 2,205 984 595 1,962
------- ------- ------- -------
Total.......................................... $ 505 $ (291) $ (680) $ 262
======= ======= ======= =======
</TABLE>
47
<PAGE>
(7) Adjustment to reflect the increase in interest on long-term debt as a
result of the issuance of the Notes on the following:
<TABLE>
<CAPTION>
12 Months Nine Months Ended 12 Months
Ended June 30, Ended
September 30, --------------------------- March 31,
1998 1998 1999 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest on the Notes issued ........................... $ 20,625 $ 15,469 $ 15,469 $ 20,625
Interest on the New Credit Facility .................... 840 615 615 840
Amortization of debt costs ............................. 1,143 884 884 1,143
Amortization of debt discount .......................... 523 392 392 523
Interest on the borrowings repaid ...................... (15,757) (10,475) (11,691) (16,833)
-------- -------- -------- --------
Net increase in interest ............................... $ 7,374 $ 6,885 $ 5,669 $ 6,298
======== ======== ======== ========
</TABLE>
(8) Cost savings resulting from the elimination of Crown Paper corporate
overhead allocation:
<TABLE>
<CAPTION>
12 Months Ended Nine Months Ended 12 Months Ended
September 30, 1998 June 30, 1999 March 31, 1999
- ----------------------------- ------------------------------------------- --------------------------
1998 1999
----------------- ----------------
<S> <C> <C> <C>
$ 6,729 $4,737 $6,211 $8,087
</TABLE>
SELECTED HISTORICAL FINANCIAL DATA
(dollars in thousands)
AMERICAN TISSUE
Set forth below are selected historical financial data for American Tissue
for the five fiscal years ended September 30, 1998, the 12 months ended March
31, 1999 and the six months ended June 30, 1998 and 1999. The data as of and
for:
o fiscal years ended September 30, 1997 and 1998 are derived from, and
should be read in conjunction with, our consolidated financial
statements audited by Arthur Andersen LLP, independent auditors, whose
report with respect to such financial statements, as well as such
financial statements, are included elsewhere herein;
o fiscal year ended September 30, 1996 are derived from, and should be
read in conjunction with, our consolidated financial statements
audited by Holtz Rubenstein & Co., LLP, independent auditors, whose
report with respect thereto, as well as such financial statements, are
included elsewhere herein; and
o fiscal years ended September 30, 1994 and 1995, the nine months ended
June 30, 1998 and 1999 and the 12 month period ended March 31, 1999
are derived from our unaudited consolidated financial statements.
The financial statements as of September 30, 1994, 1995 and 1996 and for the 12
months ended March 31, 1999 are not included in this prospectus.
In the opinion of our management, such unaudited financial statements include
all adjustments (consisting of only normal recurring adjustments) necessary for
a fair presentation of the information set forth therein. Results for the
interim periods are not necessarily indicative of the results to be expected for
the full year or any other future period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements, and the related notes, included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Nine Months
Fiscal Year Ended 12 Months
Ended September 30, June 30, Ended
---------------------------------------------------------- ---------------------- March 31,
1994 1995 1996 1997 1998 1998 1999 1999
--------- --------- --------- --------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ....................... $ 112,378 $ 138,933 $ 152,722 $ 197,596 $ 213,988 $ 156,298 $ 183,487 $ 236,214
Cost of sales ................... 90,352 116,406 122,273 152,570 175,083 128,484 143,468 190,972
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit .................... 22,026 22,527 30,449 45,026 38,905 27,814 40,019 45,242
Selling, general and
administrative expenses ......... 13,322 15,934 17,181 26,953 29,388 21,250 21,966 30,276
--------- --------- --------- --------- --------- --------- --------- ---------
Operating income ................ 8,704 6,593 13,268 18,073 9,517 6,564 18,053 14,966
Interest expense and
other income, net ............... 3,803 8,326 86 11,200 10,991 8,153 9,816 11,578
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) ............... $ 4,901 $ (1,733) $ 13,182 $ 6,873 $ (1,474) $ (1,589) $ 8,237 $ 3,388
========= ========= ========= ========= ========= ========= ========= =========
Other Data:
EBITDA(1) ....................... $ 13,839 $ 9,281 $ 27,950 $ 27,427 $ 23,783 $ 16,070 $ 27,967 $ 29,876
Adjusted EBITDA ................. 13,839 9,281 27,950 27,427 23,783 16,070 27,967 29,876
Interest expense ................ 4,945 6,922 9,175 12,272 14,672 9,641 10,890 15,346
Depreciation and amortization ... 3,993 4,092 5,593 8,282 10,585 8,018 8,830 11,327
Capital expenditures(2) ......... 4,463 24,192 40,933 29,172 27,566 19,178 12,067 25,805
Ratio of earnings to
fixed charges(3) ................ 1.9x 0.8x 2.4x 1.5x 0.9x 0.8x 1.7x 1.2x
<CAPTION>
As of As of
September 30 June 30, 1999
--------------------------------------------------------------------- ------------
1994 1995 1996 1997 1998 (unaudited)
--------- --------- --------- --------- ---------
Balance Sheet Data: (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents ................ $ 745 $ 1,017 $ 152 $ 870 $ 1,480 $ 597
Working capital (deficiency) ............. (3,671) (18,183) (18,413) (20,892) (48,748) (44,275)
Total assets ............................. 85,335 136,166 199,201 230,517 270,819 288,422
Total debt ............................... 54,834 93,300 123,376 143,690 176,394 188,013
Stockholder's equity ..................... 16,461 14,010 26,984 33,858 33,644 42,350
</TABLE>
- -----------
(1) EBITDA is defined as operating income plus depreciation and amortization,
adjusted for the following non-cash and income items:
o with respect to American Tissue, income items include rental income
and income from insurance claims; and
o with respect to the Berlin-Gorham Mills, non-cash items exclude:
o the asset impairment and net realizable value charges,
o the property tax accrual reversal,
o the corporate overhead allocation, and
o income items exclude the severance charge and the gain on
timberlands sale.
Information regarding EBITDA is presented because management believes that
certain investors use EBITDA as one measure of an issuer's ability to
service its debt. EBITDA should not be considered an alternative to, or
more meaningful than, operating income, net income or cash flow as defined
by generally accepted accounting principles or as an indicator of an
issuer's operating performance. Furthermore, caution should be used in
comparing EBITDA to similarly titled measures of other companies as the
definitions of these measures may vary. See "Unaudited Pro Forma
Consolidated Financial Data" and the consolidated financial statements and
notes thereto of American Tissue and the financial statements and notes
thereto of the Berlin-Gorham Mills, included elsewhere herein.
(2) Excludes portions attributable to capital leases.
(3) The ratio of earnings to fixed charges has been calculated by dividing
o (1) income before income taxes plus fixed charges by
o (2) fixed charges. Fixed charges are defined as interest expense plus
the estimated interest portion of rent expense.
BERLIN-GORHAM MILLS
Set forth below are selected historical financial data of the Berlin-Gorham
Mills for the five fiscal years ended 1998. The operating data and the other
financial data for:
o the 52 weeks ended December 29, 1996, December 28, 1997 and December
27, 1998 are derived from, and should be read in conjunction with, the
financial statements for the Berlin-Gorham Mills audited by Ernst &
Young LLP, independent auditors, whose report with respect to such
financial statements, as well as such financial statements, are
included elsewhere herein; and
o the 52 weeks ended December 31, 1994 and December 25, 1995 and for the
26 weeks ended June 28, 1998 and June 27, 1999, respectively, are
derived from unaudited financial statements for the Berlin-Gorham
Mills.
The unaudited financial statements for the 26 week periods
ended June 28, 1998 and June 27, 1999 are included in this prospectus. The
financial statements for the 52 weeks ended December 31, 1994 and December 25,
1995 are not included in this prospectus. See "Management's Discussion
48
<PAGE>
and Analysis of Financial Condition and Results of Operations Berlin-Gorham
Mills" and the historical financial statements, and the related notes, of the
Berlin-Gorham Mills included elsewhere in this prospectus.
<TABLE>
<CAPTION>
26 Weeks Ended
52 Weeks Ended December(1) June(2)
------------------------------------------------------------ ----------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ................................ $ 164,733 $ 236,311 $ 177,916 $ 183,398 $ 174,423 $ 87,439 $ 86,372
Cost of sales ............................ 179,996 199,416 189,173 179,648 185,820 98,360 83,268
Severance charge ......................... -- -- -- -- 1,932 1,932 --
--------- --------- --------- --------- --------- --------- ---------
Gross profit (loss) ...................... (15,263) 36,895 (11,257) 3,750 (13,329) (12,853) 3,104
Adjustment to net realizable value ....... -- -- -- -- -- -- 16,175
Selling and administrative expenses ...... 5,353 4,838 3,698 6,542 9,155 5,136 4,693
Property tax accrual reversal ............ -- -- -- -- -- -- (8,957)
Gain on timberland sale .................. -- -- -- (13,518) -- -- --
Asset impairment charge .................. -- -- -- -- 143,632 -- --
Corporate overhead allocation(3) ......... 3,085 3,880 5,412 5,726 7,764 3,342 3,783
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss) .................. (23,701) 28,177 (20,367) 5,000 (173,880) (21,331) (12,590)
Interest expense and other income, net ... 1,195 609 1,474 2,472 2,462 1,244 1,240
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes ........ (24,896) 27,568 (21,841) 2,528 (176,342) (22,575) (13,830)
Income tax provision (benefit)(4) ........ (8,992) 10,958 (8,303) 1,077 (68,287) (8,759) (5,366)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ........................ $ (15,904) $ 16,610 $ (13,538) $ 1,451 $(108,055) $ (13,816) $ (8,464)
========= ========= ========= ========= ========= ========= =========
Other Data:
EBITDA(5) ................................ $ 3,901 $ 56,877 $ 9,106 $ 21,387 $ 3,414 $ (3,974) $ 1,087
Adjusted EBITDA(6) ....................... 8,566 62,328 15,025 27,788 7,696 (1,161) 2,054
Interest expense ......................... 1,198 1,238 1,573 2,547 2,547 1,244 1,240
Depreciation and amortization ............ 24,517 24,820 24,061 24,179 23,966 12,083 2,676
Capital expenditures ..................... 16,524 13,165 10,872 13,084 9,146 2,812 3,211
<CAPTION>
As of As of
December 27, 1998 June 27, 1999
----------------- -------------
(unaudited)
<S> <C> <C>
Balance Sheet Data
Cash and cash equivalents.......................... $ 1,753 $ 1,675
Working capital.................................... 7,684 14,286
Total assets....................................... 101,042 8,280
Total debt......................................... 30,255 30,255
</TABLE>
- -----------
(1) The Berlin-Gorham Mills' fiscal year ends on the last Sunday of December
(i.e., December 25, 1994, December 31, 1995, December 29, 1996, December
28, 1997 and December 27, 1998).
(2) The Berlin-Gorham Mills' first fiscal quarter ends on the last Sunday of
the month of June (i.e., June 28, 1998 and June 27, 1999).
(3) Corporate overhead allocation represents a pro rata allocation of Crown
Paper's corporate administrative costs, which are not directly attributable
to the Berlin-Gorham Mills. Such costs include such items as accounting and
tax services, certain human resources services, computer services and
general corporate administrative costs.
(4) The Berlin-Gorham Mills have historically been included in the consolidated
tax returns of Crown Paper. Income taxes are presented as if the
Berlin-Gorham Mills filed its taxes on a separate return basis.
(5) See definition of EBITDA in note (1) of "Selected Historical Financial
Data-American Tissue."
(6) Adjusted EBITDA for the Berlin-Gorham Mills represents EBITDA adjusted as
follows:
<TABLE>
<CAPTION>
26 Weeks
Fiscal Year Ended December(1) Ended June(2)
------------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA ........................................ $ 3,901 $56,877 $ 9,106 $21,387 $ 3,414 $(3,974) $ 1,087
Non-continuing employee compensation
expense ....................................... 2,953 2,953 2,953 2,953 2,953 1,477 601
Property tax savings .......................... 1,712 2,498 2,966 3,448 1,329 1,336 366
------- ------- ------- ------- ------- ------- -------
Adjusted EBITDA ............................... $ 8,566 $62,328 $15,025 $27,788 $ 7,696 $(1,161) $ 2,054
======= ======= ======= ======= ======= ======= =======
</TABLE>
49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AMERICAN TISSUE
The following discussion should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Data," "Selected Historical Financial Data" and our
historical audited and unaudited financial statements and related notes included
elsewhere in this prospectus.
Overview
We are a leading integrated manufacturer of tissue products in North
America, with a comprehensive product line that includes jumbo tissue rolls for
converting and converted tissue products for end-use. Our converted products are
sold in the away-from-home and at-home markets, and our jumbo rolls are sold to
other manufacturers of converted tissue products. Substantially all of our net
sales are derived from the manufacture and sale of converted tissue products and
jumbo rolls. We also generate a small portion of our net sales from the sale of
tissue converting equipment.
We utilize our tissue mills on an integrated company basis to maximize
jumbo roll production at our lowest cost mills. For example, upon the
acquisition of our Neenah, Wisconsin facility from Kimberly-Clark in November
1996, we were able to consolidate tissue production by shifting manufacturing
from three of our smaller tissue mills to our largest facilities in Neenah,
Wisconsin and St. Helens, Oregon. As a result of shifting production to these
facilities, we were better able to absorb manufacturing overhead costs.
Since fiscal 1997, demand for our products has increased. Accordingly, we
have increased production at our operating tissue mills, re-opened two of our
smaller mills, and consolidated the operations of our Tomahawk, Wisconsin and
Winchester, New Hampshire facilities by moving one of our Tomahawk facility
tissue machines to Winchester. We have developed a network of tissue converting
equipment to support and enhance our converted product business.
In each of our last four fiscal years, we have experienced growth in net
sales of converted tissue products and jumbo rolls. The acquisition of our
integrated tissue mill/converting facility in Neenah, Wisconsin from
Kimberly-Clark, resulting from the merger of Kimberly-Clark and Scott Paper, has
significantly contributed to the growth of net sales of our converted tissue
products and jumbo rolls. Shipments of premium and value grades of tissue
products remained strong through the first nine months of fiscal 1999 due to our
aggressive marketing efforts. Our at-home products experienced increased product
penetration, including premium grades of bath and towel tissue. Our
away-from-home sales have experienced strong growth resulting from the new and
improved tissue products manufactured at our Neenah mill.
The following is a summary of our net sales for the periods indicated
(dollars in millions):
50
<PAGE>
Fiscal Years Nine Months
Ended September 30, Ended June 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
Paper products .......... $ 152.5 $ 196.4 $ 208.3 $ 152.6 $ 182.5
Equipment sales ......... 0.2 1.2 5.7 3.6 0.9
------- ------- ------- ------- -------
Total net sales ......... $ 152.7 $ 197.6 $ 214.0 $ 156.2 $ 183.4
======= ======= ======= ======= =======
We were incorporated in August 1998 for the purpose of reorganizing the
ownership interests of the stockholders of American Tissue Corporation and
certain of its affiliates into us. In October 1998, we completed our
reorganization of such ownership interests, which consist of the outstanding
capital stock of our corporate subsidiaries and the outstanding membership
interests in our subsidiaries formed as limited liability companies. We and our
corporate subsidiaries have elected S corporation status under the Internal
Revenue Code of 1986, as amended. As a result, we and such subsidiaries are not
subject to U.S. federal income taxes and certain state and local income taxes.
Results of Operations
The following table sets forth certain data as a percentage of our net
sales:
<TABLE>
<CAPTION>
Fiscal Years Nine Months
Ended September 30, Ended June 30,
----------------------- --------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales .................................. 80.1 77.2 81.8 82.2 78.2
----- ----- ----- ----- -----
Gross profit ................................... 19.9 22.8 18.2 17.8 21.8
Selling, general and administrative expenses (1) 11.2 13.6 13.7 13.6 12.0
Operating income ............................... 8.7 9.2 4.5 4.2 9.8
Interest expense, net .......................... 6.0 6.2 6.9 6.2 5.9
Rental and other income ........................ 0.3 0.4 0.6 0.4 0.6
Income from insurance claims ................... 5.6 0.1 1.2 0.5 --
EBITDA (2) ..................................... 18.3 13.9 11.1 10.3 15.1
</TABLE>
- -----------
(1) It is our policy to include freight expense in this category as a selling
expense.
(2) See definition of EBITDA in note (1) of "Selected Historical Financial Data
- American Tissue."
Nine Months Ended June 30, 1999 ("fiscal 1999 nine months") Compared to the
Nine Months Ended June 30, 1998 ("fiscal 1998 nine months")
Net Sales. Our net sales increased $27.2 million, or 17.4%, from $156.3
million in the fiscal 1998 nine months to $183.5 million in the fiscal 1999 nine
months.
Net sales of converted tissue products increased $11.2 million, or 9.5%,
from $118.3 million in the fiscal 1998 nine months to $129.5 million in the
fiscal 1999 nine months. Shipments of away-from-home products increased 1.2
million cases, or 25.5%, from the fiscal 1998 nine months to the fiscal 1999
nine months. This increase was due primarily to our strategy of increasing our
sales efforts to take advantage of competitor consolidation and the
implementation of our new private label program. Shipments of at-home products
increased 0.2 million cases, or 5.7%, from the fiscal 1998 nine months to the
fiscal 1999 nine months. During the fiscal 1999 nine months, we were able to
increase our sales of at-home products, despite competitive pricing in this
segment that resulted in an average price decrease of approximately 2.6%. We
believe this decrease in price was less than that experienced by some of our
competitors because of our focus on sales of a higher quality mix of products.
Net sales of jumbo rolls increased $18.7 million, or 54.4%, from $34.4
million in the fiscal 1998 nine months to $53.1 million in the fiscal 1999 nine
months. Shipments of jumbo rolls increased 18,000 tons, or 46.3%, from the
fiscal 1998 nine months to the fiscal 1999 nine months. We secured long term
contracts,
51
<PAGE>
focusing on premium and specialty grades of jumbo rolls, which resulted in
stronger pricing and higher volume in the fiscal 1999 nine months. Despite
decreases in the jumbo roll pricing of certain of our competitors, we believe
that our average selling price increased because of our mix of higher quality
specialty grades of jumbo rolls.
Net sales of equipment decreased $2.7 million from $3.6 million in the
fiscal 1998 nine months to $0.9 million in the fiscal 1999 nine months.
Equipment sales continue to be intermittent as a result of our recent entry into
this business.
Gross Profit. Our gross profit increased $12.2 million, or 43.9%, from
$27.8 million in the fiscal 1998 nine months to $40.0 million in the fiscal 1999
nine months. Gross profit, as a percentage of net sales, increased from 17.8% in
the fiscal 1998 nine months to 21.8% in the fiscal 1999 nine months. This
increase in gross profit, as a percentage of net sales, was a result of higher
sales and production volumes, lowering per unit costs and better absorption of
certain fixed costs. Depreciation and amortization increased $0.8 million, or
10.1%, from $8.0 million in the fiscal 1998 nine months to $8.8 million in the
fiscal 1999 nine months.
Selling, General and Administrative Expenses. It is our policy to include
freight expense in this category as a selling expense. Freight expense increased
$0.1 million from $9.5 million in the fiscal 1998 nine months to $9.6 million
the fiscal 1999 nine months. Selling, general and administrative expenses,
excluding freight, increased $0.6 million, or 5.3%, from $11.7 million in the
fiscal 1998 nine months to $12.3 million in the fiscal 1999 nine months.
Selling, general and administrative expense, excluding freight, was 6.7%, as a
percentage of net sales, in the fiscal 1999 nine months as compared to 7.5% in
the fiscal 1998 nine months. This percentage decrease was due to net sales
increasing at a faster rate than selling, general and administrative expenses,
excluding freight, between the fiscal 1998 nine months and the fiscal 1999 nine
months and our continuing efforts to reduce overhead.
Operating Income. Operating income increased $11.5 million, or 175%, from
$6.6 million for the fiscal 1998 nine months to $18.1 million for the fiscal
1999 nine months. Operating income, as a percentage of net sales, was 9.8% for
the fiscal 1999 nine months, as compared to 4.2% for the fiscal 1998 nine
months. This increase was due to the reasons stated above.
Interest Expense. Interest expense increased $1.3 million, or 13%, from
$9.6 for the fiscal 1998 nine months to $10.9 million for the fiscal 1999 nine
months. This increase reflects higher short-term debt levels during the fiscal
1999 nine months, as compared to the fiscal 1998 nine months.
Fiscal 1998 Compared to Fiscal 1997
Net Sales. Our net sales increased $16.4 million, or 8.3%, from $197.6
million in fiscal 1997 to $214.0 million in fiscal 1998. The increase was
attributable to greater sales volume in most product lines.
Net sales of converted tissue products increased $6.7 million, or 4.3%,
from $154.4 million in fiscal 1997 to $161.1 million in fiscal 1998. Shipments
of away-from-home products decreased 0.6 million cases, or 9.0%, from 7.1
million cases in fiscal 1997 to 6.5 million cases in fiscal 1998. This decrease
was primarily attributable to the expiration of a major contract for converted
tissue products in April 1997. Shipments, excluding this contract, increased by
0.7 million cases in fiscal 1998, as compared to fiscal 1997. We maintained our
historic price levels in the away-from-home market while pursuing increased
distribution penetration with a 36% increase in our regional sales team from 11
to 15 sales personnel. Shipments of at-home products increased 0.6 million
cases, or 13.2%, from 4.8 million cases in fiscal 1997 to 5.4 million cases in
fiscal 1998. In anticipation of the opening of our Calexico, California
converting facility, we pursued West Coast at-home business with aggressive
pricing.
Net sales of jumbo rolls increased $5.2 million, or 12.6%, from $42.0
million in fiscal 1997 to $47.2 million in fiscal 1998. We experienced an
increase in tons sold because of an increase in production of premium grades of
tissue from our Neenah, Wisconsin mill and our St. Helens, Oregon tissue
operation.
52
<PAGE>
Net sales of equipment increased $4.5 million, or 360.4%, from $1.2 million
in fiscal 1997 to $5.7 million in fiscal 1998. Equipment sales are intermittent,
and vary as a result of our recent entry into this business.
Gross Profit. Gross profit decreased $6.1 million, or 13.6%, from $45.0
million in fiscal 1997 to $38.9 million in fiscal 1998. Gross profit, as a
percentage of net sales, decreased from 22.8% in fiscal 1997 to 18.2% in fiscal
1998. This decrease in gross profit as a percentage of net sales was the result
of increased overhead due to the purchase and start-up of our Neenah, Wisconsin
mill and our Waterford, New York converting facility in the second half of
fiscal 1998. Depreciation and amortization expense relating to these facilities
as well as other capital spending increased by $2.3 million, or 27.8%, from $8.3
million in fiscal 1997 to $10.6 million in fiscal 1998.
Selling, General and Administrative Expenses. It is our policy to include
freight expense in this category as a selling expense. Freight expense increased
$2.8 million, or 26.6%, from $10.6 million in fiscal 1997 to $13.4 million in
fiscal 1998. This resulted from our increased volume of converted tissue
products, which increased 10.6%, and an increase in sales to West Coast
customers, in anticipation of the start-up of our Calexico, California
converting facility. Selling, general and administrative expenses, exclusive of
freight, decreased $0.4 million, or 2.3%, from $16.4 million in fiscal 1997 to
$16.0 million in fiscal 1998. Selling, general and administrative expenses,
excluding freight, was 7.5% as a percentage of net sales in fiscal 1998, as
compared to 8.3%, as a percentage of net sales in fiscal 1997.
Operating Income. Operating income decreased $8.6 million, or 47.3%, from
$18.1 million in fiscal 1997, to $9.5 million in fiscal 1998. Operating income
as a percentage of net sales was 4.4% in fiscal 1998, as compared to 9.1% in
fiscal 1997. This decrease was due to the reasons stated above.
Interest Expense. Interest expense increased $2.4 million, or 19.6%, from
$12.3 million in fiscal 1997 to $14.7 million in fiscal 1998. This increase was
due to acquisition financing, capital spending and higher working capital needs.
Fiscal 1998 interest expense includes $1.3 million of non-cash expense for
related party debt.
Fiscal 1997 Compared to Fiscal 1996
Net Sales. Our net sales increased $44.9 million, or 29.4%, from $152.7
million in fiscal 1996 to $197.6 million in fiscal 1997. Net sales continued to
grow in fiscal 1997, as a result of the acquisition of our Neenah mill in the
first quarter of fiscal 1997 and our Greenwich mill in the third quarter of
fiscal 1996, and the start-up of new converting facilities and machines in our
Waterford, New York operation.
Net sales of converted tissue products increased $21.3 million, or 16.0%,
from $133.1 million in fiscal 1996 to $154.4 million in fiscal 1997. Shipments
of away-from-home products increased 2.3 million cases, or 48.8%, from 4.8
million cases in fiscal 1996 to 7.1 million cases in fiscal 1997. Shipments of
at-home products increased 1.2 million cases, or 31.7%, from 3.6 million cases
in fiscal 1996 to 4.8 million cases in fiscal 1997. Net sales grew at a slower
rate than sales volume as our mix of products sold reflected a higher percentage
of certain bath tissue and towels which have a lower per unit sales price.
Net sales of jumbo rolls increased $22.6 million, or 116.5%, from $19.4
million in fiscal 1996 to $42.0 million in fiscal 1997. This increase was caused
by additional sales volume resulting from the acquisition of our Neenah and
Greenwich tissue mills and the low volume of jumbo rolls sales in fiscal 1996 as
compared to fiscal 1997 due to a fire in our Hauppauge, New York facility in the
first quarter of 1996, which decreased our inventory of jumbo rolls for sale in
fiscal 1996.
Net sales of equipment increased from $0.2 million in fiscal 1996 to $1.2
million in fiscal 1997. Fiscal 1997 was the first year that we focused on
equipment sales as part of our business strategy of bundling long-term jumbo
roll sales contracts with equipment sales.
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Gross Profit. Gross profit increased $14.6 million, or 47.9%, from $30.4
million in fiscal 1996 to $45.0 million in fiscal 1997. Gross profit, as a
percentage of net sales, increased from 19.9% in fiscal 1996 to 22.8% in fiscal
1997. This increase in gross profit, as a percentage of net sales, is a result
of higher sales volume at existing facilities and increased gross profit from
the paper mills acquired in the third quarter of 1996 and first quarter of 1997.
Depreciation and amortization expense increased $2.7 million, or 48.1%, from
$5.6 million in fiscal 1996 to $8.3 million in fiscal 1997. This increase was
due to higher capital spending, including the two acquisitions discussed above.
Selling, General and Administrative Expenses. It is our policy to include
freight expense in this category as a selling expense. Freight expenses
increased $4.2 million, or 65.7%, from $6.4 million in fiscal 1996 to $10.6
million in fiscal 1997. Selling, general and administrative expenses, exclusive
of freight, increased $5.6 million, or 52.0%, from $10.8 million in fiscal 1996
to $16.4 million in fiscal 1997. Freight expense increased as a result of
increased shipments of converted products and the shift in geographic sales as
our business expanded into the Midwest and West Coast. Selling, general and
administrative expenses, excluding freight, was 8.3% as a percentage of net
sales in fiscal 1997 as compared to 7.0% as a percentage of net sales in fiscal
1996. This increase was a result of the expansion of our sales and
administrative organization in anticipation of higher sales growth. Also,
certain expenses formerly classified in cost of sales were reclassified to this
category beginning in fiscal 1997.
Operating Income. Operating income increased $4.8 million, or 36.2%, from
$13.3 million in fiscal 1996 to $18.1 million in fiscal 1997, for the reasons
stated above. Operating income as a percentage of net sales was 9.1% for fiscal
1997, compared to 8.7% for fiscal 1996.
Unusual Item. Proceeds of insurance of $8.6 million was recognized as a
gain in fiscal 1996 relating to an insurance settlement for the fire that
destroyed our headquarters, warehouse and converting facility located in
Hauppauge, New York in the first quarter of fiscal 1996.
Interest Expense. Interest expense increased $3.1 million, or 33.8%, from
$9.2 million in fiscal 1996 to $12.3 million in fiscal 1997. The increase
resulted from acquisitions, capital spending and higher working capital needs
which in turn resulted in a significant increase in debt and related interest
expense.
BERLIN-GORHAM MILLS
The following discussion and analysis of financial condition and results of
operations covers periods before our acquisition of the Berlin-Gorham Mills. The
results of operations and financial condition for the periods subsequent to our
acquisition of the Berlin-Gorham Mills will not necessarily be comparable to
prior periods. The following should be read in conjunction with the "Unaudited
Pro Forma Consolidated Financial Data," "Selected Historical Financial Data" and
the historical audited and unaudited financial statements and related notes of
the Berlin-Gorham Mills included elsewhere in this prospectus.
Overview
The Berlin-Gorham Mills are fully integrated pulp and paper mills. The pulp
mill has an annual capacity of approximately 350,000 tons of bleached northern
hardwood and softwood pulp. Of the pulp produced at the mill in 1998,
approximately 47% of the hardwood pulp and 100% of the softwood pulp was used by
the paper mill in the production of paper and toweling and the remaining
approximately 53% of the hardwood pulp was dried and either sold to other Crown
Paper mills or as market pulp. Prior to the acquisition, at our request, Crown
Paper commenced operation of an existing wet lap machine previously idled for
which it was reimbursed by us in the amount of approximately $313,000. This wet
lap machine has added approximately 26,000 tons of annual capacity.
The four paper machines operated in the paper mill have an annual capacity
of approximately 179,000 tons of uncoated freesheet paper annually, and the
toweling machine operated in the paper mill has an annual production capacity of
approximately 39,000 tons of toweling. The four paper machines produce uncoated
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freesheet paper products for the printing and publishing markets, including
premium text and cover grades, book papers, opaques and forms bond. The toweling
machine produces primarily away-from-home towel and wiper grades. Following its
spinoff in 1995 from James River, the predecessor of Fort James, Crown Paper
redirected its production at the Berlin-Gorham Mills to increase its focus on
the text and cover sector of the premium paper market.
The following is a summary of Berlin-Gorham Mills' net sales for the
periods indicated (dollars in millions):
52 Weeks 26 Weeks
Ended December Ended June
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
Uncoated free sheet .......... $ 123.0 $ 119.9 $ 119.3 $ 62.5 $ 57.7
Towel ........................ 22.5 26.5 15.6 6.2 11.2
Market pulp .................. 32.4 37.0 39.5 18.7 17.5
------- ------- ------- ------- -------
Total net sales .............. $ 177.9 $ 183.4 $ 174.4 $ 87.4 $ 86.4
======= ======= ======= ======= =======
The Berlin-Gorham Mills historically operated as part of an operating
division of Crown Paper, and not as a stand-alone entity. As a result, the
historical financial information included in this prospectus does not
necessarily reflect what the Berlin-Gorham Mills' financial position and results
of operations would have been had the Berlin-Gorham Mills been operated as a
stand-alone entity during the periods presented.
As part of an operating division of Crown Paper, the Berlin-Gorham Mills
were allocated selling and administrative expenses and Crown Paper corporate
overhead expenses in the combined amounts of $12.3 million and $16.9 million for
the 52 weeks ended December 28, 1997 and December 27, 1998, respectively, and
$8.5 million for the 26 weeks ended June 27, 1999. The selling and
administrative expense allocations were based on sales efforts made with respect
to the Berlin-Gorham Mills, and the corporate overhead expense allocations were
based on the Berlin-Gorham Mills' projected proportion of Crown Paper's
projected tons sold. All of the Berlin-Gorham Mills' selling and administrative
costs are reported as fixed costs and are included in cost of goods sold. For
comparative purposes, Crown Paper's corporate, general and administrative costs
are reported as separate items. We estimate that the corporate overhead expenses
that will be allocated by us to the Berlin-Gorham Mills will be $1.7 million for
the first year, on a stand-alone basis, based on a detailed analysis of
compensation benefits for employees employed by us, and related non-payroll
costs incurred, following the acquisition. Future operating results are expected
to be affected by changes in depreciation and amortization expense related to
impaired assets, reduced selling and administrative expenses, elimination of
certain lease financing costs and intercompany transactions with our other
affiliates and other items resulting from the Transactions. See "Unaudited Pro
Forma Consolidated Financial Data" included elsewhere in this prospectus. We
cannot assure you that we will be able to realize all of the benefits we expect
as a stand-alone entity after the acquisition.
Interest expense represents interest expense on the industrial revenue
bonds, the proceeds of which are specifically restricted for use in funding
certain environmental improvements at the Berlin-Gorham Mills. American Tissue
will not assume the industrial revenue bonds and Crown Paper will retain
liability for the industrial revenue bonds following the acquisition.
Crown Paper took a $143.6 million charge which was recorded in the fourth
quarter of 1998 to write down the book value of Berlin-Gorham Mills. In
connection with the acquisition, Crown Paper took an adjustment to net book
value of the Berlin-Gorham Mills totaling $16.2 million, which was recorded in
the first quarter of 1999 in order to record the Berlin-Gorham Mills' assets at
their estimated net realizable value.
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Results of Operations
The following sets forth certain data as a percentage of the Berlin-Gorham
Mills' net sales:
<TABLE>
<CAPTION>
52 Weeks 26 Weeks
Ended December Ended June
------------------------ ---------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ................ 106.3 98.0 107.6 114.7 96.4
----- ----- ----- ----- -----
Gross profit (loss) ............... (6.3) 2.0 (7.6) (14.7) 3.6
Adjustment to net realizable value -- -- -- -- 18.7
Property tax accrual reversal ..... -- -- -- -- (10.4)
Selling and administrative expenses 2.1 3.6 5.2 5.9 5.4
Asset impairment charge ........... -- -- (82.3) -- --
Gain on timberlands sale .......... -- 7.4 -- -- --
Corporate allocation .............. 3.0 3.1 4.5 3.8 4.4
----- ----- ----- ----- -----
Operating income (loss) ........... (11.4) 2.7 (99.6) (24.4) (14.5)
Interest expense and other income . 0.8 1.3 1.4 1.4 1.4
EBITDA(1) ......................... 5.1 11.7 2.0 (5.0) 1.3
</TABLE>
(1) See definition of EBITDA in note (1) of "Selected Historical Financial
Data-American Tissue."
26 Weeks Ended June 27, 1999 ("1999 26 weeks") Compared to the 26 Weeks
Ended June 28, 1998 ("1998 26 weeks")
Net Sales. Net sales decreased $1.0 million, or 1.2%, from $87.4 million in
the 1998 26 weeks to $86.4 million in the 1999 26 weeks. Shipments increased
13,639 tons, or 9.0%, from 151,482 tons in the 1998 26 weeks to 165,121 tons in
the 1999 26 weeks.
Net sales of uncoated freesheet papers decreased $4.9 million, or 7.8%,
from $62.5 million in the 1998 26 weeks to $57.7 million in the 1999 26 weeks.
Despite improvements in our premium printing grades, poor market pricing for our
target bond grades contributed to an overall price decrease of 11.2%.
Net sales of jumbo rolls of towel increased $5.0 million, or 80.3%, from
$6.2 million in the 1998 26 weeks to $11.2 million in the 1999 26 weeks. The
increase in net sales was primarily due to a 8,185 ton increase in tons sold,
which was partially offset by a 7.0% decrease in average net sales price per
ton. The increase in tons sold was due to the efforts of the Berlin-Gorham Mills
to regain market share lost near the end of 1997 and increased production.
Net sales of pulp declined $1.2 million, or 6.3%, from $18.7 million in the
1998 26 weeks to $17.5 million in the 1999 26 weeks. The decline was primarily
due to a 9.8% decrease in average net sales price per ton that was partially
offset by a 2,038 ton, or 3.9%, increase in tons sold from 52,444 tons in the
1998 26 weeks to 54,482 tons in the 1999 26 weeks. Although difficult market
conditions prevailed, some upward movement in price was seen at the end of the
1999 26 weeks.
Gross Profit. Gross profit increased $16.0 million, from $(12.9) million in
the 1998 26 weeks to $3.1 million in the 1999 26 weeks. Gross profit as a
percentage of net sales increased from (14.7)% in the 1998 26 weeks to 3.6% in
the 1999 26 weeks. This increase in gross profit is a result of lower employee
compensation expense, depreciation and amortization and wood costs and improved
operating efficiencies, and was partially offset by a decline in average net
sales price per ton. Depreciation and amortization decreased $9.0 million, or
77%, from $11.7 million in the 1998 26 weeks to $2.7 million in the 1999 26
weeks.
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Selling and Administrative Expenses. Selling and administrative expenses
decreased $0.4 million, or 7.8%, from $5.1 million in the 1998 26 weeks to $4.7
million in the 1999 26 weeks.
Operating Loss. Operating loss decreased $8.7 million, or 40.8%, from
$(21.3) million in the 1998 26 weeks to $(12.6) million in the 1999 26 weeks.
Included in the 1999 26 weeks operating loss was a $16.2 million downward
adjustment from the sale of the Berlin-Gorham Mills, which was partially offset
by the $9.0 million property tax accrual reversal. Operating loss before these
special charges decreased $15.9 million, from $(21.3) in 1998 26 weeks to $(5.4)
million in 1999 26 weeks.
Crown Paper Corporate Overhead Allocation. Crown Paper corporate overhead
allocation increased $0.4 million, or 13.2%, from $3.3 million in the 1998 26
weeks to $3.8 million in the 1999 26 weeks.
Interest Expense. Interest expense remained materially unchanged in the
1999 26 weeks, as compared to the 1998 26 weeks, at $1.2 million.
Year Ended December 27, 1998 Compared to Year Ended December 28, 1997
Net Sales. Net sales decreased $9.0 million, or 4.9%, from $183.4 million
in 1997 to $174.4 million in 1998.
Net sales of uncoated freesheet papers decreased $0.5 million, or 0.4%,
from $119.9 million in 1997 to $119.3 million in 1998. Shipments of uncoated
freesheet tons sold in 1998 increased 6,768, or 3.9%, from 171,985 in 1997 to
178,753 in 1998. However, average net selling price per ton decreased by $29, or
4.2%, during the same period. Shipments of premium printing papers tons sold,
including text and cover grades, increased 3,857, or 49.2%, from 7,837 in 1997
to 11,694 in 1998, as a result of the Berlin-Gorham Mills continuing strategy to
focus on this market. Net sales price for premium printing papers declined $23
per ton, or 2.1%, in 1998 as compared to 1997. Net sales of web publishing
grades increased 5.4% from 59,146 tons in 1997 to 62,331 tons in 1998. In
addition, average net selling price increased $4 per ton, or 0.5%.
Net sales of jumbo rolls of towel declined $10.9 million, or 41.1%, during
1998 as compared to 1997. The decline was primarily due to a reduction in tons
sold of 9,867 tons, or 29.3%, from 33,635 in 1997 to 23,768 in 1998, due
primarily to a decision by a customer to use their own internal resources. Also
contributing to the decline in net sales was a 16.6% decline in average net
sales prices per ton as the Berlin-Gorham Mills discounted toweling pricing to
regain market share.
Net sales of pulp increased $2.5 million, or 6.6%, from $37.0 million in
1997 to $39.5 million in 1998. The increase in net sales was primarily due to an
19.0% increase in tons sold, from 99,598 tons in 1997 to 118,497 tons in 1998.
The increase in tons sold was due to increased operating efficiencies that led
to increased production during 1998 and therefore more pulp being made available
for sale to external markets. The effect of the increase in tons sold during
1998 was partially offset by a 10.4% decrease in average net sales price per ton
during 1998, as compared to 1997, which was reflective of pricing in the global
pulp markets.
Gross Profit. Gross profit decreased $17.1 million, from $3.8 million in
1997 to a loss of $(13.3) million in 1998. Gross profit as a percentage of net
sales decreased from 2.0% in 1997 to (7.6)% in 1998. This decrease in gross
profit is a result of the decline in average net selling price per ton and
decreased sales of jumbo rolls of towels. Gross profit in 1998 included the
severance charge of $1.9 million. Depreciation and amortization decreased $0.2
million, or 0.9%, from $24.2 million in 1997 to $24.0 million in 1998.
Selling and Administrative Expenses. Selling and administrative expenses
increased $2.6 million, or 39.9%, from $6.5 million in 1997 to $9.2 million in
1998. The increase was primarily due to increased sales and marketing expenses
to expand the Berlin-Gorham Mills' premium printing and publishing papers market
share.
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Operating Income. Operating income decreased from $5.0 million in 1997 to a
loss of $(173.9) million in 1998. Operating income in 1998 included an asset
impairment charge of $143.6 million. Operating income in 1997 included a $13.5
million gain on timberlands sale. Operating income before these special charges
declined $21.8 million, from $(8.5) million in 1997 to $(30.3) million in 1998.
Crown Paper Corporate Overhead Allocation. Crown Paper corporate overhead
allocation increased $2.0 million, or 36.8%, from $5.7 million in 1997 to $7.8
million in 1998.
Interest Expense. Interest expense remained materially unchanged in 1998,
as compared to 1997, at $2.5 million.
Year Ended December 28, 1997 as Compared to Year Ended December 29, 1996
Net Sales. Net sales increased $5.5 million, or 3.1%, from $177.9 million
in 1996 to $183.4 million in 1997.
Net sales of uncoated freesheet papers declined $3.2 million, or 2.6%, from
$123.0 million in 1996 to $119.9 in 1997, primarily as a result of a 2.4%
decrease in net sales price per ton on substantially the same tonnage volume.
Although total net sales price per ton of uncoated freesheet paper declined,
sales of premium printing papers, including text and cover grades, increased
2,412 tons, or 44.5%, from 5,425 tons in 1996 to 7,837 tons in 1997, as a result
of the Berlin-Gorham Mill's continued strategy to focus on this market. Net
sales price for premium printing papers increased $102 per ton, or 10.2%. Sales
of web publishing grades increased 5,288 tons, or 9.8% from 53,858 tons in 1996
to 59,146 tons in 1997, with net selling price decreasing by $4 per ton, or
0.5%. Net sales price per ton and sales volume of other grades of uncoated
freesheet paper declined.
Net sales of jumbo rolls of towel increased 5,062 tons, or 17.7%, in 1997,
from 28,573 tons in 1996 to 33,635 tons in 1997. Average net sales price per ton
was materially unchanged between 1997 and 1996. The increase in tons sold was
due to favorable market conditions that allowed the Berlin-Gorham Mills to
increase sales. Net sales increased $4.0 million, or 18.0%, from $22.5 million
in 1996 to $26.5 million in 1997.
Net sales of pulp increased $4.6 million, or 14.2%, from $32.4 million in
1996 to $37.0 million in 1997. The increase was primarily due to a 14.8%
increase in tons sold during 1997 as compared to 1996. The increase in tons sold
was due to increased operating efficiencies that led to increased production
during 1997 as compared to 1996.
Gross Profit. Gross profit increased $15.0 million from $(11.3) million in
1996 to $3.8 million in 1997. Gross profit as a percentage of net sales
increased from (6.3)% in 1996 to 2.0% in 1997. This increase in gross profit, as
a percentage of net sales, is a result of improved operating efficiencies and
lower wood and pulp costs in 1997, as compared to 1996.
Selling and Administrative Expenses. Selling and administrative expenses
increased $2.8 million from $3.7 million in 1996 to $6.5 million in 1997. The
increase was primarily due to increased sales and marketing expenses as Crown
Paper implemented a marketing program to support production at the Berlin-Gorham
Mills of premium text and cover papers.
Operating Income. Operating income increased $25.4 million, from $(20.4)
million in 1996 to $5.0 million in 1997. Operating income in 1997 included a
$13.5 million gain on timberlands sale. Operating income before this charge
increased $11.9 million, from $(20.4) million in 1998 to $(8.5) million in 1997.
Crown Paper Corporate Overhead Allocation. Crown Paper corporate overhead
allocation increased $0.3 million from $5.4 million in 1996 to $5.7 million in
1997.
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Interest Expense. Interest expense increased $1.0 million from $1.5 million
in 1996 to $2.5 million in 1997, as a result of the $12.3 million industrial
revenue bond offering, which occurred in August of 1996.
Liquidity and Capital Resources
American Tissue
Historically, our growth has been financed through cash flow from
operations, borrowings under our bank credit facilities and other financings.
Net cash provided by operating activities was $21.9 million, $17.0 million and
$4.8 million in fiscal 1997, 1998 and the 1999 nine months, respectively. Our
capital expenditures were $29.2 million, $27.6 million and $12.6 million in
fiscal 1997, 1998 and the 1999 nine months, respectively. We expect to spend
approximately $22 million in fiscal 1999 for capital expenditures for business
maintenance and profit improvement projects, exclusive of amounts expected to be
paid with respect to the Berlin-Gorham Mills. A substantial portion of our
capital expenditures have been for acquisitions and capacity growth and profit
improvement projects, such as the acquisition of our Neenah and Greenwich tissue
mills in fiscal 1997 and 1996, respectively, and the construction and
installation of converting assets at our Calexico, California tissue converting
facility in fiscal 1999. Our capital expenditures for the fiscal 1999 nine
months included the replacement of a damaged Yankee dryer at our Mechanicville
tissue mill, repairs and upgrades to our paper machines at our Neenah and
Greenwich mills and the relocation of a tissue machine from our idled Tomahawk
mill to our Winchester mill.
Berlin-Gorham Mills
The Berlin-Gorham Mills has historically funded its growth through cash
flow from operations and borrowings under various Crown Paper credit facilities.
Net cash provided by operating activities was $8.6 million, $(12.1) million and
$(5.4) million in 1997, 1998 and the 1999 26 weeks, respectively. The
Berlin-Gorham Mills' capital expenditures were $13.1 million, $9.1 million and
$3.1 million in 1997, 1998 and the 1999 26 weeks, respectively.
Combined
As a result of the Transactions, we have a substantial amount of
indebtedness. As of June 30, 1999, after giving pro forma effect to the
Transactions, we would have had consolidated debt of $192.4 million, consisting
of: (1) $22.9 million of mortgage and other indebtedness; (2) $9.9 million
outstanding under the New Credit Facility (exclusive of unused commitments of
$90.1, subject to borrowing base limitations); and (3) $165.0 million on the
Notes, net of a discount of approximately $5.5 million. See "Capitalization" and
"Use of Proceeds."
Our primary capital requirements are for working capital, capital
expenditures and payments of interest expense. We expect combined capital
expenditures for American Tissue and the Berlin-Gorham Mills business
maintenance (excluding environmental) and profit improvement projects of
approximately $25 million in fiscal 1999 and ranging from approximately $30
million to approximately $32 million in fiscal 2000, of which we believe
approximately $15 million will be for equipment maintenance in each of fiscal
1999 and fiscal 2000. In addition, we estimate, after consultation with
independent environmental consultants, that approximately $13 million of capital
expenditures, within a range of approximately plus or minus 25%, may be required
to comply with the Cluster Rules at the Berlin-Gorham Mills, with compliance
dates beginning in 1999 and extending over the next two to five years.
We believe, based on current levels of operations and anticipated internal
growth and price increases, anticipated reductions in capital expenditures, cash
flow from operations, together with other available sources of funds including
the availability of borrowings under the New Credit Facility, will be adequate
for the foreseeable future to make required payments of principal and interest
on our indebtedness and to fund anticipated capital expenditures and working
capital requirements. Our ability to meet our debt service obligations and
reduce our total debt will be dependent, however, upon our future performance,
which, in turn, will be subject to general economic conditions and to financial,
business and other factors, including
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factors beyond our control. A portion of our debt bears interest at floating
rates. Therefore, our financial condition is and will continue to be affected by
changes in prevailing interest rates.
Year 2000 Compliance
The Year 2000 issue concerns the potential exposures related to the
erroneous generation of business and financial information resulting from the
fact that certain computer systems and software programs use two digits, rather
than four, to define the applicable year of business transactions. These
programs do not properly recognize a year that begins with "20" instead of the
familiar "19." These programs may process data incorrectly or stop processing
data altogether on January 1, 2000. We rely upon our own and vendor-supplied
technology and recognize the potential business risk to our assets and systems
associated with the arrival of the Year 2000.
American Tissue
We have substantially completed the process of identifying and remediating
Year 2000 compliance issues associated with our computer systems and software
programs. To date, we have spent approximately $600,000 in connection with our
Year 2000 compliance program, and we believe there will be no material
additional charges through completion. We are in the process of identifying Year
2000 compliance issues associated with our suppliers' products, services and
operations. Our customers and suppliers may not have management information
systems that are Year 2000 compliant and required systems modifications may not
be completed by the Year 2000. We have initiated formal communications with all
of our significant suppliers and large customers to determine the extent to
which we are vulnerable to those third parties failure to address their own Year
2000 issue. Failure of our customers and suppliers to be Year 2000 compliant
could have a material adverse effect on our business, financial condition and
results of operations.
Berlin-Gorham Mills
We are responsible for completing the remediation of any computer systems
and software programs at the Berlin-Gorham Mills which were not remediated by
Crown Paper as of the closing of our acquisition of the Berlin-Gorham Mills.
Crown Paper has represented to us that it had in operation programs designed to
identify and remediate Year 2000 issues and that it estimated that the total
cost to complete its remediation program would not exceed $1.25 million, of
which we estimate $700,000 was remaining as of the consummation of the
acquisition of the Berlin-Gorham Mills. However, we cannot assure you that the
cost of remediating such systems and programs will not significantly exceed such
amount.
Environmental Matters
At December 28, 1997, December 27, 1998 and June 27, 1999, the
Berlin-Gorham Mills had total accrued costs of $2.5 million, $2.4 million and $
2.8 million, respectively, primarily for estimated landfill site restoration,
post-closure and monitoring costs over the next 30 years. For the nine months
ended June 27, 1999, cash costs for site restoration, post-closure and
monitoring of the landfill was less than $100,000.
We believe, after consultation with independent environmental consultants,
that approximately $13 million of capital expenditures, within a range of plus
or minus approximately 25%, may be required to comply with the Cluster Rules,
with compliance dates beginning in 1999 and extending over the next two to five
years. Environmental capital spending for the 1999 fiscal year includes $0.2
million for compliance with the Cluster Rules. There are risks and uncertainties
associated with the estimate that could cause total capital expenditures and the
timing of such expenditures to be materially different from current estimates,
including changes in technology, interpretation of the rules by government
agencies that may be substantially different from management's interpretation or
other matters. The EPA has also proposed additional requirements for the pulp
and paper industry, which, if and when adopted, may require additional material
expenditure.
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The Berlin-Gorham Mills have been in operation for many years and, over
such time, Crown Paper and other prior operators at the Berlin-Gorham Mills have
generated and disposed of wastes which are or may be considered hazardous. The
soil, groundwater and adjacent area remediation which is currently under
consideration with respect to the Berlin-Gorham Mills could, based upon
available information, cost up to $400,000 over the next two years. Included
among the waste materials generated by past operations are contaminants left in
the vicinity of a former chemical plant on the northern portion of the Berlin
pulp mill property, of which a small building known as the "Cell House" remains
standing. The procedures required to remove the Cell House, encapsulate and seal
off the affected areas and thereafter to monitor such areas as required by
current regulations are estimated to cost up to $2.3 million. In addition,
certain maintenance and repairs to the wastewater treatment plants at the
Berlin-Gorham Mills have been identified which are estimated to cost up to $2.1
million.
The discovery of previously unknown contamination of property underlying,
or in the vicinity of, the Berlin-Gorham Mills could require us to incur
material unforeseen expenses for which we may not have any recourse against
Crown Paper or other prior operators. Occurrences of any of these events could
have a material adverse effect on our financial condition.
The Berlin-Gorham Mills have systems which process and treat large amounts
of wastewater primarily generated by their operations. Due to aging of the
treatment systems and to the evolution of mill operations, it is anticipated
that the related treatment systems and equipment will require replacement and/or
upgrading. In addition, there is evidence that effluent in connection with the
wastewater treatment processes has, over time, resulted in accumulations of
sediment and other buildup in adjacent lagoons and watercourses. It is
anticipated that changes in the applicable processes and the related technology
and equipment may be necessary in the future both to remediate such buildups and
to accommodate expansion of mill production schedules. The foregoing changes may
require additional material capital expenditures.
Certain Other Matters
Gain on Timberland Sale. During the fourth quarter of 1997, the
Berlin-Gorham Mills sold 24,000 acres of timber-producing properties for $24.5
million and recognized a gain of $13.5 million. Net proceeds of the sale were
used to pay down Crown Vantage debt.
Settlement of City of Berlin Property Tax Case. In February 1999, the
Berlin-Gorham Mills concluded an agreement with the City of Berlin, New
Hampshire, concerning assessed values and taxability of factory machinery. Over
the next three years the agreement significantly reduces the assessed value from
recent valuations of the Berlin-Gorham Mill's pulp mill. The Berlin-Gorham Mills
reversed a property tax accrual of approximately $9.0 million in the 1999 six
months, which relates to amounts over-accrued for previous tax years.
We Have Recently Made Changes in Our Finance and Accounting Department.
Historically, we have not always completed our fiscal year audited financial
statements or our fiscal quarter unaudited financial statements in a timely
manner. For instance, our audited financial statements for the fiscal year ended
September 30, 1998 were not issued until February 19, 1999 and our unaudited
financial statements for the fiscal quarter ended December 31, 1998 and March
31, 1999 were not issued until February 22, 1999 and May 21, 1999, respectively.
However, our unaudited financial statements for our fiscal quarter ended June
30, 1999 were timely delivered to the trustee under the indenture for the old
notes and the record holder of the old notes as required by the indenture. The
failure to complete and deliver our financial statements in the past has caused
defaults under our then existing credit facilities. See "Risk Factors - Our Debt
Agreements Contain Operating And Financial Restrictions."
In order to address certain deficiencies of our management information
systems and accounting systems, we have restructured our financial and
accounting department, including hiring a new chief financial officer and
retaining consultants who are working with us to install new management
information systems. We
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believe that such changes will be helpful in managing our operations, including
completing and delivering our financial statements in a more timely manner.
It is our intention to deliver financial statements and file reports with
the Securities and Exchange Commission within the required time periods of the
Securities Exchange Commission and as required by the indenture governing the
old notes and our New Credit Facility. However, we can give you no assurance
that we will be able to effect such changes in our management information
systems and accounting systems in a timely manner or that any delay will not
have a material adverse effect on our business, financial condition and results
of operations.
Inflation and Cyclicality
Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in the
foreseeable future to have, a material impact on our results of operations.
Although management of the Berlin-Gorham Mills cannot accurately anticipate
the effect of inflation on the operations of the Berlin-Gorham Mills, it does
not believe that inflation has had, or is likely in the foreseeable future to
have, a material impact on the results of operations of the Berlin-Gorham Mills.
The markets for the tissue and uncoated freesheet paper products produced
by American Tissue and the Berlin-Gorham Mills are characterized by periods of
supply and demand imbalance, with supply being added in large blocks and demand
fluctuating with changes in industry capacity, economic conditions (including in
the case of our uncoated freesheet paper products, the overall level of domestic
economic activity) and competitive conditions (including, in the case of our
uncoated freesheet paper products, intensified competition from overseas
producers responding to favorable exchange rate fluctuations and/or unfavorable
overseas market conditions). All of such conditions are beyond our control.
Seasonality
Historically, net sales for American Tissue have been somewhat stronger
during our third and fourth fiscal quarters, due to increased seasonal usage by
consumers in our at-home business and inventory and usage patterns in our
away-from-home business.
Statement of Financial Accounting Standards No. 121
Statement of Financial Accounting Standards No. 121 ("Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of")
requires management to assess the recoverability of its investments in
long-lived assets to be held and used in operations whenever events or
circumstances indicate that their carrying amounts may be impaired. Such
assessment requires that the future cash flows expected to result from use of
the assets are estimated and an impairment loss recognized when future cash
flows are less than the carrying value of such assets. Estimating future cash
flows requires an estimate of useful lives of its long-lived assets, future
production volumes and costs, future sales volumes, demand for the product mix
and prices of the Berlin-Gorham Mills that reflect the use of its long-lived
assets and market conditions.
Based on this assessment, Crown Paper took a $143.6 million charge which
was recorded during the fourth quarter of 1998 to write down the carrying value
of the Berlin-Gorham Mills. Statement of Financial Accounting Standards No. 121
also requires that assets held for sale be stated at the lower of cost or net
realizable value. In connection with the acquisition, Crown Paper took an
adjustment to net book value of the Berlin-Gorham Mills totaling $16.2 million,
which was recorded in the first quarter of 1999 in order to record the assets at
their estimated net realizable value. Although management of Crown Paper
believes it had a reasonable basis for its estimates, it is reasonably possible
that American Tissue may change its estimate of future cash flows and/or net
realizable values.
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INDUSTRY OVERVIEW
Tissue Industry
Tissue is used principally in products such as bath tissue, facial tissue,
napkins and paper towels and is typically sold into two key market segments: (1)
the consumer, or "at-home," sector; and (2) the commercial and industrial, or
"away-from-home," sector. In general, at-home tissue products are sold to
grocery stores and supermarkets, retail mass merchandisers, warehouse club
stores and drug stores for direct purchase by the consumer end-user.
Away-from-home tissue products are usually sold to paper, foodservice and
janitorial supply distributors, who, in turn, re-sell these products for use in
hotels, restaurants, factories, schools and other commercial, government and
industrial institutions. Tissue is generally manufactured in jumbo roll form and
is then converted into finished product for consumer end-use. A small quantity
of tissue, however, is also used in consumer hygienic and absorbent products
such as diapers, wipes and feminine hygiene products.
According to industry sources, approximately 42% of all U.S. tissue is
produced from purchased waste fiber, approximately 21% is produced from
purchased virgin pulp, with the remainder produced on-site at integrated pulp
and paper mills.
The U.S. tissue industry is highly concentrated due to the recent merger
activity between some of the largest industry participants. In 1995,
Kimberly-Clark acquired Scott Paper, and in 1997 Fort Howard merged with James
River, creating Fort James, the industry leader in terms of tissue capacity.
Based on estimated 1998 capacity data for U.S. manufactures, the top five tissue
producers accounted for approximately 80% of total industry capacity.
According to industry sources, the U.S. tissue industry has among the most
stable growth rates in the U.S. paper industry. Over the 15 year period from
1984 through 1998, total annual shipments of tissue increased from approximately
4.9 million tons to approximately 6.7 million tons, a compound annual growth
rate of approximately 2.2%. Since 1984, total annual shipments have declined
only once.
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Tissue is a mature industry and growth in shipments for the overall
industry is correlated to increases in the general population. However, certain
segments of the overall tissue industry, such as the at-home private label
market, are experiencing significantly higher growth rates.
Capacity growth in the tissue industry averaged approximately 1.4% over the
period 1992 through 1998. Over the same period, operating rates averaged
approximately 93.8%. As a result of significant new capacity coming on-line
during 1998 and early 1999, growth in capacity for 1999 is expected to be
approximately 3.7%. However, some of this new capacity was effectively offset by
mill closures announced in 1997 and 1998 by major industry participants, such as
Kimberly-Clark and Fort James. Many industry observers expect capacity growth to
stabilize at an average of approximately 2.0% going forward, in-line with the
historical growth in shipments. Imports, except a modest amount of tonnage from
Canada, are not a significant factor since shipping relatively bulky tissue
products long distances is usually economically inefficient.
U.S. Tissue Industry Statistics
(000 tons)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999e
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shipments .................. 5,781 6,004 6,094 6,208 6,261 6,431 6,711 6,757
% change ................ 2.0% 3.9% 1.5% 1.9% 0.9% 2.7% 4.4% 0.7%
Capacity ................... 6,413 6,407 6,539 6,552 6,647 6,884 6,899 7,155
% change ................ 2.7% -0.1% 2.1% 0.2% 1.4% 3.6% 0.2% 3.7%
Utilization ................ 90.1% 93.7% 93.2% 94.7% 94.2% 93.4% 97.3% 94.4%
</TABLE>
- ---------------------
e=estimate
Source: Resource Information Systems, Inc.
While pricing remained competitive during 1998, we believe that prices for
tissue products may increase in 1999 as a result of: (1) rising pulp prices and
(2) announced price increases by certain major jumbo roll manufacturers.
The At-Home Market
Since the mid-1990s, shipments in the approximately $7.0 billion at-home
market (based on estimated 1997 total sales) have been growing at an annual rate
of just over 2.0%. Converted tissue products for this segment ranges from
branded value grades (approximately 40% of the market) to specialty and premium
grades (approximately 44.0% of the market). An increasingly important segment of
the at-home market is private label. Within the at-home sector, bath tissue
represents approximately 50.0% of the market, towels make up approximately 32.0%
and facial tissue and paper napkins represent approximately the remaining 18.0%.
In general, at-home tissue products are sold to grocery stores and supermarkets,
retail mass merchandisers, warehouse club stores and drug stores for direct
purchase by the consumer end-user.
Industry sources estimate that the approximately 16.0% private label share
of the at-home market is significantly stronger in the western U.S., with an
approximate 21.8% market share. Growth in 1998 within the national private label
sector was estimated to be 4.0%. In our opinion, the higher growth rate seen
within the private label segment versus the overall tissue industry is
representative of:
(1) increased recognition by consumers that private label tissue can offer
reasonable quality at consistently attractive prices;
(2) product line extension by tissue manufacturers within the private label
segment, from traditional economy and value brands into premium brands;
(3) increased emphasis by retailers who generally receive higher margins on
private label tissue products than on branded national tissue products; and
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(4) the growth of retail mass merchandisers and warehouse club stores which
generally emphasize private label tissue products.
The Away-From-Home Market
The approximately $4.0 billion away-from-home market (based on estimated
1997 total sales) has experienced modestly lower growth in shipments since the
mid-1990s versus the at-home market. Industry sources estimate the average
annual growth in shipments at approximately 1.5%. Despite positive trends
regarding dining outside the home and a growing travel market, the slower growth
in shipments seen over the past few years within the away-from-home versus the
at-home markets is likely a result of lower growth rates in traditional
manufacturing and industrial job markets versus the increasing service economy.
Paper, foodservice and janitorial supply distributors, the primary
customers for away-from-home tissue products, tend to favor manufacturers who
can provide a broad line of various tissue products. In addition, we believe
that many of these same customers are increasingly concerned regarding industry
consolidation within the away-from-home market, and are looking for alternatives
to the large, national suppliers.
Within the away-from-home market, towels represents approximately 44% of
the market, bath tissue makes up approximately 30% and facial tissue and napkins
represent approximately the remaining 26%.
Uncoated Freesheet Papers
Uncoated freesheet paper constitutes the largest segment of the
printing/writing/publishing paper sector in the United States, with estimated
1998 capacity of 14.9 million tons representing approximately 31% of total U.S.
paper capacity of 48.4 million tons.
The primary use for uncoated freesheet paper is in office reprographic or
communication papers (i.e., copier and printer papers), accounting for
approximately 30% of total shipments; followed by offset papers for commercial
printing and book publishing applications (approximately 24% of shipments);
premium value applications, such as text and cover fine printing grades (used
for financial printing, fine stationary and promotional brochures); greeting
cards and technical specialty papers (approximately 18% of shipments); business
forms bond and computer forms (approximately 18% of shipments); and envelopes
(approximately 10% of shipments).
Commodity grades of uncoated freesheet, such as offset papers and forms
bond, are generally manufactured on larger machines that often have lower
production costs than smaller machines. Many manufacturers with large machines
often have kraft pulp mills onsite, enabling the lowest cost production of
uncoated freesheet paper. Smaller machines, which may include machines not
integrated to the production of kraft pulp, are typically dedicated to more
value added grades of uncoated freesheet in order to offset their generally
higher cost of production.
Despite merger activity during 1998 (e.g., Weyerhauser's purchase of
Bowater's Dryden, Ontario mill and International Paper's merger with Union
Camp), the uncoated freesheet industry remains relatively unconcentrated as
compared to tissue paper industry. Based on estimated 1998 capacity data for U.S
manufacturers, the top five uncoated freesheet producers accounted for
approximately 60% of industry capacity.
Demand for uncoated freesheet papers is correlated to strength in the
general economy and changing technology. U.S. uncoated freesheet capacity had a
compound annual growth rate of approximately 1.6% over the period 1992 through
1998. Over the same period, total annual shipments increased from approximately
12.3 million tons to 13.7 million tons, a compound annual growth rate of
approximately 1.7%. However, certain grades of uncoated freesheet, such as cut
size reprographic paper, continue to be in high demand as a result of the
increased use of computer desk top printers and the growth of the small
office/home office
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market. As the table below indicates, year-to-year growth was much more
cyclical, resulting in significant volatility in pricing over the same
seven-year period.
U.S. Uncoated Freesheet Industry Statistics
(000 tons)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999e
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shipments .......................... 12,348 12,532 13,462 12,993 13,160 13,684 13,651 13,974
% change ........................ 5.5% 1.5% 7.4% -3.5% 1.3% 4.0% -0.2% 2.4%
Capacity ........................... 13,617 13,625 13,956 14,393 14,488 14,701 14,946 15,163
% change ........................ 3.1% 0.1% 2.4% 3.1% 0.7% 1.5% 1.7% 1.5%
Utilization ........................ 90.7% 91.9% 96.4% 90.3% 90.8% 93.1% 91.3% 92.2%
Imports, net ....................... 228 455 214 391 295 390 595 720
Apparent U.S. consumption .......... 12,576 12,987 13,676 13,384 13,455 14,074 14,246 14,694
% change ........................ 5.2% 3.3% 5.3% -2.1% 0.5% 4.6% 1.2% 3.1%
Price ($/ton)* ..................... $ 578 $ 589 $ 611 $ 931 $ 747 $ 675 $ 651 $ 622
</TABLE>
- -----------
e = estimate
Source: Resource Information Systems, Inc.
* 20 lb. communication paper (reprographic bond).
According to industry sources, uncoated freesheet capacity is forecast to
increase by an average annual rate of approximately 0.9% over the 1999 to 2001
period, below the historical 10 year average of approximately 2.1%.
Average historical pricing for benchmark 20 lb. communication paper
exhibits the cyclical nature of the uncoated freesheet market. Transaction
prices were at their last cyclical low in 1992, at approximately $578 per ton,
and peaked in 1995 at approximately $931 per ton, a 61% increase in price.
Current pricing for bond paper is similar, on a nominal basis, to 1992 pricing.
Uncoated freesheet apparent U.S. consumption has increased 3.2% in the
first quarter of 1999 as compared to the same quarter in 1998, substantially
above the 1998 increase in apparent U.S. consumption. The increase in demand has
prompted a number of major U.S. producers, including Georgia-Pacific and Boise
Cascade, to announce price increases for various grades of uncoated freesheet,
although there can be no assurance that these price increase announcements will
hold.
BUSINESS
Overview
We are a leading integrated manufacturer of tissue products in North
America, with a comprehensive product line that includes jumbo tissue rolls for
converting and converted tissue products for end-use. Since our inception in
1981, we have grown primarily through the opportunistic acquisition and
integration of underperforming tissue mills and converting assets. We currently
operate six paper mills (including five tissue mills), seven converting
facilities, two printing/packaging facilities and 11 distribution centers.
During the LTM Period, we derived approximately 72.5% of our net sales from
sales of converted tissue products, approximately 26.2% from sales of jumbo
rolls and the remainder from tissue converting equipment sales. For the LTM
Period, on a pro forma basis, giving effect to the Transactions, we would have
generated net sales of approximately $409.4 million and Adjusted EBITDA of
approximately $57.2 million.
Our converting facilities transform jumbo rolls into a wide range of
finished tissue products, such as bath tissue, paper towels, napkins and facial
tissue. We believe that our flexible manufacturing capabilities allow us to
offer a range of products that is broader than that offered by any other North
American tissue producer. We sell converted tissue products in the
away-from-home and at-home markets. During the LTM Period, our
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tissue mills produced approximately 96,000 tons of jumbo rolls for our own
converting operations and approximately 67,000 tons for sale to other tissue
producers. In addition to tissue products, we use our internal engineering
expertise to recondition and sell used tissue converting equipment to support
our jumbo roll business. With the acquisition of the Berlin-Gorham Mills, we
became effectively 100% vertically integrated with respect to virgin pulp,
increased our toweling capacity by approximately 17.7% and extended our product
offering in the away-from-home market with uncoated freesheet papers.
Our converted tissue products are sold throughout the United States and in
certain regions of Canada and Mexico. We sell premium, specialty and commodity
grades of jumbo rolls to both domestic and international markets. Our total net
sales have increased every year since our inception.
We were founded in 1981 as a manufacturer of converted tissue products for
the at-home market, principally in the eastern United States. Since then, we
have become more vertically integrated through the acquisition of various mill
facilities. We began selling jumbo rolls to third parties in 1990. We entered
the away-from-home market in 1992 and expanded our presence in that market in
1994 with the acquisition of Tagsons Papers, Inc., which included a paper mill
and converting assets in upstate New York. Since 1992, we have sought to expand
our presence throughout North America. We commenced our western expansion
strategy with the acquisition of our tissue machine in St. Helens, Oregon in
1992. We opened our tissue converting/distribution facility in Mexicali, Mexico
in 1995 and we acquired our tissue manufacturing and converting facility in
Neenah, Wisconsin in 1996. To further support such expansion, we established a
tissue converting/distribution facility in Calexico, California in November
1998.
Business Strategy and Competitive Advantages
Our business strategy and competitive advantages include the following:
o Opportunistic Acquisitions of Underperforming Assets. We benefit from
a senior management team experienced in acquiring underperforming
paper mills and converting assets at a substantial discount to
replacement costs, implementing strict cost reduction programs and
selectively making capital expenditures to increase capacity and
improve operating efficiency. In November 1996, for example, pursuant
to an opportunity created by the merger of Kimberly-Clark and Scott
Paper, we acquired our Neenah, Wisconsin facility from Kimberly-Clark
at an attractive price. The Neenah facility then had 372 employees and
five tissue machines, of which two were operating full-time, two were
operating part-time and one was idled. These machines produced a total
of approximately 43,000 tons annually. Shortly thereafter, we
implemented a number of initiatives to improve the efficiency of the
Neenah facility, including personnel reductions and selective capital
investments to improve the operation of these tissue machines. As of
March 31, 1999, the Neenah facility had 259 employees and five tissue
machines in full-time operation. We estimate that these five full-time
tissue machines will produce approximately 66,000 tons in fiscal 1999,
based on production of approximately 33,000 tons in the first half of
fiscal 1999. Net sales at our Neenah facility have grown from
approximately $39.2 million in fiscal 1997 to approximately $64.0
million in the LTM Period, a compound annual growth rate of
approximately 38.7%.
o Capitalize on Flexible, Efficient Manufacturing Capability. We
maintain a diverse array of manufacturing, converting and packaging
equipment and a skilled workforce, which we believe enable us to
respond to changes in market conditions and customer requirements more
rapidly than our competitors. Our 11 tissue machines (excluding the
toweling machine at the Berlin-Gorham Mills) have an annual capacity
ranging from approximately 12,000 tons to approximately 50,000 tons,
and our highest capacity machine is among the largest capacity tissue
machines in the industry. In addition, we are able to vary the raw
material input on most of our tissue machines to produce tissue from
virgin pulp, recycled paper or paper manufacturing by-products. These
flexibilities enable us to economically manufacture a broad range of
products, utilizing the most efficiently configured machine for each
product.
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o Capitalize on Competitor Consolidation. We believe the continuing
trend of competitor consolidation has created marketing opportunities
for us. For example, Kimberly-Clark's merger with Scott Paper and
James River's merger with Fort Howard have increased the concentration
of suppliers, which is a concern of many customers. In addition,
certain niche opportunities have been created by our competitors'
consolidations, where they have chosen to discontinue or de-emphasize
certain value or economy product categories. To capitalize on this
trend and strengthen our position as an alternative supplier in
certain product areas, we have built a comprehensive product line of
premium, value and economy grades in each product category and have
increased our away-from-home salesforce.
o Strategically Locate Our Manufacturing Facilities. We believe that our
tissue mills, converting facilities and distribution centers are
strategically located across North America, including:
o five tissue mills, with three in the Northeast, one in the
Midwest and one on the West Coast;
o seven converting facilities, with four in the Northeast, one in
the Midwest, one on the West Coast and one in Mexico; and
o 11 distribution centers, with eight in the Northeast and Middle
Atlantic States, one in the Midwest, one on the West Coast and
one in Mexico.
We believe that the geographic diversity of our locations allows us to
service both national and regional accounts economically and
efficiently. Since our inception, we have had a strong presence in the
Northeast, and more recently, we have expanded our business westward.
Our Mexicali, Mexico converting facility, which opened in fiscal 1995,
and our Calexico, California converting facility, which opened in
fiscal 1998, enable us to take advantage of the geographic diversity
of our tissue mill operations in Neenah, Wisconsin and St. Helens,
Oregon.
o Continue To Expand Our Diverse and Broad Product Line. We believe that
our diverse product line, with over 200 product categories and over
780 SKUs, is the broadest in North America and represents a key
competitive advantage. Our broad line of converted tissue products,
which are available in a wide range of grades, designs and package
configurations, and our ability to respond quickly to customer
requirements for multiple-product orders, allow us to offer "one-stop
shopping" to our customers. This is particularly important given the
trend toward supplier consolidation. By offering a wide range of
products, we can provide our customers with more frequent shipments of
a larger mix of products, which lowers the minimum efficient order
quantity per product, which facilitates "just-in-time" and
"cross-docking" practices. Our strategy is to continue to expand our
product line through the introduction of new or enhanced products.
Recent additions to our product line include polycoated tablecovers,
printed table napkins, pizza boxes, center-pull towels, straws and
stirrers and split-core bath tissue.
o Diverse Customer Base. Our customer base is broadly diversified across
industries and geographic locations, greatly reducing our dependence
on any single customer or market. Prior to our acquisition of the
Berlin-Gorham Mills, no single customer represented more than 8.0% of
our net sales in the LTM Period and our top 10 customers represented
approximately 28.6% of our net sales in the LTM Period.
o Grow Jumbo Roll Sales by Leveraging Equipment Sales Business. We
intend to leverage our expertise in buying, reconditioning and selling
used tissue converting equipment to increase our sales of jumbo rolls.
For example, we generally sell our tissue converting equipment to
tissue products manufacturers who sign multi-year jumbo roll purchase
contracts with us. Our third-party jumbo rolls are generally used by
domestic customers to manufacture non-competing finished tissue
products, such as branded at-home and niche tissue products, including
disposable diapers, feminine sanitary napkins and disposable medical
products or are sold to overseas converters. During the LTM Period,
our equipment sales business generated net sales of approximately $3.1
million.
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o Favorable Supply and Service Agreements. We have entered into supply
and service agreements which we believe are favorable to us. We
entered into a supply agreement with Boise-Cascade, expiring in 2022,
under which we purchase slush pulp, at a price which is substantially
below the market price for baled virgin pulp, from the integrated
Boise Cascade pulp and paper mill in St. Helens, Oregon that houses
our tissue machine. During the LTM Period, we purchased approximately
42,000 tons under this agreement, which represented approximately
84.0% of the total pulp requirements of our St. Helens, Oregon
operation. Also, in connection with our acquisition of the
Berlin-Gorham Mills, we entered into agreements with Crown Paper,
under which Crown Paper will purchase from us annually 40,000 tons of
pulp produced at the Berlin-Gorham Mills. We have also agreed to
outsource the sales and marketing of certain grades of our uncoated
freesheet papers to the established salesforce of Crown Paper, which
we believe will afford us substantial savings over the Berlin-Gorham
Mills historical selling expense.
Products, Marketing and Customers
We manufacture and sell a full line of converted tissue products varying by
weight, softness, size, grade, package configuration and price for both the
away-from-home and at-home markets. We have four major product lines: bath
tissue, paper towels, napkins and facial tissue. We also manufacture
tablecovers, paper plates, pizza boxes and straws and stirrers. Towel, napkin
and tablecover products are available in occasional and seasonal prints for
parties and holiday seasons. Potential new products now being evaluated include
printed paper plates, hot and cold beverage cups and paper bags. In addition, we
manufacture and sell jumbo rolls to other tissue converters.
The following table sets forth our net sales by market for the periods
shown (dollars in millions):
<TABLE>
<CAPTION>
12 Months
Fiscal Years Ended September 30, Ended
----------------------------------------------------------------------------- March 31, 1999
1995 1996 1997 1998 (unaudited)
---------------- ----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Away-from-home ............... $ 53.0 38.2% $ 69.9 45.8% $ 85.8 43.4% $ 89.2 41.7% $ 96.8 41.0%
At-home ...................... 61.3 44.1 63.2 41.4% 68.6 34.7 71.9 33.6 74.5 31.5
Total converted ............ 114.3 82.3 133.1 87.2% 154.4 78.1 161.1 75.3 171.3 72.5
Jumbo rolls .................. 24.7 17.7 19.4* 12.7% 42.0 21.3 47.2 22.1 61.8 26.2
Equipment sales .............. -- -- 0.2 0.1% 1.2 0.6 5.7 2.6 3.1 1.3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total ...................... $139.0 100.0% $152.7 100.0% $197.6 100.0% $214.0 100.0% $236.2 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- -----------
* The decrease from fiscal 1995 was due primarily to the fire in our
Hauppauge, New York facility in November 1995.
Away-from-home converted products (approximately 41.0% of LTM Period net
sales). We manufacture and market a broad line of converted tissue products for
the estimated $4.0 billion U.S. away-from-home market. We sell our
away-from-home products principally to paper, foodservice and janitorial supply
distributors, who resell these products to hotels, restaurants, offices,
factories, hospitals, schools and government facilities. Our 15 regionally based
away-from-home sales managers are responsible for coordinating our sales efforts
to these distributors. Additionally, we seek to create "pull-through" demand for
our away-from-home products by marketing directly to end-users. Since we entered
the away-from-home market in 1992, we have built our away-from-home product line
to include 141 product categories and 299 SKUs, ranging from economy and value
grades to premium grades. Kimberly-Clark's merger with Scott Paper and James
River's merger with Fort Howard have resulted in a concentration of supply base,
a concern of customers. We believe the continuing trend of competitor
consolidation has created marketing opportunities for us, and we have become an
alternative supplier to give our customers a choice of products.
Certain niche areas have been created by our competitors' consolidations,
where they have chosen to withdraw or de-emphasize certain value or economy
product categories. We believe we are the only tissue
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supplier in North America to offer premium, value and economy grades in each
category for combined shipment in a truckload order. This has enabled us to
provide our customers with what we believe to be the broadest product offering
in the industry, an increasingly critical selling point with customers who are
seeking "one-stop shopping." Our away-from-home converted products include
folded and roll towels, bulk and dispenser napkins and bath and facial tissues.
While we have historically concentrated on value-priced and economy products in
this market, we have introduced our Manhattan(TM) line of premium quality
away-from-home products to take advantage of the growing demand for premium
away-from-home products. During the LTM Period, approximately 76.7% of our
away-from-home products were sold under our brand names, with private label
products (under distributor label) and products manufactured for particular,
national accounts (under corporate label) constituting the remainder. Our
away-from-home products are sold through distributors, such as Bunzl, Burke,
Restaurant Depot and Sweet Paper, to a wide variety of end-customers including:
o restaurants, such as Sbarro, Bertucci's and Chili's;
o hospitality companies, such as Caesars Palace, Carnival Cruise Lines
and Holiday Inn;
o corporations, such as AT&T and General Electric; and
o educational institutions, such as Dartmouth College, Johns Hopkins
University and the University of North Carolina.
In addition, we sell to national accounts, such as Burger King and Wendy's.
Our net sales in the away-from-home market have grown from approximately
$53.0 million in fiscal 1995 to approximately $96.8 million in the LTM Period, a
compound annual growth rate of approximately 18.8%. This growth was due to,
among other things:
o acquiring assets;
o expanding product lines; and
o increasing market share in certain segments.
At-home converted products (approximately 31.5% of LTM Period net sales).
We manufacture and market a broad line of converted tissue products for the
estimated $7.0 billion U.S. at-home market. Our at-home products are sold
through a network of more than 60 independent brokers and agents that sell
throughout the United States and in certain regions of Canada and Mexico. Our
four regional sales managers are responsible for coordinating the sales efforts
of these independent brokers and agents. These sales managers focus on
maintaining close relationships with independent food brokers and retailers in
their territories by emphasizing our traditional strengths:
o value,
o competitive pricing,
o enhanced margins for retailers, and
o the flexibility to manufacture short runs of products at prices
attractive to retailers and margins acceptable to us.
In particular, we target the estimated $1.1 billion private label segment
of the at-home market, for which we manufacture products that range from economy
to premium quality grades. As a private label manufacturer, we generally seek to
avoid direct competition with larger branded consumer product companies, such as
Procter & Gamble and Kimberly-Clark. During the LTM Period, approximately 82.1%
of our at-home
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products are manufactured for specific retailers for sale under private labels,
with the remainder manufactured for sale under our own brand names.
Our core at-home products include a broad line of bath tissue, paper
towels, napkins and facial tissue. Over the past several years, the at-home
market has expanded from economy products to an assortment of quality grades,
and we have responded by expanding the range and variety of printing, coloring
and embossing applied to our at-home products. We produce our branded at-home
tissue products principally under our Magnolia(TM), Sterling(TM), Magic Soft(TM)
and Elan(TM) brand names. We sell our brand name products principally to smaller
retailers that do not have their own private label brands, as well as large
retailers that wish to offer tissue across a wide price continuum.
We focus our marketing efforts for at-home products on trade promotion and
incentive programs targeted to major food store chains, mass merchandisers and
drug retailers. Consistent with our focus on the private label and branded value
segments of the at-home market, our use of advertising and promotion focused on
the end-users is minimal. We currently estimate private label penetration to be
only approximately 16.0% of the at-home market and industry sources estimate
that the growth of this segment was approximately 4.0% in 1998, as retailers
continue to extend their lines of tissue products from economy and value grades
to premium grades. We believe that this trend will continue. Our customers
include:
o grocery stores and supermarkets, such as Aldi, Pathmark, Winn Dixie,
Ralphs, Loblaws and Stop & Shop;
o mass merchandisers, including Dollar General;
o drug stores, such as Rite Aid and Walgreens; and
o buying "co-ops" and wholesalers such as Super Value and Wakefern.
Our net sales in the at-home market have grown from approximately $61.3
million in fiscal 1995 to approximately $74.5 million in the LTM Period, a
compound annual growth rate of approximately 5.7%.
Jumbo rolls (approximately 26.2% of LTM Period net sales). In addition to
supplying the internal needs of our converting facilities, we manufacture and
sell standard and specialty grades of jumbo rolls directly to converters of
finished tissue products, such as Kimberly-Clark, Georgia-Pacific and Fort
James. The jumbo rolls we sell are generally used by our domestic customers to
manufacture non-competing finished tissue products, such as branded at-home and
niche tissue products, including disposable diapers, feminine sanitary napkins
and disposable medical products. Our strategy is to emphasize stable customer
relationships to sustain a long-term market for our specialty jumbo rolls, which
often sell at a higher price per ton than our converted tissue products. Our net
sales of jumbo rolls have grown from approximately $24.7 million in fiscal 1995
to approximately $61.8 million in the LTM Period, a compound annual growth rate
of approximately 30.0%, reflecting our strategy of emphasizing jumbo roll sales.
Converting Equipment Sales
In addition to our lines of tissue products, we have two machine shops in
Hauppauge, New York which are dedicated to refurbishing and reconditioning
converting equipment that we either use internally or sell to other tissue
converters. In fiscal 1996, 1997, 1998 and the LTM Period, we had net equipment
sales of approximately $0.2 million, $1.2 million, $5.7 million and $3.1
million, respectively, achieving gross profits of approximately $0.1 million,
$0.9 million, $4.1 million and $2.8 million, respectively. We have initiated a
strategy of bundling future jumbo roll sales with equipment sales, which has
resulted in strengthening our long-term jumbo roll business.
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Pricing Trends
We believe favorable industry tissue pricing conditions exist, particularly
in the jumbo roll market. All our tissue mills are operating at full capacity
and recent jumbo roll pricing announcements indicate a tightness of supply will
support increased prices.
Manufacturing
Jumbo Roll Manufacturing. Our jumbo roll manufacturing process begins with
wood pulp, recycled paper and waste paper. These raw materials typically are
pulped in large blenders or pulpers and moved via networks of pipes and pumps to
a tissue machine where sheets of tissue paper are formed according to customer
or grade specifications. The tissue paper is then drawn through the machine,
being formed on wires as it travels through various press rolls. Once the sheets
are formed, they are transferred to a dryer section of the machine that dries
the tissue. Following the drying process, the tissue paper is removed from the
drying cylinders and wound into jumbo rolls. Jumbo rolls are either used
internally for our converting operations or sold to third-party purchasers.
Converting. Converting involves loading jumbo tissue rolls onto converting
machines which unwind, perforate, emboss and print tissue as needed. The
machines then roll or fold the processed tissue into finished products such as
bath tissue, napkins or paper towels.
Packaging. We carton, wrap and pack our converted products into cases.
Consistent with our emphasis on vertical integration, we also manufacture our
own corrugated boxes, folding cartons, printed poly wrap and printed paper wrap.
Our packaging capabilities complement our flexible manufacturing strength by
enabling us to offer our products in a wider range of package configurations, an
especially important consideration in the at-home market, and to respond quickly
and efficiently to our customer needs.
Quality Control
Our tissue mills and converting facilities are subject to rigorous quality
control standards. We require our production facilities to adhere to strict
technical specification guidelines. For example, we require that the tissue we
produce meet standards such as basis weight, tensile strength, absorbency and
brightness. Our five tissue mills use the Measurex Open Network System, a
process control system which helps provide consistent quality and compatibility
with existing systems. Our converting facilities use an acceptance grading
system/statistical process control, which requires that plant managers and floor
supervisors be responsible for our product specifications. All quality control
processes are monitored on a daily basis and the results are forwarded for
plotting and graphing to our centralized Quality Assurance Department.
Raw Materials and Suppliers
The principal raw materials for our tissue manufacturing operations are
wood pulp, recycled paper pulp and waste paper. Under our agreement with Boise
Cascade, as recently amended, we are currently required to purchase a minimum of
35,000 tons of wood pulp per year from Boise Cascade. This minimum increases to
57,000 tons per year commencing January 1, 2000. Additionally, Boise Cascade is
currently required to make available to us a minimum of 40,000 tons of pulp per
year, which minimum increases to 62,000 tons per year, commencing January 1,
2000. All of the pulp tonnage made available to us by Boise Cascade is currently
used at our St. Helens, Oregon tissue-making operation. This tonnage is
currently sufficient to satisfy our requirements at our St. Helens facility. In
addition, Boise Cascade is required to make available to us a minimum of 20 tons
per day of blended pulp. Pricing is calculated by a formula referencing certain
market prices. Our agreement with Boise Cascade is effective through December
31, 2022. We also purchase pulp from a number of other suppliers. We purchase
wastepaper under a combination of supply arrangements with brokers located in
the Midwest and Northeast United States. In order to minimize freight costs, we
focus on maintaining and establishing relationships with wastepaper dealers
located near our manufacturing facilities and in close proximity to urban areas
where a majority of waste is generated. We believe our current sources of supply
are adequate to meet our requirements for our tissue manufacturing operations
and that with our
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acquisition of the Berlin-Gorham Mills, we are effectively 100% vertically
integrated with respect to virgin pulp.
The principal raw materials for our tissue converting operations are
standard and specialty grade jumbo rolls of tissue. We believe our ability to
supply our converting operations with a range of tissue grades manufactured at
our mills is a competitive advantage, as we can supply all of our tissue needs
from internal production.
Competition
The tissue industry is highly competitive. We believe that competition is
based principally on product quality, price and customer service. Our
competitors include Kimberly-Clark, Fort James, Procter & Gamble,
Georgia-Pacific, Wisconsin Tissue (a subsidiary of Chesapeake Corporation),
Potlatch, Marcal, Irving and Global Tissue (a subsidiary of Kruger, Inc.). Many
of our competitors are larger and more strongly capitalized than we are, which
may enable them to better withstand periods of declining prices and adverse
operating conditions in the tissue industry.
In the uncoated freesheet paper market, we compete principally in North
America, primarily with U.S. and Canadian paper producers, but also with
overseas producers. Similar to the tissue market, we compete primarily on the
basis of price, although quality and service are often the determining factors
in the choice of a supplier. In addition, we compete with integrated and
non-integrated producers of paper products. Fully-integrated manufacturers
(i.e., those whose requirements for pulp or other fiber are met fully from their
internal sources) may have certain competitive advantages relative to those that
are not fully-integrated manufacturers in periods of relatively high prices for
raw materials, in that the former are able to ensure a steady source of such raw
materials at costs that may be lower than prices in the prevailing market. In
contrast, certain competitors which are less integrated than we are may have
certain cost advantages in periods of relatively low pulp prices in that they
may be able to purchase pulp at prices lower than our production costs.
Moreover, certain of our competitors are lower-cost producers than we are and
certain of our competitors have greater financial resources than we have. Our
competitors include International Paper, Georgia-Pacific, Champion International
and Boise Cascade. In addition, many end-users of printing/writing/publishing
products in recent years have responded to changing economic conditions and
paper prices by substituting less expensive paper grades for use in their
products, and this tendency may benefit certain of our competitors which produce
lower priced paper products.
We cannot assure you that we will be able to successfully compete in the
tissue or uncoated freesheet papers industry or that increased competition will
not have a material adverse effect on our business, financial condition and
results of operations.
Berlin-Gorham Mills Acquisition
On July 9, 1999, we purchased the Berlin-Gorham Mills from Crown Paper,
through Pulp & Paper of America LLC, a wholly-owned subsidiary of ours and one
or more of its subsidiaries. As consideration for the purchase of such assets,
we paid $47.1 million in cash, of which $45 million is subject to adjustment,
and assumed certain ongoing contractual liabilities related to the assets being
acquired.
The cash portion of the purchase price included $2.1 million relating to
mill costs and wet lap machine and other repair costs and reimbursement of
certain property tax for the amount of $0.9 million prepaid for us by Crown
Paper.
In addition to the property, plant and equipment which we acquired pursuant
to the asset purchase agreement, Crown Paper transferred certain inventory to us
at the closing comprised of raw materials, finished goods, supplies and spare
parts. Such inventory is to have a value of $31.4 million. The actual value of
the inventory is being determined according to generally accepted accounting
principles as of the closing date of the acquisition. Thereafter, the $45
million of the cash portion of the purchase price will be adjusted
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downward depending on the amount by which the parties agree or if they cannot
agree, an agreed-upon mediator determines, that the closing inventory value was
below $31.4 million.
In connection with our acquisition of the Berlin-Gorham Mills, we have
entered into a number of agreements with Crown Paper. Under these agreements,
Crown Paper will, for a period of three years from the consummation of the
acquisition:
o purchase from us annually, 40,000 tons of virgin pulp at a
contractually determined market-based price, less certain discounts;
o purchase orders for a minimum of 20,000 tons of certain publishing
grades of uncoated freesheet paper manufactured at the Berlin-Gorham
Mills. If we accept such orders, we will be obligated to manufacture
and sell such products to Crown Paper, under its trademarks, for
resale by Crown Paper to its customers, at certain agreed-upon prices,
less a discount; and
o be engaged as our exclusive sales representative for certain grades of
uncoated freesheet paper (other than certain publishing grades), with
the obligation to use its best efforts to sell a minimum of 130,000
tons of such papers annually for a specified commission.
Under such uncoated freesheet paper marketing agreements, Crown Paper bears
all marketing costs and selling responsibility. In addition, under the asset
purchase agreement, Crown Paper has agreed not to compete with us in the
manufacture and marketing of tissue, toweling and certain grades of uncoated
freesheet papers for a period of three years following the consummation of the
acquisition.
At the closing of the acquisition, we entered into a transitional services
agreement with Crown Paper. Under such agreement, each party will provide the
other with certain transition services for an agreed-upon period at an agreed
upon cost.
The Berlin-Gorham Mills have been in continuous operation since 1904 and
were acquired by Crown Paper in 1995 as part of its spin-off from James River,
the predecessor to Fort James. The Berlin-Gorham Mills are a fully integrated
pulp and paper manufacturing facility consisting of a kraft pulp mill in Berlin,
New Hampshire and a paper mill in Gorham, New Hampshire which is comprised of
four paper machines and a towel machine. The four paper machines were dedicated
by Crown Paper to the manufacture of uncoated freesheet papers primarily for
printing, writing and publishing applications. The toweling machine was
dedicated by Crown Paper to the manufacture of jumbo rolls of towel for
converting into commercial towel products. The Berlin-Gorham Mills also include
six hydroelectric generating facilities, six steam turbines for the generation
of electricity and a solid waste landfill. The mills and the hydroelectric
generating facilities are located on the Androscoggin River, which provides
water for operation of the mills and the hydroelectric generating facilities.
The four paper machines have an aggregate annual production capacity of
approximately 180,000 tons and produced approximately 150,000 tons of uncoated
freesheet paper products in the LTM Period, sales of which generated revenues of
approximately $115.0 million in the LTM Period. We believe that the machines are
well suited for the production of specialty grade papers and, together, produce
grades ranging from 26 to 150 pounds in basis weight. The independent
manufacturing systems of the four machines allow the Gorham paper mill to
simultaneously produce papers with different colors, characteristics and
mixtures of pulp and additives. In addition to producing various grades of
freesheet paper for sale to or through Crown Paper pursuant to our marketing
agreement with Crown Paper, we are currently using the paper machines to
manufacture freesheet reprographic papers (computer printer, copier and fax
papers) under our own brands or the brands of our private label away-from-home
customers for resale to small office/home office customers and specialty papers
for converting into certain disposable food service papers such as paper plates
and bags.
The toweling machine manufactures jumbo rolls of towel for converting into
away-from-home towel products, such as C-fold and multi-fold towels. This
machine has the potential for producing toweling for
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converting jumbo rolls into at-home towel products, masking tape base, surgical-
medical disposables and filtration products.
The Berlin pulp mill consists of nine batch digesters, three washer lines,
separate hardwood and softwood elemental chlorine bleach plants and a chemical
recovery unit capable of simultaneously producing hardwood and softwood pulp.
The pulp mill is connected to the Gorham paper mill via two gravity-fed
pipelines. In the LTM Period, the pulp mill supplied 85.3% of the paper mill's
wood pulp requirements. In the LTM Period, the Berlin pulp mill dried and sold
approximately 116,000 tons of hardwood as market pulp (including sales to other
Crown Paper mills).
Reports filed by Crown Paper with the Securities and Exchange Commission
state that from 1992 to 1994, Fort James invested approximately $87.0 million to
rebuild and expand the chemical recovery unit, which Crown Paper believes
extended the life of such unit by approximately 20 to 25 years. Through the
implementation of various strategies, including the startup of an existing wet
lap pulp machine at the Berlin pulp mill and the use of recycled paper and
certain paper manufacturing by-products that would otherwise be discarded, we
are seeking to significantly increase the amount of virgin pulp available for
sale to our tissue mills and as market pulp to third party purchasers. We cannot
assure you that we will be able to successfully implement such strategies or
that the implementation of such strategies will result in any anticipated cost
benefits or increased revenues.
Wood fiber is the largest single material cost for the Berlin-Gorham Mills.
Wood chips, which are used in kraft pulp making, are either produced at the
Berlin pulp mill from timber purchased under long term supply contracts or
purchased from local suppliers. Raw materials required by the Berlin-Gorham
Mills are clay and chemicals used in pulp and paper production, which are
supplied under contracts with certain suppliers. We believe that the
Berlin-Gorham Mills currently have adequate sources of raw materials and that
adequate alternative sources of supply are available.
The six hydroelectric generating facilities located on the Androscoggin
River and six steam turbines generate approximately 31 megawatt hours of
electricity in the aggregate. In 1998, the Berlin-Gorham Mills generated
approximately 82% of their power requirements and their average cost of
internally generated power was approximately 31% of the cost of purchased power.
The Berlin-Gorham Mills sell a small amount of power to the local public utility
when internal demand is less than internal generation.
The Gorham paper mill principally produces uncoated freesheet papers for
custom business forms, book and opaque papers for hard cover books and manuals
and premium grade papers for annual reports and other printing applications.
Paper products from the Berlin-Gorham Mills include:
Products Markets
-------- -------
Text and Cover, Writing and Opaque Commercial Printing
Publishing Papers Book and Magazine
Business Papers Communication
Technical Specialties Specialty Converting
In September 1998, Crown Paper appointed a new management team, including a
new mill manager, for the Berlin-Gorham Mills. The new management team improved
operating performance, increased production and reduced fixed costs. In the six
month period following Crown Paper's appointment of the new mill management
team, fixed costs decreased approximately $5.5 million, or approximately 14.5%,
while paper production increased approximately 9,483 tons, or approximately
11.2%, as compared to the same period in the prior year. The severance of 95
employees during the LTM Period, in addition to the 13 employees who left in the
first quarter of 1998, is estimated to result in approximately $3.0 million of
annual savings. Approximately $2.5 million of compensation costs associated with
the severed employees was recorded in the LTM Period and has been reflected in
Adjusted EBITDA for the LTM Period. Associated with the reduction in personnel
was a non-recurring severance charge of approximately $1.9 million. In addition,
in
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February 1999, the City of Berlin, New Hampshire settled a longstanding property
tax dispute regarding the Berlin pulp mill. Based upon the revised property
assessment value and the current property tax rate, we believe that we will
realize approximately $2.0 million in savings for each of the next three years
as a result of this settlement, of which $0.6 million is reflected in Adjusted
EBITDA for the LTM Period. Also reflected in the results of the LTM Period is a
non-cash write-down in the value of the assets at the Berlin-Gorham Mills of
approximately $159.8 million, $16.2 million of which resulted from Crown Paper
selling the assets to us at below book value.
Facilities
In addition to the Berlin-Gorham Mills, we operate five tissue mills, with
a total annual capacity of 220,000 tons. Of these mills, one is in New
Hampshire, two are in New York, one is in Oregon and one is in Wisconsin. We
also operate seven converting facilities and two packaging/printing facilities.
Of these converting facilities, one is in California, one is in Mexico, four are
in New York and one is in Wisconsin. Both packaging/printing facilities are in
New York. We also have 11 distribution facilities. Of these distribution
facilities, one is in California, one is in Mexico, one is in New Jersey, seven
are in New York and one is in Wisconsin. Certain of the mills and facilities
discussed above are located on the same real property sites. See "-Berlin-Gorham
Mills Acquisition" for information as to these facilities.
The following table lists our production facilities and their operations:
<TABLE>
<CAPTION>
Fiscal Year Annual Production
Mills Acquired Products Capacity(1)
- ----------------------------------- -------------------- ----------------------------------- ---------------------------
<S> <C> <C> <C>
Winchester, New Hampshire 3Q 1994 100% recycled and 24,000 tons
100% virgin tissue
Greenwich, New York 3Q 1996 100% recycled and 24,000
100% virgin tissue
Mechanicville, New York 1Q 1995 100% recycled and 50,000
100% virgin tissue
St. Helens, Oregon(2) 1Q 1993 20% recycled and 50,000
100% virgin tissue
Neenah, Wisconsin 1Q 1997 100% recycled and 72,000
100% virgin tissue -------
Total tonnage 220,000 tons
=======
Converting Facilities
- -----------------------------------
Calexico, California 1Q 1998 Converted Tissue 1,500,000 cases
Mexicali, Mexico 4Q 1996 Converted Tissue 1,000,000
Coram, New York 2Q 1997 Converted Tissue 2,000,000
Hauppauge, New York(3) 3Q 1990 Converted Tissue
3Q 1991 and Plastic Products 4,000,000
Waterford, New York(4) 3Q 1996 Converted Tissue 4,000,000
Neenah, Wisconsin 1Q 1997 Converted Tissue 2,500,000
-----------
Total cases 15,000,000 cases
===========
</TABLE>
- -----------
(1) All annual capacity amounts are approximate.
(2) We have leased a portion of Boise Cascade's St. Helens, Oregon facility
from Boise Cascade pursuant to a lease expiring in December 31, 2022 in
connection with the operation of a tissue paper machine which we purchased
from Boise Cascade in November 1992. Boise Cascade operates such tissue
machine for us on a cost-sharing basis and, pursuant to its agreement with
us, retains an option to repurchase the machine under certain
circumstances.
(3) We operate two converting facilities in Hauppauge, New York, one of which
is leased.
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(4) This distribution center is held in the form of a leasehold estate granted
by the Town of Waterford Industrial Development Agency and, upon the
expiration of the related lease on January 1, 2009, will be reacquired in
fee by us for nominal consideration.
Legal Proceedings
From time to time we are subject to a number of legal proceedings and other
claims arising in the ordinary course of our business. We do not believe that
any pending or threatened legal proceedings or other claims will have,
individually or in the aggregate, a material adverse effect on our financial
condition or results of operations.
Environmental Regulation
Our operations are subject to comprehensive and frequently changing
federal, state and local environmental laws and regulations, including laws and
regulations governing emissions of air pollutants, discharges of waste water and
storm water, storage, treatment and disposal of materials and waste, remediation
of soil, surface water and ground water contamination, and liability for damages
to natural resources. Compliance with these laws and regulations is an
increasingly important factor in our business. We will continue to incur capital
and operating expenditures in order to maintain compliance with applicable
federal, state and local environmental laws and regulations and to meet new
regulatory requirements.
We are subject to strict, and under certain circumstances, joint and
several, liability for the investigation and remediation of environmental
contamination (including contamination caused by other parties) at properties
that we own or operate and at properties where we or our predecessors have
arranged for the disposal of regulated materials. As a result, we are involved
from time to time in administrative and judicial proceedings and inquiries
relating to environmental matters. We may be involved in additional proceedings
in the future and the total amount of such future costs and other environmental
liabilities may be material.
On April 15, 1998, the U.S. Environmental Protection Agency issued final
rules known as the "Cluster Rules" affecting pulp and paper industry discharges
of wastewater and gaseous emissions. The Cluster Rules apply to pulping from the
initial feedstock of wood and certain bleaching processes. The Cluster Rules
require changes in the pulping, bleaching and/or air emission and wastewater
treatment processes presently used in some U.S. pulp and paper mills, including
the Berlin-Gorham Mills. Based upon our understanding of the Cluster Rules, and
after consultation with independent environmental consultants, we estimate that
approximately $13 million of capital expenditures, within a range of
approximately plus or minus 25%, may be required to comply with the Cluster
Rules, with compliance dates beginning in 1999 and extending over the next two
to five years. There are risks and uncertainties associated with our estimate
that could cause total capital expenditures and timing of such expenditures to
be materially different from current estimates. The EPA has also proposed
additional requirements for the pulp and paper industry, which, if and when
adopted, may require additional material expenditures.
The Berlin-Gorham Mills have been in operation for many years and, over
such time, Crown Paper and other prior operators at the Berlin-Gorham Mills have
generated and disposed of wastes which are or may be considered hazardous. The
soil, groundwater and adjacent area remediation which is currently under
consideration with respect to the Berlin-Gorham Mills could, based upon
available information, cost up to $400,000 over the next two years. Included
among the waste materials generated by past operations are contaminants left in
the vicinity of a former chemical plant on the northern portion of the Berlin
pulp mill property, of which a small building known as the "Cell House" remains
standing. The procedures required to remove the Cell House, to encapsulate and
seal off the affected areas and thereafter to monitor such areas as required by
current regulations are estimated to cost up to $2.3 million. The discovery of
previously unknown contamination of property underlying, or in the vicinity of,
the Berlin-Gorham Mills could require us to incur material unforeseen expenses
for which we may not have any recourse against Crown Paper or other prior
operators. In addition, certain maintenance and repairs to the wastewater
treatment plant at the Berlin-Gorham Mills have been identified, which are
estimated to cost up to $2.1 million.
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The Berlin-Gorham Mills have systems which process and treat large amounts
of wastewater primarily generated by their operations. Due to aging of the
treatment systems and to the evolution of mill operations, it is anticipated
that the related treatment systems and equipment will require replacement and/or
upgrading. In addition, there is evidence that effluent in connection with the
wastewater treatment processes has, over time, resulted in accumulations of
sediment and other buildup in adjacent lagoons and watercourses. It is
anticipated that changes in the applicable processes and the related technology
and equipment may be necessary in the future both to remediate such buildups and
to accommodate expansion of mill production schedules. The foregoing changes may
require additional material capital expenditures.
Employees
As of September 1, 1999, we employed 2,343 persons, consisting of 1,938
hourly and 405 salaried employees. We have collective bargaining agreements with
the Paper, Allied-Industrial, Chemical and Energy Workers International Union
covering approximately 928 of our hourly employees, 242 of which are employed at
our mill in Neenah, Wisconsin and 686 of which are employed at the Berlin-Gorham
Mills. We also have an agreement with the Office and Professional Employees
International Union covering 22 clerical employees at the Berlin-Gorham Mills.
Our agreement relating to the Neenah hourly employees expires on May 31, 2002,
subject to automatic annual renewals unless either party objects. Our agreements
relating to the Berlin-Gorham employees expire in June 2002, as to hourly
employees, and in July 2002, as to clerical employees.
Our St. Helens, Oregon paper machine is operated for us by employees of
Boise Cascade on a cost-sharing basis. The Boise Cascade employees are
represented by the Association of Western Pulp and Paper Workers. Boise
Cascade's collective bargaining agreement expires on March 14, 2004, subject to
automatic yearly renewals unless either party notifies the other to the
contrary.
We believe that relations with our employees are satisfactory.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth, as of September 1, 1999, certain
information as to our directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Nourollah Elghanayan 83 Chairman of the Board and a Director
Mehdi Gabayzadeh 54 President, Chief Executive Officer and a Director
Edward I. Stein 54 Executive Vice President and Chief Financial Officer
Nicholas T. Galante, III 43 Executive Vice President and President and Chief
Executive Officer of Pulp & Paper of America LLC
Steven C. Catalfamo 39 First Vice President-Tissue Converting
John J. Jackmore 61 First Vice President-Away-From-Home Division
Donald A. MacIntyre 56 First Vice President-At-Home Division
Mark J. Smith 38 First Vice President-Tissue Manufacturing
Andrew H. Rush 40 Director
</TABLE>
Directors are elected by the stockholders to one-year terms. Officers serve
at the discretion of the board of directors.
Nourollah Elghanayan has served as our Chairman of the Board and a director
since October 1998. He served as President, Chief Operating Officer and Director
of our subsidiary, American Tissue Corporation, from 1982 until October 1998.
Mr. Elghanayan is also an investor in commercial real estate.
Mehdi Gabayzadeh has served as our President, Chief Executive Officer and a
director since October 1998. He served as Executive Vice President and Director
of our subsidiary, American Tissue Corporation, from 1982 to October 1998.
Edward I. Stein has served as our Executive Vice President and Chief
Financial Officer since May 1999. Prior to joining us, Mr. Stein served as Chief
Financial Officer of Perry H. Koplik & Sons, Inc., a pulp and paper broker, from
1976 to May 1999.
Nicholas T. Galante, III has served as our Executive Vice President and
President of our subsidiary, Pulp & Paper of America LLC, since April 1999. Mr.
Galante has also served as Director of Jumbo Rolls and Fast Food Restaurants of
our subsidiary, American Tissue Corporation, since 1994. Prior to joining
American Tissue Corporation, Mr. Galante served an Executive Vice President of
Tagsons Papers, Inc. from 1977 to 1994. Tagsons Papers, Inc. filed a petition
seeking relief under Chapter 11 of the Federal Bankruptcy Code in 1994.
Steven C. Catalfamo has served as our First Vice President-Tissue
Converting since April 1999 and Vice President-Engineering of our subsidiary,
American Tissue Corporation, since 1994. He served as our Vice President of
Engineering and Quality Control from 1989 to 1994, having joined American Tissue
Corporation as a plant manager in 1986.
John J. Jackmore has served as our First Vice President-Away-From Home
Division since April 1999 and has served as Vice President-Commercial and
Industrial Sales of our subsidiary, American Tissue Corporation, since 1992.
From 1990 to 1992, he served as Sales Manager for Tagsons Papers, Inc. From 1985
to 1990, he served as President of Rhem-Sofco, a paper distributor.
Donald A. MacIntyre has served as our First Vice President-At-Home Division
since April 1999 and as Director of Consumer and Private Label Sales of our
subsidiary, American Tissue Corporation, since 1991.
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<PAGE>
From 1969 to 1991, he held various sales positions with Fort Howard and
Sweetheart Cup Company Inc., including as National Sales Manager from 1989 to
1991.
Mark J. Smith has served as our First Vice President-Tissue Manufacturing
since April 1999 and as Vice President-Tissue and Kraft Manufacturing of our
subsidiary, American Tissue Corporation, since 1994.
Andrew H. Rush became one of our directors on July 9, 1999. Mr. Rush has
been a Managing Director of DLJ Merchant Banking Partners, L.P. since January
1997. From 1992 to 1997, Mr. Rush was an officer of DLJ Merchant Banking
Partners, L.P. and its predecessors. Mr. Rush currently serves as a member of
the advisory board of Triax Midwest Associates, L.P. and as a member of the
board of directors of Societe d'Ethanol de Synthese and Nextel Partners Inc. Mr.
Rush previously served as a director of Doane Products Company.
Executive Compensation
The following table sets forth the compensation earned, whether paid or
deferred, by our Chief Executive Officer and by our other most highly
compensated executive officers during fiscal 1996, 1997 and 1998 for services
rendered in all capacities to us and our predecessor during such fiscal years.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------------
Fiscal Other Annual All Other
Name and Principal Position Year Salary ($) Bonus($) Compensation ($)(1) Compensation ($)(2)
- --------------------------- ---- ---------- -------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Mehdi Gabayzadeh 1998 240,000 -- 691 --
President and Chief Executive 1997 240,000 -- 749 --
Officer 1996 240,000 -- 749 --
Nicholas T. Galante, III(3) 1998 210,000(3) -- 259 1,835
Executive Vice President, 1997 200,000(3) -- 281 1,600
President and Chief Executive 1996 200,000(3) -- 250 1,600
Officer of Pulp & Paper
America LLC
Roland L. Gasper(4) 1998 130,000 -- 1,814 1,350
Chief Financial Officer 1997 120,000 -- 1,094 --
1996 -- -- -- --
Steven C. Catalfamo 1998 95,192 12,000 259 --
First Vice President- 1997 82,000 18,500 258 --
Tissue Converting 1996 82,000 15,000 256 --
John J. Jackmore 1998 101,724 31,493 293 1,912
First Vice President- 1997 92,000 27,821 287 1,917
Away-From-Home Division 1996 89,203 19,459 278 2,173
</TABLE>
- -----------
(1) Reflects life insurance premiums and car allowances paid or reimbursed by
us.
(2) Reflects matching contributions under our 401(k) Plan.
(3) Mr. Galante's salary includes an annual consulting fee of $120,000 which
has been paid to Six Gees, Inc., a corporation wholly owned by Mr. Galante.
(4) Mr. Gasper resigned as of May 31, 1999.
Edward I. Stein, our Executive Vice President and Chief Financial Officer,
began his employment with us on May 31, 1999. He will receive from us annually a
salary of $275,000, entertainment reimbursement of up to $20,000 and a personal
usage and company car allowance of up to $7,500, plus reimbursement for
insurance related thereto.
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<PAGE>
Director Compensation
None of our directors receives any compensation or fees for service on the
Board of Directors.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of August 31, 1999,
with respect to the beneficial ownership, fully diluted, of our common stock by
(a) each stockholder known by us to own beneficially 5% or more of the
outstanding shares of our common stock; (b) each of our directors; (c) each of
our executive officers named in "Management - Executive Compensation;" and (d)
all of our executive officers and directors as a group.
<TABLE>
<CAPTION>
Number of Shares of Percentage of
Name of Beneficial Owner(1) Common Stock Total
- --------------------------- ------------ -----
<S> <C> <C>
Middle American Tissue Inc.(2) 200.000 100.000%
Super American Tissue Inc.(3) 176.000 88.000
DLJMB Funds(4) 24.000 12.000
Nourollah Elghanayan 53.474(5) 26.737
Victoria Elghanayan 35.057(6) 17.529
Mehdi Gabayzadeh 88.000(7) 44.000
Mehdi Gabayzadeh and Joseph Neissany
as trustees for Diane Gabayzadeh Trust 17.327(7) 8.664
Mehdi Gabayzadeh and Joseph Neissany
as trustees for Deborah Gabayzadeh Trust 17.327(7) 8.664
Mehdi Gabayzadeh and Joseph Neissany
as trustees for John Gabayzadeh Trust 20.103(7) 10.051
Jeffrey Elghanayan 25.773 12.887
Edward I. Stein -- --
Nicholas T. Galante, III -- --
Steven C. Catalfamo -- --
John J. Jackmore -- --
Donald A. MacIntyre -- --
Mark J. Smith -- --
Andrew H. Rush -- (8) --
All directors and executive officers
as a group (9 persons)(5)(7) 141.474(8) 70.737
</TABLE>
- -----------
(1) The address of each of these stockholders (other than DLJMB Funds) is c/o
American Tissue Corporation, 135 Engineers Road, Hauppauge, New York 11788.
(2) Middle American Tissue Inc. directly owns 100% of our issued and
outstanding shares.
(3) Super American Tissue Inc. directly owns 88% of the issued and outstanding
shares of Middle American Tissue Inc., our direct parent, after giving
effect to the exercise of certain warrants to purchase up to 12% of Middle
American Tissue's common stock to be issued to affiliates of the Initial
Purchaser upon the consummation of the Transactions. Each of the persons or
entities listed in this table beneficially owns their shares in American
Tissue through their ownership interest in either Middle American Tissue
Inc. or Super American Tissue Inc.
(4) The DLJMB Fund consists of DLJ Merchant Banking Partners II, L.P. and the
following related investors: DLJ Merchant Banking Partners II-A, L.P.; DLJ
Offshore Partners II, C.V.; DLJ Diversified Partners, L.P.; DLJ Diversified
Partners-A, L.P.; DLJ Millennium Partners, L.P.; DLJ Millennium Partners-A,
L.P.; DLJMB Funding II, Inc.; DLJ EAB Partners, L.P.; DLJ First ESC, L.P.
and DLJ ESC II, L.P., hold directly warrants to purchase up to 12% of the
common stock of Middle American Tissue as of July 9, 1999. The address of
each of these entities, other than DLJ Offshore Partners II, C.V., is 277
Park Avenue, New York, New York 10172. The address of DLJ Offshore Partners
II, C.V., is care of John B. Gorsiraweg, 14, Willemstad, Curacao,
Netherlands Antilles.
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<PAGE>
(5) The shares of common stock beneficially owned by Mr. Elghanayan include
35.057 shares owned directly by his wife, Victoria Elghanayan. Mr.
Elghanayan disclaims beneficial ownership of the shares held by his wife.
(6) The shares of our common stock beneficially owned by Mrs. Elghanayan do not
include 18.417 shares owned directly by her husband, Nourollah Elghanayan.
Mrs. Elghanayan disclaims beneficial ownership of the shares owned by her
husband.
(7) The shares of our common stock beneficially owned by Mr. Gabayzadeh include
20.103 shares owned by the John Gabayzadeh Trust, 17.327 shares owned by
the Diane Gabayzadeh Trust and 17.327 shares owned by the Deborah
Gabayzadeh Trust, over which he has shared voting and dispositive power.
(8) Does not include warrants to purchase up to 12% of Middle American Tissue's
common stock as of July 9, 1999 beneficially owned by the DLJMB Funds. Mr.
Rush is a Managing Director of DLJ Merchant Banking Partners II, L.P. and,
as a result, may be deemed to beneficially own the warrants owned by the
DLJMB Funds. Mr. Rush disclaims beneficial ownership of the warrants
beneficially owned by the DLJMB Funds.
Super American Tissue Inc., Mr. Elghanayan and the other shareholders of
Super American Tissue affiliated with him, Mr. Gabayzadeh and the other
shareholders of Super American Tissue affiliated with him, and certain other
companies controlled by Messrs. Elghanayan and Gabayzadeh that are not
subsidiaries of Super American Tissue have entered into a shareholders
agreement. The shareholders agreement provides that the board of directors of
Super American Tissue is to consist of an equal number of directors designated
by each of Messrs. Elghanayan and Gabayzadeh and that each subsidiary of Super
American Tissue (including American Tissue and its subsidiaries) shall be
directly or indirectly managed by them, provided that if any financing
arrangement requires that the board of directors of Super American Tissue or any
of its subsidiaries consist of one or more directors not appointed by Messrs.
Elghanayan and Gabayzadeh,
o such outside directors shall constitute no more than one third of the
board of directors of Super American Tisssue or the applicable
subsidiary and
o any action by such board will require the consent of a majority of the
directors designated by each of Messrs. Elghanayan and Gabayzadeh.
Under the shareholders agreement, Messrs. Elghanayan and Gabayzadeh, or
upon the incapacity or death of either of them, the remaining shareholder and
the designee of such incapacitated or deceased shareholder, have the right to
cause Super American Tissue or any of its subsidiaries to effect an initial
public offering of its capital stock or any capital stock of its subsidiaries
and certain other financial transactions. However, if the purpose of an initial
public offering of the capital stock of Super American Tissue or any of its
subsidiaries or other financial transaction (including a sale of all or
substantially all of the assets of Super American Tissue or one of its
subsidiaries) is the facilitation of payment of indebtedness owing by Super
American Tissue or any of its subsidiaries to a shareholder of Super American
Tissue then the authorization of such transaction is subject to the prior
satisfaction of certain conditions. The most significant of such conditions is
the requirement that the receipt by the shareholder proposing such transaction
or the applicable company receive an opinion of an investment banking firm of
nationally recognized standing to the effect that the proposed transaction is
fair to all of the companies that are parties to the shareholders agreement and
their respective shareholders. Super American Tissue is not required to redeem
any of its capital stock from the estate of a deceased shareholder.
For information as to the stockholders agreement relating to Middle
American Tissue, see "Description of Certain Indebtedness - Middle American
Tissue Notes."
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<PAGE>
CERTAIN RELATED PARTY TRANSACTIONS
Super American Tissue Inc., a Delaware corporation, beneficially owns all
of the outstanding common stock of Middle American Tissue Inc. (other than
certain warrants issued to certain affiliates of the initial purchaser of the
old notes to purchase up to 12% of Middle American Tissue's common stock as of
the issue date of the old notes). Middle American Tissue owns 100% of our
outstanding capital stock. See "Principal Shareholders" and "Description of
Certain Indebtedness - Middle American Tissue Notes." Mr. Nourollah Elghanayan,
our Chairman of the Board and a director, together with members of his family,
owns 50.0% of the outstanding common stock of Super American Tissue. Mr. Mehdi
Gabayzadeh, our President, Chief Executive Officer and a director, together with
certain trusts for the benefit of Mr. Gabayzadeh's children, of which he is one
of the trustees, owns the other 50.0% of the outstanding common stock of Super
American Tissue.
In September 1998, Messrs. Elghanayan and Gabayzadeh and the other
stockholders of Super American Tissue caused American Tissue to be incorporated
as a Delaware corporation. As of October 1, 1998, these stockholders also
beneficially owned, all of the outstanding capital stock or membership
interests, as the case may be, of all of the corporations and limited liability
companies, which are now our wholly owned subsidiaries. See Note 1 to our
historical consolidated financial statements. Effective as of October 1, 1998,
these stockholders caused us to issue 200 shares of our common stock to them, on
a pro rata basis, in exchange for the shares of common stock and membership
interests they owned, constituting all of the outstanding equity interests in
such corporations and limited liability companies. As a result of this exchange,
such corporations and limited liability companies became our subsidiaries.
Thereafter, on March 26, 1999, these stockholders caused Super American
Tissue to be formed as a Delaware corporation. Effective June 1, 1999, these
stockholders exchanged, on a pro rata basis, the shares of our outstanding
common stock they owned for pro rata shares of the common stock of Super
American Tissue. As a result of this exchange, we became a wholly-owned direct
subsidiary of Super American Tissue. On July 1, 1999, these stockholders caused
Middle American Tissue to be formed as a Delaware corporation. Middle American
Tissue is a wholly-owned subsidiary of Super American Tissue, and we are a
wholly-owned subsidiary of Middle American Tissue, in each case without giving
effect to warrants issued to affiliates of the initial purchaser of the old
notes in connection with the purchase by such affiliates for $20.0 million of
senior secured discount notes of Middle American Tissue. See "Principal
Shareholders."
These stockholders also collectively own all of the outstanding shares of
common stock or membership interests, as the case may be, of the following
corporations and limited liability companies (the "Affiliated Companies"):
American Kraft Mills of Tennessee LLC, American Tissue Mills of Massachusetts,
Inc., American Tissue Mills de Mexico S.A. de C.V., American Tissue Mills of
Ohio, Inc., Huntington LLC, Lakeview Real Estate LLC and Pheasant LLC.
Each of the Affiliated Companies is owned 50.0% by Mr. Elghanayan and
members of his family and 50.0% by Mr. Gabayzadeh and certain trusts for the
benefit of Mr. Gabayzadeh's children, of which he is one of the trustees. Mr.
Elghanayan serves as Chairman, Chief Executive Officer, Treasurer and a director
of each of the Affiliated Companies. Mr. Gabayzadeh serves as President, Chief
Operating Officer, Secretary and a director of each of the Affiliated Companies.
The Affiliated Companies do not have any other officers or directors.
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<PAGE>
Transactions with the Affiliated Companies
Certain of the Affiliated Companies are indebted to certain of our
subsidiaries, which indebtedness was incurred since October 1, 1997, the first
day of fiscal 1998, or was incurred prior thereto and has been outstanding since
the date of incurrence of such indebtedness. All of the amounts receivable by
our subsidiaries from the Affiliated Companies have no definite maturity date
and do not bear interest.
<TABLE>
<CAPTION>
Amount Outstanding at
June 30, 1999 and
Highest Amount Outstanding
Creditor Debtor Since October 1, 1997
-------- ------ ---------------------
<S> <C> <C>
American Tissue Corporation American Kraft Mills of Tennessee $ 4,999,376(1)
American Tissue Corporation Huntington 0(2)
American Tissue Corporation American Tissue Mills of Ohio 4,547,178(3)
American Tissue Corporation American Tissue Mills of Massachusetts 4,916,161(4)
American Tissue Corporation American Tissue Mills de Mexico 2,301,058(5)
Grand American Tissue Mills of Ohio 1,032,632(6)
Grand American Tissue Mills of Massachusetts 1,442,278(7)
American Tissue Mills of Greenwich American Tissue Mills of Massachusetts 197,000(8)
100 Realty Management Lakeview Real Estate 395,207(9)
100 Realty Management Pheasant 182,090(10)
Unique Financing American Tissue Mills of Ohio 290,000(11)
American Tissue Mills of New York American Tissue Mills of Massachusetts 183,229(12)
Other 54,000
-----------
Total $20,540,209
===========
</TABLE>
- -----------
(1) Represents indebtedness arising from loans made from time to time to
finance the purchase of assets by American Kraft Mills of Tennessee,
consisting of a kraft paper mill and related startup costs, capital
improvements and working capital needs.
(2) Represents indebtedness arising from loans made to finance the cost of
certain improvements of real property owned by Huntington.
(3) Represents indebtedness for advances made from time to time to finance
certain continuing costs of maintaining the tissue mill owned by American
Tissue Mills of Ohio.
(4) Represents indebtedness for advances made from time to time to finance
certain continuing costs relating to a tissue mill formerly operated by
American Tissue Mills of Massachusetts which has discontinued operations.
(5) Represents indebtedness for working capital loans made from time to time to
finance the converting operations conducted by American Tissue Mills de
Mexico at our converting facility in Mexicali, Mexico.
(6) Represents indebtedness for advances made from time to time to finance
certain continuing costs of maintaining the tissue mill assets owned by
American Tissue Mills of Ohio.
(7) Represents indebtedness for advances made from time to time to finance
certain continuing costs of the discontinued paper mill operations of
American Tissue Mills of Massachusetts.
(8) Represents indebtedness for advances made from time to time to finance
certain continuing costs of the discontinued paper mill operations of
American Tissue Mills of Massachusetts.
(9) Represents indebtedness arising from working capital loans made from time
to time to finance the costs of repairs and improvements of certain real
property owned by Lakeview.
(10) Represents indebtedness arising from working capital loans made from time
to time to finance the acquisition of certain undeveloped land owned by
Pheasant which is proposed to be leased to American Tissue Corporation
following the development and construction of a warehouse.
(11) Represents indebtedness for advances made from time to time to finance
certain continuing costs of maintaining the tissue mill assets owned by
American Tissue Mills of Ohio.
(12) Represents indebtedness for advances made from time to time to finance the
continuing costs of the discontinued paper mill operations of American
Tissue Mills of Massachusetts.
Certain of our subsidiaries are indebted to certain of the Affiliated
Companies for money borrowed by these subsidiaries from such Affiliated
Companies during fiscal 1998 to finance the working capital
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<PAGE>
requirements of such subsidiaries. Such indebtedness is not evidenced by any
promissory notes, is payable on demand and does not accrue interest. The details
of such indebtedness are as follows:
<TABLE>
<CAPTION>
Amount Payable
Debtor Creditor as of June 30, 1999
------ -------- -------------------
<S> <C> <C>
American Tissue Corporation Lakeview Real Estate $4,570,934
American Tissue Mills of Neenah Lakeview Real Estate 931,877
100 Realty Management Huntington 1,310,848
----------
Total $6,813,659
==========
</TABLE>
Our subsidiary, American Tissue Mills of Neenah, has entered into a lease,
dated August 1, 1998, with Lakeview Real Estate pursuant to which American
Tissue Mills of Neenah leases our Neenah, Wisconsin distribution facility from
Lakeview for a 20-year term expiring on July 31, 2018. The annual rental under
such lease is currently approximately $1,270,000, and increases from time to
time to a maximum annual rent of approximately $1,460,000. In addition, the
tenant pays as additional rent to Lakeview all taxes, insurance and maintenance
costs of such facility. American Tissue Mills of Neenah has made aggregate
rental payments to Lakeview from the beginning of the lease term, August 1,
1998, through August 31, 1999, of $1,029,149.
Our subsidiary, American Tissue Corporation, leases a warehouse facility
located in Huntington, New York from Huntington LLC under a lease dated June 1,
1998, for a 20-year term expiring on May 29, 2018. The current annual rental
under such lease is approximately $520,000 and increases from time to time to a
maximum of approximately $883,000. In addition, the tenant pays as additional
rent to Huntington all taxes, insurance and maintenance costs of such facility.
American Tissue Corporation has made aggregate rental payments to Huntington
from the beginning of the lease term, June 1, 1998, through August 31, 1999 of
$633,780.
American Tissue Corporation purchases corrugating medium, a material used
to manufacture corrugated containers, and core stock from American Kraft Mills
of Tennessee at market prices. For the 18 months ended August 31, 1999, American
Tissue Corporation purchased approximately 8,701 tons of corrugating medium and
core stock from American Kraft Mills of Tennessee for which it paid an aggregate
of approximately $2,433,155.
Pursuant to an agreement dated December 12, 1994, our subsidiary, American
Tissue Corporation, reimburses American Tissue Mills de Mexico for all operating
expenses, including payroll costs, incurred by American Tissue Mills de Mexico
for converting jumbo rolls of tissue supplied by American Tissue Corporation
into finished tissue products at our converting facility in Mexicali, Mexico.
American Tissue Corporation also pays American Tissue Mills de Mexico a fee
equal to 5.0% of such operating expenses, net of any losses resulting from
currency fluctuations. For the 18 months ended August 31, 1999, American Tissue
Corporation reimbursed American Tissue Mills de Mexico for $1,484,606 of
operating expenses and paid American Tissue Mills de Mexico $74,230 in
converting fees.
Three of our subsidiaries, Engineers Road, Gilpin Realty and Coram Realty,
together with Huntington, an Affiliated Company, have entered into a mortgage
loan with Roslyn Savings Bank in the principal amount of $14.3 million, at an
annual rate of 7.5%, which matures on August 1, 2008. The aggregate principal
amount we allocated to our subsidiaries was $7,718,644.
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<PAGE>
Transactions with Executive Officer
American Tissue Corporation has paid an annual consulting fee of $120,000
to Six Gees, Inc., of which Nicholas T. Galante, III, one of our Executive Vice
Presidents, is the sole stockholder. Such consulting fee is in addition to
compensation paid to Mr. Galante as one of our executive officers.
Transactions with Certain Stockholders
Messrs. Elghanayan and Gabayzadeh have borrowed money from certain of our
subsidiaries in the aggregate amount of $1.5 million as of June 30, 1999. The
highest amount of such indebtedness outstanding since October 1, 1997 was $1.5
million. Such loans have no definite repayment date and do not bear interest.
Certain of our subsidiaries are indebted to the beneficial owners of our
common stock on account of loans made by such stockholders to our subsidiaries
to finance their working capital requirements. The aggregate amount of such
indebtedness was $21.7 million as of June 30, 1999 and each item of indebtedness
is evidenced by a demand promissory note and bears interest at 10.0% per annum.
As of July 9, 1999, all of such indebtedness was assumed by Super American
Tissue and is evidenced by a seven year note of Super American Tissue which
bears interest at 10.0% per annum, and requires no interest payments prior to
maturity. Our subsidiaries were released from liability to such stockholders. In
addition, certain of our beneficial holders of our common stock loaned Super
American Tissue $5.0 million on the issue date of the old notes on the same
terms.
DESCRIPTION OF CERTAIN INDEBTEDNESS
New Credit Facility
General. On July 9, 1999, we, certain of our subsidiaries, certain lenders
and LaSalle Bank National Association, as agent for such lenders (the "Agent"),
entered into a revolving credit and security agreement (the "New Credit
Facility"). The New Credit Facility provides for the making of revolving credit
loans to, and the issuance of letters of credit on behalf of, one or more of our
subsidiaries, subject to the following limitations:
o the aggregate amount of loans outstanding at any one time to any
borrower will be limited to a maximum of the sum of:
(1) 85% of the face amount of such borrower's accounts receivable
assigned to, and accepted by, the lenders, plus
(2) 75% of the lower of the cost or market value of such borrower's
jumbo roll inventory assigned to, and accepted by, the lenders,
plus
(3) 65% of the lower of the cost or market value of such borrower's
inventory (other than jumbo rolls) assigned to, and accepted by
the lenders, minus
(4) such reserves as the Agent may establish from time to time;
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<PAGE>
o the aggregate sum of all loans outstanding to all borrowers at any one
time on the basis of the borrowers' eligible inventory may not exceed
$50.0 million;
o the face amount of all issued and undrawn letters of credit may not
exceed $15.0 million; and
o the aggregate amount of all loans and letters of credit may not exceed
$100.0 million.
Interest Rates. Borrowings under the New Credit Facility (including amounts
reimbursable following drawings under letters of credit) bear interest, at our
election, at an annual rate equal to either 30-, 60- or 90-day LIBOR plus 2.25%
or the Agent's prime rate (as publicly announced from time to time).
Prepayments. Borrowings under the new credit facility may be prepaid by us
at any time without penalty.
Covenants. The obligations of the lenders who are parties to the New Credit
Facility to advance funds are subject to certain conditions customary for
facilities of similar size and nature. In addition, we and our subsidiaries are
subject to certain affirmative and negative covenants customarily contained in
agreements of this type, including, without limitation, covenants that restrict,
subject to specified exceptions:
o mergers, consolidations, assets sales or changes in capital structure;
o creation or acquisition of subsidiaries;
o purchase or redemption of our capital stock or declaration or payment
of dividends or distributions on such capital stock;
o incurrence of additional indebtedness;
o investment activities;
o granting or incurrence of liens to secure other indebtedness (other
than the Notes);
o prepayment or modification of the terms of subordinated indebtedness;
and
o engaging in transactions with affiliates.
In addition, the New Credit Facility requires us to satisfy certain
financial covenants customary for facilities of similar size and nature and also
provides for customary events of default.
Collateral. The New Credit Facility is secured by a first priority lien on
all of accounts receivable, inventory, chattel paper, instruments, investment
property, documents, all related general intangibles of the foregoing (other
than any intellectual property collateral) of those of our subsidiaries that are
parties to the New Credit Facility and all proceeds of the foregoing. In
addition, the New Credit Facility is secured by a security interest that is
junior to that of the trustee for the Notes on all of the collateral securing
the Notes in which the trustee has a first priority security interest.
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<PAGE>
Other Indebtedness
Certain of our subsidiaries have entered into financing arrangements in
connection with the purchase or construction of real property for our facilities
in the aggregate principal amount of approximately $21.0 million as of June,
1999, as follows:
<TABLE>
<CAPTION>
Annual
Principal Interest
Amount Rate Maturity Lender Real Property Collateral
- ------------- ------------- ------------------- ----------------------- -----------------------------------------
<S> <C> <C> <C> <C>
$284,000(1) -- September 30, 2004 Community Converting/distribution facility
Redevelopment Agency Calexico, CA
166,000 3.00% September 30, 2013 Community Converting/distribution facility
Redevelopment Agency Calexico, CA
3,000,000(2) prime plus 1% April 15, 2004 Valley Independent Converting/distribution facility,
Bank Calexico, CA
6,303,214 8.05% October 17, 2007 Bank United Converting/distribution facility,
Waterford, NY
2,777,119 7.75% January 1, 2008 Bank United Distribution center, Saratoga Springs, NY
7,718,644(3) 7.50% August 1, 2008 Roslyn Savings Bank Distribution center, executive offices and
machine shop, Hauppauge, NY and
converting facility, Coram, NY
794,167 7.50% November 1, 2008 Security Mutual Life Distribution center, Halfmoon, NY(4)
Insurance Company of
New York
</TABLE>
- -----------
(1) This is a reimbursement loan with the Community Redevelopment Agency of the
City of Calexico, which by its terms will be forgiven 5 years after the
filing of employment report by our subsidiary, Calexico Tissue Company,
stating that it has hired 100 employees.
(2) On April 15, 1999, this short term mortgage loan was refinanced with a
mortgage loan with Bank United in the principal amount of $4.0 million, at
an annual interest rate of 8.0%, which matures on April 15, 2004.
(3) This sum is a part of a larger mortgage loan of approximately $14.1 million
with respect to which three of our subsidiaries, Engineers Road, Gilpin
Realty and Coram Realty, as well as an unconsolidated affiliate,
Huntington, are obligors. The outstanding principal amount of additional
indebtedness outstanding under the mortgage loan and attributable to
Huntington as of March 31, 1999 was approximately $6.4 million. See
"Certain Related Party Transactions."
(4) This distribution center is held in the form of a leasehold estate granted
by the Town of Waterford Industrial Development Agency and, upon the
expiration of the related lease on January 1, 2009, will be reacquired in
fee, for a nominal consideration.
In addition, as of June 30, 1999, we had outstanding indebtedness in the
principal amount of approximately $733,000, payable to Curtiss-Wright. This
indebtedness bears interest at an annual rate of 8% and matures on August 1,
2006.
Middle American Tissue Notes
Middle American Tissue Inc., our parent, raised approximately $20.0 million
of the funds necessary to consummate the Transactions through the issuance of
senior secured discount notes to certain affiliates of the initial purchaser of
the old notes in a private transaction. The Middle American Tissue notes were
issued with warrants to purchase up to 12% of Middle American Tissue's common
stock at a nominal exercise price. The holders of such notes and warrants and
Super American Tissue have executed a stockholders agreement which contains
various rights and obligations of Middle American Tissue and the holders of the
equity securities of Middle American Tissue. As long as affiliates of the
initial purchaser of the old notes collectively own a majority of
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<PAGE>
the Middle American Tissue notes or warrants, they will have the right to
appoint one member of our board of directors of Middle American Tissue.
The Middle American Tissue notes:
o are structurally subordinate to the New Credit Facility and the Notes
because such notes have been issued by our parent and are not
guaranteed by us;
o accrue but do not pay interest at the rate of 15% per year for the
first four years;
o pay interest in cash at the rate of 15% per year semi-annually in
arrears on each January 15 and July 15, commencing January 15, 2004;
o together with certain obligations under the stockholders agreement,
are secured by a pledge of our outstanding common stock; and
o subject Middle American Tissue and its subsidiaries to customary
covenants for this type of financing, including restrictions on
indebtedness, dividends, liens, affiliate transactions, stock
repurchases, assets sales and mergers.
The stockholders agreement contains provisions providing for each of Middle
American Tissue and the initial purchasers (and, in some instances, their
transferees) to require redemption of the notes or warrants, or both, at various
times, prior to the maturity of the Notes. When Middle American Tissue is
required to pay interest in cash, or if Middle American Tissue is required by
the holders of the Middle American Tissue notes or warrants, or both, to redeem
the Middle American Tissue notes or warrants, or both, Middle American Tissue
may be unable to make the payment. The restricted payment covenant of the
indenture relating to the Notes does not contain any express provision
permitting us to pay dividends to Middle American Tissue or to pay interest or
principal or finance a redemption of the Middle American Tissue notes. See
"Description of Notes - Certain Covenants - Restricted Payments." If Middle
American Tissue defaults under its obligations set forth above, the holders
could exercise their rights under the pledge agreement regarding the pledge of
our common stock, and thereby obtain control of us and the right to sell our
common stock. If an affiliate of the initial purchaser of the old notes obtains
control of us, no change of control will occur under the Notes. In such case,
any sale by an affiliate of the initial purchaser to a non-affiliate would
likely result in a change of control under the Notes. See "Description of
Exchange Notes - Certain Covenants Change of Control" and "- Certain Definitions
- - Permitted Holders."
DESCRIPTION OF EXCHANGE NOTES
General
The exchange notes will be issued under an indenture among American Tissue,
the subsidiary guarantors and The Chase Manhattan Bank, as trustee, which is
also the indenture under which the old notes were issued. The terms of the
exchange notes are identical in all material respects to the terms of the old
notes, except that the exchange notes will have been registered under the
Securities Act of 1933 and, therefore, will not bear legends restricting their
transfer. Moreover, the provisions of the registration rights agreement,
including those respecting payment of liquidated damages, will not apply to the
exchange notes. The terms of the exchange notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. The exchange notes are subject to all of those terms, and
holders of the exchange notes and the related subsidiary guarantees are referred
to the indenture and the Trust Indenture Act for a complete statement of them.
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The following summary of the material provisions of the indenture and
certain material provisions of the collateral documents is not complete. For a
complete understanding of the indenture and the collateral documents, you should
read each of these documents in its entirety, including the definitions stated
in the indenture of the defined terms used in it. Copies of the indenture, the
collateral documents and the registration rights agreement were filed as
exhibits to the exchange offer registration statement and are available as set
forth under the caption "Available Information." The definitions of some of the
terms used in this description are stated below under "Certain Definitions." For
purposes of this summary, the terms "American Tissue", "we", "our" or "us"
refers only to American Tissue and not to any of its subsidiaries.
Under specified circumstances, American Tissue will be able to designate
current or future subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not guarantee the exchange notes or be subject to any of the
restrictive covenants set forth in the indenture. As of the date of this
prospectus, none of our subsidiaries is an Unrestricted Subsidiary.
Principal, Maturity and Interest
The exchange notes will be limited in aggregate principal amount to $165.0
million and will mature on July 15, 2006. The exchange notes will be issued in
denominations of $1,000 and integral multiples thereof.
The exchange notes will accrue interest at the annual rate of 12 1/2% and
will be payable semi-annually in arrears on January 15 and July 15, commencing
on Janury 15, 2000. We will make each interest payment to the holders of record
of these exchange notes on the immediately preceding January 1 and July 1.
Interest on the exchange notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance thereof. Interest will be computed on the basis of a 360-day year
comprised of twelve 30- day months.
Principal, premium, if any, and interest on the exchange notes will be
payable at the office or agency of American Tissue maintained for such purpose
within the City and State of New York. Until otherwise designated by us, our
office or agency in New York City will be the office of the trustee maintained
for such purpose. At our option, payment of interest may be made by check mailed
to the holders of the exchange notes at their respective addresses set forth in
the register of holders of these exchange notes. However, payments of the
principal, premium, if any, and interest on exchange notes, will be required to
be made by wire transfer of immediately available funds to the accounts of those
holders of exchange notes that have given wire transfer instructions to us.
Ranking and Security
The exchange notes will be senior obligations of American Tissue and will
rank:
o equally in right of payment with all of our current and future
unsubordinated Indebtedness, and
o senior in right of payment to any of our Indebtedness that is
subordinated to the exchange notes.
Our obligations under the exchange notes will be unconditionally guaranteed
on a senior basis, jointly and severally, by each of our subsidiary guarantors.
See "- Subsidiary Guarantees." All
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of our domestic subsidiaries (other than a Receivables Subsidiary or an
Unrestricted Subsidiary) are subsidiary guarantors. The subsidiary guarantees
will be senior obligations of our subsidiary guarantors and will rank:
o equal in right of payment with all existing and future unsubordinated
Indebtedness of our subsidiary guarantors, and
o senior in right of payment to any Indebtedness of our subsidiary
guarantors that is subordinated to such subsidiary guarantees.
Under the collateral documents, the exchange notes and the subsidiary
guarantees will be secured by a first priority lien on:
o the Primary Collateral (as defined below); and
o the Boise Collateral (as defined below), except that Boise Cascade
will have a right to share in certain proceeds of such collateral, as
limited by the Boise Intercreditor Agreement (as defined below); and
in accordance with the Existing Lien Intercreditor Agreement (as defined below),
by a lien on the Secondary Collateral (as defined below) that is junior to the
lien on such collateral securing Indebtedness under our new Revolving Credit
Facility and other Indebtedness.
American Tissue is a holding company and has, and as of the issue date of
the exchange notes will have, no material assets other than the Capital Stock of
its subsidiaries, and all of its consolidated operations are conducted through
its subsidiaries.
Under the collateral documents, we and each of our subsidiary guarantors,
as applicable (except as otherwise indicated below), has assigned, granted and
pledged as collateral to the trustee for the benefit of the trustee and the
holders of the exchange notes:
(1) a first priority lien on all of the following assets constituting
the "Primary Collateral":
o substantially all paper mill plant and property (which as of the
date of this prospectus consists of the owned and certain leased
facilities described under "Business - Facilities") and,
substantially all of the equipment (excluding any equipment
located outside the United States) owned by any subsidiary
guarantor (including all of the land and fixed assets of the
Berlin-Gorham Mills, existing tissue and jumbo roll manufacturing
assets and tissue converting equipment), together with all
additions, accessions, improvements, alterations, replacements
and repairs thereto, excluding, however the Existing Mortgage
Collateral;
o all outstanding Capital Stock of each of our domestic
subsidiaries and 65% of the outstanding Capital Stock of each of
our foreign subsidiaries;
o all assets deposited or required to be deposited in the
Collateral Account pursuant to the indenture;
o the Intellectual Property Collateral;
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o any and all other property or assets of ours and of any of our
subsidiary guarantors (other than the Boise Collateral and the
Secondary Collateral);
o all general intangibles relating to any of the foregoing; and
o all proceeds of the foregoing;
(2) a first priority lien on all of the following assets constituting
the "Boise Collateral", subject to the Boise Intercreditor Agreement:
o certain tissue manufacturing equipment located at Boise Cascade's
St. Helens, Oregon mill facility, including all future
improvements thereof and additions and replacements thereto; and
o all proceeds of the foregoing;
(3) a second priority lien on all of the following assets,
constituting the "Secondary Collateral", subject to the Existing Lien
Intercreditor Agreement:
o the Existing Mortgage Collateral; and
o all inventory, accounts receivable, chattel paper, instruments,
investment property, documents, all related general intangibles
(other than Intellectual Property Collateral) and all proceeds of
the foregoing of those subsidiary guarantors that are parties to
our new Revolving Credit Facility (the "Revolving Credit
Collateral").
Collateral consisting of real property will be mortgaged by the relevant
subsidiary guarantors, pursuant to mortgages or deeds of trust, subject to
certain Permitted Collateral Liens. Collateral consisting of personal property
will be pledged by American Tissue and our subsidiary guarantors, pursuant to a
security agreement, subject to certain Permitted Collateral Liens.
The indenture and the relevant collateral documents require that we and our
subsidiary guarantors pledge, subject to Permitted Collateral Liens, all
(1) After-Acquired Property of the types described in the preceding
paragraph, and
(2) as soon as practicable after the issue date of the old notes, the
plant and property owned by Calexico Tissue Company LLC located at Parcels
5 and 6 of the Kloke Tract, Calexico, California,
in each case as collateral under the indenture and the relevant collateral
documents. However, Calexico Tissue will not be required to grant a lien on
Parcel 5 of the Kloke Tract until such time as it undertakes to improve such
property.
To the extent specifically permitted pursuant to the terms of the
indenture,
o the exchange notes will be effectively subordinated to existing
and future secured Indebtedness to the extent of any of our
assets serving as collateral for such Indebtedness, and
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o each subsidiary guarantee, likewise, will be effectively
subordinated to existing and future secured Indebtedness of the
relevant subsidiary guarantors to the extent of any assets
serving as collateral for such Indebtedness.
Specifically the obligations:
o of our subsidiary guarantors, American Tissue Mills of Oregon,
Inc. and American Tissue Corporation, under the Boise Agreement,
are secured by a lien on the Boise Collateral which is junior in
priority to the lien securing repayment of the exchange notes and
the subsidiary guarantees of these subsidiary guarantors;
provided, however, that notwithstanding such lien priority, the
Boise Intercreditor Agreement provides that:
o Boise Cascade and the trustee have the right to share, on a
dollar-for-dollar basis, up to the first $20.0 million in
proceeds derived from the Boise Collateral and
o thereafter, all such proceeds are to be used exclusively to
satisfy the outstanding obligations under the exchange notes
and the subsidiary guarantees of these subsidiary
guarantors;
o under the Existing Mortgage Loans of those subsidiary guarantors
that are parties to such loans are secured by liens on the
Existing Mortgage Collateral that are senior in priority to the
lien securing the exchange notes and the subsidiary guarantees,
and the exchange notes and the subsidiary guarantees will be
secured by a lien on certain of such collateral that is junior in
priority to the liens securing the Existing Mortgage Loans; and
o under our new Revolving Credit Facility of those of our
subsidiary guarantors that are parties to such Revolving Credit
Facility will be secured by a first priority lien on the
Revolving Credit Collateral that is senior in priority to the
liens securing the exchange notes and the subsidiary guarantees
thereof, and by a second priority lien on the Primary Collateral
of those subsidiary guarantors, and the exchange notes and the
subsidiary guarantees will be secured by a lien on the Revolving
Credit Collateral that is junior in priority to the lien securing
the Revolving Credit Facility.
In addition, the indenture permits us and our subsidiary guarantors to create
Purchase Money Liens securing Purchase Money Obligations, and the exchange notes
and the subsidiary guarantees thereof will also be effectively subordinated to
such Purchase Money Obligations to the extent of any assets serving as
collateral for such Purchase Money Obligations.
If an event of default occurs under the indenture, the trustee, on behalf
of the holders of the exchange notes, in addition to any rights or remedies
available to it under the indenture, may take such actions as the trustee deems
advisable to protect and enforce its rights in the collateral for the exchange
notes and the subsidiary guarantees thereof, including, without limitation, the
institution of foreclosure proceedings in accordance with the collateral
documents and applicable law. However, the rights and remedies available to the
trustee under the collateral documents and the actions
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permitted to be taken by it thereunder with respect to the collateral securing
the exchange notes and the subsidiary guarantees thereof will be subject to the
provisions of the Intercreditor Agreements.
The proceeds received by the trustee from any foreclosure of such
collateral will be applied by the trustee,
o first, to pay the expenses of such foreclosure and fees and other
amounts then payable to the trustee under the indenture and the
collateral documents, and
o thereafter, to pay the principal of, premium, if any, and accrued
interest on the exchange notes.
Until such time, however, as all of the obligations under the Existing Mortgage
Loans and the Revolving Credit Facility are paid in full, the proceeds from any
foreclosure or other realization upon the Existing Mortgage Collateral and the
Revolving Credit Collateral will be applied
o first, to pay the lenders under such facilities all amounts then
payable under the Existing Mortgage Loans and the Revolving
Credit Facility, respectively, and
o thereafter, in the manner described in the immediately preceding
sentence.
Certain proceeds from any foreclosure or other realization on the Boise
Collateral will be shared with Boise Cascade in the manner and to the extent
described above.
Under the terms of the indenture and the collateral documents, the trustee
will determine the circumstances under, and manner in, which to dispose of the
Primary Collateral and, subject to the Boise Intercreditor Agreement, the Boise
Collateral (including, without limitation, the determination of whether to
release all or any portion of such collateral from the liens created by the
collateral documents and whether to foreclose on such collateral following an
event of default). See "- Intercreditor Agreements." The trustee will have no
vote on any decisions with respect to the Secondary Collateral (including,
without limitation, the time or method of foreclosure), until such time as the
Indebtedness constituting the Existing Mortgage Loans and/or under the Revolving
Credit Facility, as the case may be, is satisfied in full. See "- Intercreditor
Agreements."
The right of the trustee to repossess and dispose of collateral upon the
occurrence of an event of default under the indenture is, in the case of Boise
Collateral and the Secondary Collateral, subject to the provisions of the
Intercreditor Agreements. With respect to any of the collateral, such right is
likely to be significantly impaired by applicable bankruptcy law if a bankruptcy
case were to be commenced by or against us or any of our subsidiary guarantors
prior to the trustee having repossessed and disposed of the collateral. In the
case of real property collateral, such right could be significantly impaired by
restrictions under state law.
The indenture permits the release of collateral without the substitution of
additional collateral under certain circumstances, as described under "- Certain
Covenants - Asset Sales." See "- Possession, Use and Release of Collateral." As
a result, we and our subsidiaries will be permitted to sell certain assets
without compliance with the covenant of the indenture concerning "Asset Sales".
Collateral will also be released as security for the exchange notes and the
subsidiary guarantees upon the release of a subsidiary guarantor as described in
the last paragraph under "Subsidiary Guarantees" below.
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The amounts realizable by the trustee in respect of the collateral in the
event of a liquidation will depend upon market and economic conditions at such
time, the availability of buyers, certain existing liens and similar factors.
The Boise Collateral and the Existing Mortgage Collateral are necessary to
continue the operation of our business in the ordinary course. However, the
trustee and the holders of the exchange notes will not have an exclusive right
to receive proceeds from the Boise Collateral or the benefit of a first priority
lien on the Existing Mortgage Collateral. In addition, the fact that Boise
Cascade has a right to receive certain proceeds from the Boise Collateral and
the lenders under the Existing Mortgage Loans and our new Revolving Credit
Facility, as the case may be, have a first priority lien on the Secondary
Collateral could have a material adverse effect on the amount that would be
realized upon a liquidation of the collateral. Accordingly, we cannot assure you
that proceeds of any sale of the collateral pursuant to the indenture and the
related collateral documents following an event of default would be sufficient
to satisfy, or would not be substantially less than, amounts due under the
exchange notes. See "Risk Factors - The Value Of Your Security Interest In The
Collateral Is Uncertain." If the proceeds of any of the collateral were not
sufficient to repay all amounts due on the exchange notes, the holders of the
exchange notes (to the extent not repaid from the proceeds of the sale of the
collateral) would have only an unsecured claim against the remaining assets, if
any, of American Tissue and our subsidiary guarantors.
Some or all of the collateral will be illiquid and may have no readily
ascertainable market value. Likewise, there can be no assurance that the
collateral will be saleable, or, if saleable, that there will not be substantial
delays in its liquidation. To the extent that liens, rights or easements granted
to third parties encumber assets owned by these subsidiary guarantors, including
the Boise Collateral and the Secondary Collateral, such third parties have or
may exercise rights and remedies with respect to the property subject to such
liens that could adversely affect the value of the collateral and the ability of
the trustee or the holders of the exchange notes to realize or foreclose on such
collateral.
Intercreditor Agreements
The trustee has entered into the Existing Lien Intercreditor Agreement with
certain of the lenders under Existing Mortgage Loans, the agent for the lenders
under our new Revolving Credit Facility, us and our subsidiary guarantors. The
Existing Lien Intercreditor Agreement provides for the allocation of rights
among the trustee, these lenders with respect to their respective interests in
the collateral (excluding the Boise Collateral) and the enforcement provisions
relating thereto. Until such time as any of the Existing Mortgage Loans or
indebtedness under our new Revolving Credit Facility (including permitted
refinancings), or both, have been satisfied in full, the relevant lenders under
such facilities will have the exclusive right to determine the circumstances and
manner in which the Existing Mortgage Collateral and the Revolving Credit
Collateral, respectively, may be disposed of. This includes, without limitation,
the right to determine whether to foreclose on the Existing Mortgage Collateral
and the Revolving Credit Collateral, respectively, following an event of default
under the Indebtedness secured thereby. At such time as the Existing Mortgage
Loans or the Revolving Credit Facility, or both, have been satisfied in full,
the trustee will have a first priority lien on such portion of the Existing
Mortgage Collateral or the Revolving Credit Collateral which no longer secures
such Indebtedness.
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The Existing Lien Intercreditor Agreement provides, among other things,
that until such time as the Existing Mortgage Loans and the Revolving Credit
Facility, or both, have been satisfied in full:
(1) during any insolvency proceeding, the lenders under such
facilities and the trustee will coordinate their efforts to give effect to
the relative priorities of their respective liens in the collateral;
(2) the trustee and such lenders will provide notices to each other
with respect to the occurrence of an event of default under the indenture,
the Existing Mortgage Loans or the Revolving Credit Facility, as the case
may be, and the commencement of any action to enforce rights of the
trustee, the holders of the exchange notes or such lenders;
(3) upon the occurrence of an event of default, all decisions with
respect to (a) the Primary Collateral, including the time and method of any
disposition thereof, will be made by the trustee, (b) the Existing Mortgage
Collateral, including the time and method of any disposition thereof, will
be made by the applicable lender under the Existing Mortgage Loans and (c)
the Revolving Credit Collateral, including the time and method of any
disposition thereof, will be made by the agent for the lenders under the
Revolving Credit Facility;
(4) for a period up to 120 days following the date of receipt by the
agent for the lenders under the Revolving Credit Facility of written notice
from the trustee or a lender under an Existing Mortgage Loan, as
applicable, directing removal by the agent for the lenders under the
Revolving Credit Facility of Revolving Credit Collateral from the
applicable mortgaged property, the Revolving Credit Lender may enter and
use the Existing Mortgage Collateral or the Primary Collateral, as
appropriate, to the extent necessary to complete the manufacture of
inventory, collect accounts receivable and repossess, remove, sell or
otherwise dispose of the Revolving Credit Collateral;
(5) proceeds of the Primary Collateral will be applied,
o first, to the outstanding obligations of American Tissue and the
subsidiary guarantors under the indenture, these exchange notes,
the subsidiary guarantees and the collateral documents, and
o second, any remaining Primary Collateral (including proceeds
thereof) will be delivered to the agent for the lenders under the
Revolving Credit Facility for application to the outstanding
obligations under the Revolving Credit Facility;
(6) proceeds of the Existing Mortgage Collateral will be applied,
o first, to the outstanding obligations of the applicable
subsidiary guarantors under the applicable Existing Mortgage
Loans,
o second, any remaining Existing Mortgage Collateral (including
proceeds thereof) will be delivered to the trustee for
application in accordance with the provisions of the indenture,
and
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o third, any remaining Existing Mortgage Collateral (including
proceeds thereof), will be delivered to the Revolving Credit
Lender for application to the outstanding obligations under the
Revolving Credit Facility;
(7) proceeds of the Revolving Credit Collateral will be applied,
o first, to the outstanding obligations under the Revolving Credit
Facility of American Tissue and those subsidiary guarantors that
are parties to such facility, and
o second, any remaining Revolving Credit Collateral (including
proceeds thereof) will be delivered to the trustee for
application in accordance with the provisions of the indenture;
(8) after the payment or other satisfaction in full of these exchange
notes, the subsidiary guarantees, the Existing Mortgage Loans and
Indebtedness under the Revolving Credit Facility, the balance of proceeds
of the collateral, if any, shall be paid to or at the direction of American
Tissue and the subsidiary guarantors or as otherwise required by law; and
(9) neither the trustee nor any of the lenders under the Existing
Mortgage Loans or the Revolving Credit Facility will directly or indirectly
seek to foreclose or realize upon, judicially or non-judicially, any
collateral upon which it does not have a senior lien or take any other
enforcement action against or in respect of the collateral upon which it
does not have a senior lien, without the consent of the party having such
senior lien.
Certain holders of Indebtedness of American Tissue or the subsidiary
guarantors have not agreed, or may not agree, to be a party to the Existing Lien
Intercreditor Agreement and, therefore, the trustee will not have a lien on any
assets of American Tissue or such subsidiary guarantors encumbered by a lien in
favor of such creditors. However, pursuant to indenture, American Tissue and the
subsidiary guarantors will be required to grant a lien in favor of the trustee
on such assets at such time as the Indebtedness held by such creditor has been
satisfied in full.
The trustee has entered into an intercreditor agreement with Boise Cascade
Corporation (the "Boise Intercreditor Agreement"), pursuant to which, among
other things:
(1) Boise Cascade (a) consents to the granting of a lien by the
applicable subsidiary guarantors in favor of the trustee on the Boise
Collateral and certain agreements, including, without limitation, the Boise
Agreement, relating to the use and operation thereof and (b) agrees to
subordinate its lien on such collateral to the lien in favor of the
trustee;
(2) upon commencement of foreclosure upon the Boise Collateral by the
trustee, Boise Cascade will have a right of first refusal to purchase the
Boise Collateral if the trustee elects to sell such collateral to a third
party;
(3) upon commencement of a foreclosure of the contract rights of the
applicable subsidiary guarantors under the Boise Agreement by the trustee,
the trustee is not permitted to sell or otherwise transfer such rights to
certain competitors of Boise Cascade; and
(4) Boise Cascade and the trustee will share proceeds of a disposition
of the Boise Collateral, on a dollar-for-dollar basis, up to the first
$20.0 million of proceeds therefrom.
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Thereafter, Boise Cascade will be subordinated to the rights of the trustee
with respect to all remaining proceeds of the Boise Collateral until such
time as the outstanding obligations of the applicable subsidiary guarantors
in respect of the exchange notes and their subsidiary guarantees thereof
have been paid or otherwise satisfied in full.
Possession, Use and Release of Collateral
Subject to and in accordance with the provisions of the collateral
documents and the indenture, so long as the trustee has not exercised its rights
with respect to the collateral, upon the occurrence and continuance of an event
of default, we and our subsidiary guarantors will have the right to remain in
possession and retain exclusive control of the collateral, to operate the
collateral, to alter or repair the collateral and to collect, invest and dispose
of any income therefrom, subject, in the case of the Boise Collateral, the
Existing Mortgage Collateral and the Revolving Credit Collateral, to the
provisions of the Intercreditor Agreements and the Boise Agreement, the Existing
Mortgage Loans and the Revolving Credit Facility, as applicable.
Release of Collateral. We or any of our subsidiary guarantors, as the case
may be, will have the right to obtain a release of items of collateral (other
than certain Trust Monies) subject to an Asset Sale, and the trustee will
release such collateral from the lien of the relevant collateral document and
reconvey such collateral to us or any such subsidiary guarantor upon compliance
with the condition that we deliver to the trustee the following:
(a) a notice from us requesting the release of specified collateral,
which notice:
(i) specifically describes the collateral requested to be
released,
(ii) specifies the fair market value of such collateral as of a
date within 60 days of such notice,
(iii) states that the consideration to be received in respect of
such collateral is at least equal to the fair market value of such
collateral,
(iv) states that the release of such collateral will not
materially and adversely impair the value of the remaining collateral,
taken as a whole, or interfere with the trustee's ability to realize
such value and will not impair the maintenance and operation of the
remaining collateral, taken as a whole,
(v) confirms the sale of, or an agreement to sell, the collateral
requested to be released in a bona fide sale to a person that is not
our Affiliate or, in the event that such sale is to a person that is
an Affiliate of ours, confirming that such sale is made in compliance
with the provisions set forth in "- Certain Covenants - Affiliate
Transactions,"
(vi) certifies that if the sale of the collateral requested to be
released constitutes an Asset Sale, such Asset Sale complies with the
terms and conditions of the indenture with respect thereto, including,
without limitation, the provisions set forth in "- Certain Covenants -
Asset Sales," and
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(vii) in the event there is to be a substitution of property for
such collateral subject to the Asset Sale, specifies the property
intended to be substituted for the collateral to be disposed of;
(b) an officers' certificate from us stating that:
(i) such sale covers only the collateral requested to be released
(or other property which is not Primary Collateral),
(ii) all Net Proceeds, if any, from the sale of any of such
collateral will be applied pursuant to the provisions of the indenture
in respect of Asset Sales,
(iii) to the extent any of such collateral is comprised of any
Boise Collateral or Secondary Collateral, Boise Cascade, the
applicable lender under the Existing Mortgage Loans or the lenders
under the Revolving Credit Facility, as applicable, to the extent such
Indebtedness remains outstanding, shall have authorized the release of
the same,
(iv) there is no default or event of default under the indenture
in effect or continuing on the date thereof or the valuation date
referred to in clause (a)(ii) above,
(v) the release of such collateral will not result in a default
or event of default under the indenture, and
(vi) all conditions precedent in the indenture relating to the
release in question have been complied with; and
(c) all documentation required by the Trust Indenture Act, if any,
prior to the release of the collateral requested to be released by the
trustee and, in the event that there is to be a substitution of property
for such collateral subject to the Asset Sale, all documentation necessary
to effect the substitution of such new collateral and to subject such new
collateral to the lien of the relevant collateral documents.
The indenture provides that:
o we will be entitled, subject to compliance with the conditions set
forth therein, to obtain the release of collateral which has been
taken by eminent domain, condemnation or in similar circumstances;
o we will be entitled to obtain a full release of all of the collateral
following legal defeasance or covenant defeasance of the indenture as
described below under "- Legal Defeasance and Covenant Defeasance;"
and
o upon the release of any subsidiary guarantor from its obligations
under the indenture and its subsidiary guarantee as described in the
last paragraph under "- Subsidiary Guarantees," such subsidiary
guarantor shall be entitled to obtain the release of all of its
collateral.
Disposition of Collateral Without Release. Notwithstanding the provisions
of "- Release of Collateral" above, so long as no default or event of default
under the indenture shall have occurred and be continuing or would result
therefrom, we and our subsidiary guarantors may, among other
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things, without any release or consent by the trustee, conduct ordinary course
activities with respect to collateral, including selling or otherwise disposing
of, in any transaction or series of related transactions, any property subject
to the lien of the collateral documents which has become worn out, defective or
obsolete or not used or useful in the business and which either has an aggregate
fair market value of $500,000 or less, or which is replaced by property of
substantially equivalent or greater value which becomes subject to the lien of
the collateral documents as After-Acquired Property; abandoning, terminating,
cancelling, releasing or making alterations in or substitutions of any leases or
contracts subject to the lien of the indenture or any of the collateral
documents; surrendering or modifying any franchise, license or permit subject to
the lien of the indenture or any of the collateral documents which it may own or
under which it may be operating; altering, repairing, replacing, changing the
location or position of and adding to its structures, machinery, systems,
equipment, fixtures and appurtenances; granting a nonexclusive license of any
intellectual property; and abandoning intellectual property which is no longer
used or useful in our business.
Use of Trust Monies
All Trust Monies (including, without limitation, all Net Proceeds that
become part of the Available Amount under the covenant entitled "Asset Sales"
and Net Insurance Proceeds required to be deposited with the trustee) shall be
held by the trustee as a part of the collateral securing the exchange notes and,
so long as no default or event of default under the indenture shall have
occurred and be continuing, may either:
(1) be released as contemplated by "- Certain Covenants - Asset Sales"
if such Trust Monies represent Available Amounts in respect of an Asset
Sale; or
(2) at our direction applied by the trustee from time to time to the
payment of the principal of, premium, if any, and interest on any exchange
notes at maturity or upon redemption or retirement, or to the purchase of
exchange notes upon tender or in the open market or otherwise, in each case
in compliance with the indenture.
We may also withdraw Trust Monies constituting Net Insurance Proceeds to
repair or replace the relevant Collateral, subject to certain conditions set
forth in the indenture.
The trustee will be entitled to apply any Trust Monies to cure any event of
default under the indenture. Trust Monies deposited with the trustee shall be
invested in Cash Equivalents pursuant to our direction and, so long as no
default or event of default shall have occurred and be continuing, we will be
entitled to any interest or dividends accrued, earned or paid on such Cash
Equivalents.
Subsidiary Guarantees
Our payment obligations under the exchange notes will be, jointly and
severally, guaranteed on an unconditional basis by each of our subsidiary
guarantors. The obligations of each subsidiary guarantor under its subsidiary
guarantee, and the grant by each subsidiary guarantor of liens on its assets to
secure its obligations under its subsidiary guarantee, will be subject to
various laws for the protection of creditors, including, without limitation,
laws governing fraudulent conveyances and transfers. To the extent that the
obligations of each subsidiary guarantor under its subsidiary guarantee, or the
lien granted by the subsidiary guarantor on its collateral, were held to be
unenforceable as a fraudulent conveyance or transfer or for other reasons,
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o the holders of the exchange notes would cease to have any direct claim
against such subsidiary guarantor,
o the trustee would cease to have a lien on the assets of such
subsidiary guarantor, or
o both, as appropriate.
In an attempt to avoid this result, the subsidiary guarantees will provide that
the obligations of each subsidiary guarantor thereunder will be limited to the
maximum amount as will not constitute a fraudulent conveyance or fraudulent
transfer under applicable law. Such amount could be substantially less than the
obligations under the exchange notes. In addition, any limitation on the amounts
payable by a subsidiary guarantor under its subsidiary guarantee pursuant to
such provision will result in a corresponding limitation on the ability of the
trustee to realize upon the collateral pledged by such subsidiary guarantor. See
"Risk Factors - We May Be Subject To Federal And State Fraudulent Transfer
Laws."
The indenture provides that no subsidiary guarantor may consolidate with or
merge with or into another corporation or other person (whether or not that
subsidiary guarantor is the surviving entity), whether or not affiliated with
that subsidiary guarantor, unless:
(1) subject to the provisions of the following paragraph, the person
formed by or surviving any such consolidation or merger (if other than that
subsidiary guarantor) assumes all the obligations of that subsidiary
guarantor under its subsidiary guarantee, the indenture and the collateral
documents pursuant to a supplemental indenture and other agreements in form
and substance reasonably satisfactory to the trustee;
(2) immediately after giving effect to such transaction, no default or
event of default under the indenture exists;
(3) such subsidiary guarantor, or any entity formed by or surviving
any such consolidation or merger, would have a Consolidated Net Worth
(immediately after giving effect to such transaction), equal to or greater
than the Consolidated Net Worth of such subsidiary guarantor immediately
preceding the transaction;
(4) we, at the time of such transaction and after giving pro forma
effect thereto as if the transaction had occurred at the beginning of the
applicable four-quarter period, would be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the covenant described under the caption "- Certain Covenants
- Incurrence Of Indebtedness And Issuance Of Preferred Stock;"
(5) the collateral owned by that subsidiary guarantor or surviving
entity, as the case may be:
(a) shall be subject to a lien in favor of the trustee for the
benefit of the holders of the exchange notes; and
(b) shall not be subject to any lien, other than Permitted
Collateral Liens; and
(6) the assets of the entity which is merged or consolidated with or
into such subsidiary guarantor, to the extent that they are assets of the
types which would constitute collateral
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under the collateral documents, shall be treated as After-Acquired Property
and such subsidiary guarantor or the surviving person, as the case may be,
shall take such actions as may be reasonably necessary in accordance with
the provisions of the collateral documents to cause such assets to be made
subject to the lien of the collateral documents in the manner and to the
extent required by the indenture;
provided, that the provisions of clauses (2) through (4) above shall not apply
to the merger of two or more subsidiary guarantors into another subsidiary
guarantor or the merger of a subsidiary guarantor into American Tissue.
The indenture provides that in the event of:
(x) a sale or other disposition of all or substantially all of the
assets of a subsidiary guarantor, by way of merger, consolidation or
otherwise; or
(y) a sale or other disposition of all of the Capital Stock of a
subsidiary guarantor, to a person which is not American Tissue or a
subsidiary or an affiliate of American Tissue;
then such subsidiary guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the Capital Stock of
such subsidiary guarantor) or the person acquiring the property (in the event of
a sale or other disposition of all or substantially all of the assets of such
subsidiary guarantor) will be released and relieved of any obligations under its
subsidiary guarantee, the indenture and the collateral documents, provided that:
(1) the Net Proceeds of such sale or other disposition are applied in
accordance with the provisions of the indenture described under "- Certain
Covenants - Asset Sales;" and
(2) all obligations of such subsidiary guarantor under all of its
guarantees of, and under all of its pledges of assets or other Liens which
secure, Indebtedness of American Tissue or any of our subsidiaries, shall
also terminate.
Optional Redemption
At any time prior to July 15, 2002, we may, on any one or more occasions,
redeem up to 35% in aggregate principal amount of exchange notes originally
issued under the indenture, with the net cash proceeds of one or more Equity
Offerings, at a redemption price equal to 113.25% of the principal amount
thereof, plus accrued and unpaid interest thereon to the date of redemption,
provided that
o at least 65% of the aggregate principal amount of exchange notes
originally issued under the indenture would remain outstanding
immediately after giving effect to any such redemption; and
o such redemption must occur within 90 days after the consummation of
any such Equity Offering.
Except pursuant to the preceding paragraph, we will not have the option of
redeeming the exchange notes prior to July 15, 2004.
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On or after July 15, 2004, we may redeem all or part of these exchange
notes, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed beginning on July 15 of each of the years indicated below:
Date Percentage
---- ----------
2004............................... 106.625%
2005 and thereafter................ 100.000%
Selection and Notice
If less than all of the exchange notes are to be redeemed at any
time, the trustee will select exchange notes for redemption:
(1) if the exchange notes are listed, in compliance with the
requirements of the principal national securities exchange on which the
exchange notes are listed; or
(2) if the exchange notes are not so listed, on a pro rata basis, by
lot or by such method as the trustee deems fair and appropriate.
No exchange notes of $1,000 or less will be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of exchange notes to be redeemed
at its registered address. Notices of redemption may not be conditional. If any
exchange note is to be redeemed in part only, the notice of redemption that
relates to such exchange note will state the portion of the principal amount
thereof to be redeemed. A new exchange note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original exchange note. Exchange notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on exchange notes or portions thereof called for
redemption.
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund payments
with respect to the exchange notes, other than pursuant to a Change of Control
Offer or an Asset Sale Offer.
Certain Covenants
Change of Control
If a Change of Control occurs, each holder of exchange notes will have the
right to require us to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such holder's exchange notes pursuant to a Change
of Control Offer. In the Change of Control Offer, we will offer a Change of
Control Payment in cash equal to 101% of the aggregate principal amount of the
exchange notes repurchased, plus accrued and unpaid interest thereon to the date
of purchase. Within 30 days following any Change of Control, we will mail a
notice to each holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase exchange notes on the Change of
Control Purchase Date pursuant to the procedures required by the indenture and
described in such notice. We will comply with the requirements of Rule 14e-1
under
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the Securities Exchange Act of 1934 and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the exchange notes as a result of a Change of
Control. To the extent that the provisions of any securities laws and
regulations conflict with provisions of the indenture relating to such Change of
Control Offer, we will comply with the applicable securities laws and
regulations and will not be deemed to have breached our obligations in the
indenture by virtue thereof.
The Change of Control Offer Period will be 20 business days following the
commencement of the Change of Control Offer and no longer, except to the extent
that a longer period is required by applicable law. No later than five business
days after the termination of the Change of Control Offer Period (the "Change of
Control Purchase Date"), we will purchase all exchange notes tendered in
response to the Change of Control Offer. Payment for any exchange notes so
purchased will be made in the same manner as interest payments are made.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the person in whose name an exchange note is registered
at the close of business on such record date, and no additional interest will be
payable to holders who tender exchange notes pursuant to the Change of Control
Offer.
On the Change of Control Purchase Date, we will, to the extent lawful:
(1) accept for payment all exchange notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all exchange notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the trustee the exchange notes
so accepted together with an officers' certificate stating the aggregate
principal amount of exchange notes or portions thereof being purchased by
American Tissue.
The paying agent will promptly mail to each holder of exchange notes so
tendered the Change of Control Payment for such exchange notes, and the trustee
will promptly authenticate and mail (or cause to be transferred by book-entry)
to each holder a new exchange note equal in principal amount to any unpurchased
portion of the exchange notes surrendered, if any; provided that each such new
exchange note will be in a principal amount of $1,000 or an integral multiple
thereof.
We will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Purchase Date.
The provisions described above that require us to make a Change of Control
Offer will be applicable whether or not any other provisions of the indenture
are applicable. Except as described above with respect to a Change of Control,
the indenture does not contain provisions that permit the holders of the
exchange notes to require that we repurchase or redeem the exchange notes in the
event of a takeover, recapitalization or similar transaction.
Our ability to repurchase exchange notes pursuant to a Change of Control
Offer may be limited by a number of factors. Our new Revolving Credit Facility
currently prohibits us from
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purchasing exchange notes and also provides that certain change of control
events with respect to us would constitute a default thereunder. In that event,
we would have to seek consent to purchase exchange notes or attempt to refinance
the borrowings that contain such provision. If we do not obtain such consent or
repay such borrowings, our failure to purchase tendered exchange notes would
constitute a default under the indenture, which, in turn, would constitute a
default under the Revolving Credit Facility.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of American Tissue and its subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of exchange notes to require American
Tissue to repurchase such exchange notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of American
Tissue and its subsidiaries taken as a whole to another Person or group may be
uncertain.
We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us and purchases all
exchange notes validly tendered and not withdrawn under such Change of Control
Offer.
Asset Sales
The indenture provides that we will not, and will not permit any of our
subsidiaries to, engage in an Asset Sale unless:
(1) we or the subsidiary, as the case may be, receive consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets or Equity Interests sold or otherwise disposed of in such Asset
Sale, evidenced, in each case by
o a resolution of the board of directors of such entity set forth
in an officers' certificate delivered to the trustee and
o with respect to an Asset Sale involving Primary Collateral in
excess of $1.0 million, an appraisal report of an independent
appraiser);
(2) at least 80% of the consideration therefor received by us or such
subsidiary is in the form of cash or Cash Equivalents;
(3) if such Asset Sale involves the disposition of collateral, subject
to the Intercreditor Agreements, we or such subsidiary have complied with
the provisions described under"-Possession, Use and Release of Collateral;"
(4) if such Asset Sale involves the disposition of collateral (other
than Secondary Collateral), subject to the Intercreditor Agreements, the
cash Net Proceeds thereof remaining after repayment (including a
corresponding commitment reduction, if applicable) of any indebtedness
secured by a Permitted Collateral Lien on such asset (the "Available
Amount") shall be paid directly by the purchaser of the collateral to the
trustee for deposit into the Collateral Account, and, if any property other
than cash or Cash Equivalents is included in
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such Net Proceeds, such property shall be made subject to the lien of the
applicable collateral documents;
(5) if such Asset Sale involves the disposition of Secondary
Collateral, subject to the Intercreditor Agreements, the Available Amount
shall be paid directly by the lender who holds a lien on the applicable
Secondary Collateral to the trustee for deposit into the Collateral
Account, and, if any property other than cash or Cash Equivalents is
included in the Net Proceeds constituting such Available Amount, such
property shall be made subject to the lien of the applicable collateral
documents; and
(6) we or such subsidiary, as the case may be, applies the Net
Proceeds as provided in the following paragraph.
For purposes of clause (2) above, each of the following shall be deemed to be
cash:
(a) the amount of any liabilities (as shown on our or such
subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables) of us or any subsidiary (other
than liabilities that are by their terms subordinated to, or equal in right
of payment with, the exchange notes or any subsidiary guarantee thereof)
that are assumed by the transferee of any such assets; and
(b) any securities, notes or other obligations received by us or any
subsidiary from such transferee that are converted by us or such subsidiary
into cash within 60 days.
We or the applicable subsidiary may, at our or its option, apply any such
Net Proceeds within 360 days of the related Asset Sale as follows:
(1) to the acquisition of "Replacement Assets," which shall be another
business or other long-term assets, in each case, in the same or a similar,
complementary, ancillary or related line of business as us or any of our
subsidiaries was engaged in on the issue date of the old notes or any
reasonable extensions or expansions thereof, provided, that:
o any Replacement Assets acquired with any Available Amount shall
be owned by us or by our subsidiary guarantor that made the Asset
Sale and shall not be subject to any liens, other than Permitted
Collateral Liens, and
o we or our subsidiary guarantor, as the case may be, shall,
subject to any applicable Intercreditor Agreement, execute and
deliver to the trustee such collateral documents or other
instruments as shall be reasonably necessary to cause such
Replacement Assets to become subject to a lien in favor of the
trustee, for the benefit of the holders of the exchange notes,
securing its obligations under the exchange notes or its
subsidiary guarantee, as the case may be, and otherwise shall
comply with the provisions of the indenture applicable to
After-Acquired Property; or
(2) to reimburse us or any of our subsidiaries for expenditures made,
and costs incurred, to repair, rebuild, replace or restore property subject
to loss, damage or taking to the extent that the Net Proceeds consist of
Net Insurance Proceeds received on account of such loss, damage or taking.
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If we do not use any portion of the Net Proceeds as described above within
such 360-day period, such unused portion of the Net Proceeds period shall
constitute "Excess Proceeds" subject to disposition as provided below. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, we will be required
to make an Asset Sale Offer to all holders of exchange notes to purchase the
maximum principal amount of exchange notes that may be purchased out of the
aggregate amount of Excess Proceeds. The Asset Sale Offer Price will be equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the date of purchase, and will be payable in cash in accordance with
the procedures set forth in the indenture. To the extent that the aggregate
amount of exchange notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, remaining Excess Proceeds shall be released to us and may
be used free and clear of the lien of the collateral documents for general
corporate purposes. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
Subject to the Intercreditor Agreements, all Available Amounts shall,
pending their application in accordance with this covenant or the release
thereof in accordance with the provisions described under "- Possession, Use and
Release of Collateral" and "- Use of Trust Monies," be deposited in the
Collateral Account under the indenture.
The Asset Sale Offer Period will be a period of 20 business days following
the commencement of the Asset Sale Offer and no longer, except to the extent
that a longer period is required by applicable law. No later than five business
days after the termination of the Asset Sale Offer Period (the "Asset Sale
Purchase Date"), we will purchase the principal amount of exchange notes
required to be purchased pursuant to this covenant (the "Asset Sale Offer
Amount") or, if less than the Asset Sale Offer Amount has been tendered, all
exchange notes tendered in response to the Asset Sale Offer. Payment for any
exchange notes so purchased will be made in the same manner as interest payments
are made.
If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the holder in whose name an exchange note is registered at the
close of business on such record date, and no additional interest will be
payable to holders who tender exchange notes pursuant to the Asset Sale Offer.
On or before the Asset Sale Purchase Date, we will, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Asset Sale
Offer Amount of exchange notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered,
all exchange notes tendered, and will deliver to the trustee an officers'
certificate stating that such exchange notes or portions thereof were accepted
for payment by us in accordance with the terms of this covenant. We, the
Depositary or the paying agent, as the case may be, will promptly (but in any
case not later than five days after the Asset Sale Purchase Date) mail or
deliver to each tendering holder an amount equal to the purchase price of the
exchange notes tendered by such holder and accepted by us for purchase, and we
will promptly issue a new exchange note, and the trustee, upon delivery of an
officers' certificate from us, will authenticate and mail or deliver such new
exchange note to such holder, in a principal amount equal to any unpurchased
portion of the exchange note surrendered. Any exchange note not so accepted will
be promptly mailed or delivered by us to the holder thereof. We will publicly
announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.
We will comply with the requirements of Rule 14e-1 under the Securities
Exchange Act of 1934 and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the exchange notes as a result of an
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Asset Sale. To the extent that the provisions of any securities laws or
regulations conflict with the Asset Sale provisions of the indenture, we shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached our obligations under the Asset Sale provisions by
virtue thereof.
Restricted Payments
The indenture provides that we will not, and will not permit any of our
subsidiaries to, directly or indirectly, make any of the following Restricted
Payments:
(1) declare or pay any dividend or make any distribution on account of
our or any of our subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving us), other than dividends or distributions payable in our Equity
Interests (other than Disqualified Stock) or dividends or distributions
payable to us or any of our wholly owned subsidiaries;
(2) purchase, redeem or otherwise acquire or retire for value any of
our Equity Interests or Equity Interests of any direct or indirect parent
of ours or of any of our subsidiaries (other than any such Equity Interests
owned by us or any of our wholly owned subsidiaries that is a subsidiary
guarantor);
(3) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any indebtedness
that is subordinated to the exchange notes, other than through the purchase
or acquisition by us of indebtedness through the issuance in exchange
therefor of Equity Interests (other than Disqualified Stock); or
(4) make any Restricted Investment,
unless, at the time of and after giving effect to such Restricted Payment:
(a) no default or event of default will have occurred and be
continuing or would occur as a consequence thereof;
(b) we would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by us and our subsidiaries after the Issue Date
(excluding Restricted Payments permitted by clauses (2), (3) and (4) of the
next succeeding paragraph), is less than the sum of:
(i) 50% of our Consolidated Net Income for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date, to the end of our most recently ended
fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit); plus
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(ii) to the extent not included in the amount described in clause
(i) above, 100% of the aggregate net cash proceeds received after the
Issue Date by us:
o from the issue or sale of, or from additional capital
contributions in respect of, our Equity Interests or of debt
securities of ours or of any of our subsidiary guarantors
that have been converted into, or canceled in exchange for,
Equity Interests of ours or of any direct or indirect parent
of ours, or
o from the issue or sale of convertible or exchangeable
Disqualified Stock that has been converted into or exchanged
for such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a subsidiary of ours
and other than Disqualified Stock or debt securities that
have been converted into Disqualified Stock),
plus the aggregate net cash proceeds received by us upon any such
conversion or exchange; plus
(iii) 100% of the cash proceeds realized upon the sale of any
Unrestricted Subsidiary (less the amount of any reserve established
for purchase price adjustments and less the maximum amount of any
indemnification or similar contingent obligation for the benefit of
the purchaser, any of its Affiliates or any other third party in such
sale, in each case as adjusted for any permanent reduction in any such
amount on or after the date of such sale, other than by virtue of a
payment made to such Person) following the issue date of the old notes
not in excess of the original amount of the Investment in such
Unrestricted Subsidiary; plus
(iv) without duplication of amounts in clause (iii) above, to the
extent that any Restricted Investment that was made after the issue
date of the old notes is sold for cash or otherwise liquidated or
repaid for cash, the amount of net cash proceeds received with respect
to such Restricted Investment not in excess of the original amount of
such Restricted Investment.
The foregoing provisions do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of the indenture;
(2) the making of any Restricted Investment in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
subsidiary of ours) of, or from substantially concurrent additional capital
contributions in respect of, Equity Interests of ours (other than
Disqualified Stock); provided, that any net cash proceeds that are utilized
for any such Restricted Investment, and any Net Income resulting therefrom,
will be excluded from clauses (c)(i) and (c)(ii) of the preceding
paragraph;
(3) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of ours or of our direct or indirect parent in exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to a subsidiary of ours) of, or from substantially concurrent capital
contributions in respect of, other Equity Interests of ours (other than any
Disqualified Stock); provided that any net cash proceeds that are utilized
for any such
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redemption, repurchase, retirement or other acquisition, and any Net Income
resulting therefrom, will be excluded from clauses (c)(i) and (c)(ii) of
the preceding paragraph;
(4) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than
to a Subsidiary of ours) of, or from substantially concurrent additional
capital contributions in respect of, our Equity Interests (other than
Disqualified Stock); provided, that any net cash proceeds that are utilized
for any such defeasance, redemption or repurchase, and any Net Income
resulting therefrom, will be excluded from clauses (c)(i) and (c)(ii) of
the preceding paragraph;
(5) Permitted Tax Payments;
(6) the acquisition by a Receivables Subsidiary in connection with a
Qualified Receivables Transaction of Equity Interests of a trust or other
Person established by such Receivables Subsidiary to effect such Qualified
Receivables Transaction;
(7) the repurchase, redemption, retirement for value or other
acquisition of any of our Equity Interests or Equity Interests of any of
our subsidiaries from employees, officers or directors (or their nominees)
of ours or any of our subsidiaries or their authorized representatives upon
such Person's cessation of employment with us or any such subsidiary or
death pursuant to the terms of an employee benefit, employment agreement or
similar arrangement in an aggregate amount not to exceed $500,000 in any
fiscal year, plus the aggregate net cash proceeds from any issuance during
such fiscal year of Equity Interests by us or any of our subsidiaries to
employees, officers or directors thereof;
(8) pro rata dividends or other distributions made by a subsidiary of
ours to minority shareholders (or owners of an equivalent interest in the
case of a subsidiary that is not a corporation);
(9) the acquisition by us or a wholly owned subsidiary of ours of any
Equity Interest in a subsidiary of ours from a minority shareholder of such
subsidiary; and
(10) the repurchase of our Equity Interests deemed to occur upon the
exercise of stock options if such Equity Interests represent a portion of
the exercise price thereof.
Our board of directors may designate any of our subsidiaries (including a
newly acquired subsidiary) to be an Unrestricted Subsidiary if such designation
would not cause a default. For purposes of making such determination, all
outstanding Investments by us and our subsidiaries in the Unrestricted
Subsidiary so designated will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All such outstanding Investments
will be deemed to constitute Investments in an amount equal to the fair market
value of such Investments at the time of such designation. Such designation will
only be permitted if such Restricted Payment would be permitted at such time and
if such subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the fair
market value (evidenced by a resolution of our board of directors set forth in
an officers' certificate delivered to the trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by us or such subsidiary, as
the case may be, pursuant to the Restricted Payment. Not later than the date of
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making any Restricted Payment, we will deliver to the trustee an officers'
certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this covenant were computed,
which calculations may be based upon our latest available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The indenture provides that we will not, and will not permit any of our
subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Indebtedness) and we will not issue any Disqualified Stock and will not permit
any of our subsidiaries to issue any shares of preferred stock; provided,
however, that we may incur indebtedness (including Acquired Indebtedness) or
issue shares of preferred stock or Disqualified Stock and our subsidiaries that
are subsidiary guarantors may incur Indebtedness and issue shares of preferred
stock if:
(1) the Fixed Charge Coverage Ratio for our most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such preferred stock or Disqualified Stock is issued would have
been at least 2.25 to 1 on or prior to the second anniversary of the Issue
Date and 2.5 to 1 at any time thereafter, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the preferred stock or
Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period; and
(2) no default or event of default will have occurred and be
continuing or would occur as a consequence thereof;
provided, that no guarantee may be incurred pursuant to this paragraph unless
the guaranteed Indebtedness is incurred by us or our subsidiary in compliance
with this paragraph.
The foregoing provisions will not apply to the following types of
"Permitted Indebtedness":
(1) the incurrence by us or any of our subsidiaries of Indebtedness
under the Revolving Credit Facility and reimbursement obligations in
respect of letters of credit (and guarantees thereof by subsidiaries that
are subsidiary guarantors) in an aggregate principal amount at any time
outstanding (with letter of credit obligations being deemed to have a
principal amount equal to the maximum potential liability of us and our
subsidiaries that are subsidiary guarantors with respect thereto) not to
exceed an amount equal to $100.0 million less any mandatory repayments or
prepayments of the Revolving Credit Facility with the proceeds of Asset
Sales;
(2) Existing Indebtedness;
(3) Indebtedness represented by the exchange notes, the subsidiary
guarantees and the indenture;
(4) the incurrence by us or any of our subsidiaries of Indebtedness
represented by capital lease obligations or Purchase Money Obligations, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or
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improvement of property used in our business or in the business of such
subsidiary, in an aggregate principal amount not to exceed $20.0 million at
one time outstanding;
(5) the incurrence by us or any of our subsidiaries of Permitted
Refinancing Indebtedness;
(6) the incurrence by us or any of our wholly owned subsidiaries of
intercompany Indebtedness between or among us and any of our wholly owned
subsidiaries or between or among any wholly owned subsidiaries and the
issuance of preferred stock by any of our wholly owned subsidiaries to us
or any other of our wholly owned subsidiaries; provided, however, that (a)
any subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness or preferred stock being held by a person other than us
or any wholly owned subsidiary of ours and (b) any sale or other transfer
of any such Indebtedness or preferred stock to a person that is not either
American Tissue or a wholly owned subsidiary of ours will be deemed, in
each case, to constitute an incurrence of Indebtedness by us or such
subsidiary, as the case may be, not permitted pursuant to this clause (6);
(7) the incurrence by us or any of our subsidiaries that are
subsidiary guarantors of Hedging Obligations;
(8) Non-Recourse Debt;
(9) Indebtedness by us or any of our subsidiaries solely in respect of
bankers' acceptances, letters of credit and performance bonds or similar
arrangements, in each case in the ordinary course of business;
(10) Indebtedness arising from agreements of ours or our subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than guarantees
of Indebtedness incurred by any person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such
acquisition; provided, however, that:
(a) such Indebtedness is not reflected on our balance sheet or
the balance sheet of any of our subsidiaries (contingent obligations
referred to in a footnote to financial statements and not otherwise
reflected on the balance sheet will not be deemed to be reflected on
such balance sheet for purposes of this clause (a)); and
(b) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including
non-cash proceeds (the fair market value of such non-cash proceeds
being measured at the time it is received and without giving effect to
any subsequent changes in value) actually received by us and our
subsidiaries in connection with such disposition;
(11) the incurrence by us or any of our subsidiaries that are
subsidiary guarantors of Indebtedness (in addition to Indebtedness
permitted by any other clause of this paragraph) in an aggregate principal
amount at any time outstanding not to exceed the sum of $10.0 million; and
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(12) the incurrence by a Receivables Subsidiary of Indebtedness in an
amount not to exceed $25.0 million in a Qualified Receivables Transaction
that is without recourse to us or to any of our subsidiaries or their
assets (other than such Receivables Subsidiary and its assets), and is not
guaranteed by any such person.
Notwithstanding any other provision of this covenant, a guarantee of
Indebtedness permitted by the terms of the indenture at the time such
Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
Indebtedness or preferred stock of any person which is outstanding at the
time such person becomes a subsidiary of ours or is merged with or into or
consolidated with us or a subsidiary of ours shall be deemed to have been
incurred at the time such person becomes such a subsidiary of ours or is merged
with or into or consolidated with us or any of our subsidiaries, as applicable.
Notwithstanding any other provisions of this covenant, the maximum amount
of Indebtedness that we or a subsidiary of ours may incur shall not be deemed to
be exceeded solely as a result of fluctuations in the exchange rates of
currencies.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (12) above or is
entitled to be incurred pursuant to the Fixed Charge Coverage Ratio provisions
of this covenant, we may, in our sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant.
Liens
The indenture provides that we will not, and will not permit any of our
subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any lien, except:
(1) with respect to any property or asset constituting collateral,
liens created by the indenture or the collateral documents and Permitted
Collateral Liens, or
(2) with respect to any property or asset (other than collateral) now
owned or hereafter acquired, Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The indenture will provide that we will not, and will not permit any of our
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
of our Subsidiaries to:
(1) (a) pay dividends or make any other distributions to us or any of
our other subsidiaries (x) on its Capital Stock or (y) with respect to any
other interest or participation
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in, or measured by, its profits, or (b) pay any Indebtedness owed to us or
any of our other subsidiaries;
(2) make loans or advances to us or any of our other Subsidiaries; or
(3) transfer any of its properties or assets to us or any of our other
subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(a) Existing Indebtedness (including, without limitation, pursuant to
the Boise Agreement and the Existing Mortgage Loans) and any documents or
agreements entered into pursuant thereto or securing obligations
thereunder, all as in effect on the issue date of the old notes;
(b) the Revolving Credit Facility and any documents or agreements
entered into pursuant thereto or securing obligations thereunder, all as in
effect as of the issue date of the old notes, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the
agreements governing the Revolving Credit Facility as in effect on the
issue date of the old notes;
(c) the indenture, the exchange notes, the subsidiary guarantees and
the collateral documents;
(d) applicable law;
(e) any instrument governing Acquired Indebtedness or Capital Stock of
a Person acquired by us or any of our subsidiaries as in effect at the time
of such acquisition (except to the extent such Acquired Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any person, other than the person, or the assets of
the person, so acquired;
(f) by reason of customary non-assignment or subletting provisions in
leases and licenses entered into in the ordinary course of business and
consistent with past practices;
(g) Purchase Money Obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (3) above on the property so acquired;
(h) agreements relating to the financing of the acquisition of real or
tangible personal property acquired after the issue date of the old notes;
provided that such encumbrance or restriction relates only to the property
which is acquired and in the case of any encumbrance or restriction that
constitutes a Lien, such Lien constitutes a Purchase Money Lien;
(i) Indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables Transaction; provided
that such restrictions apply only to such Receivables Subsidiary;
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(j) any restriction or encumbrance contained in contracts for sale or
other conveyance of assets permitted by the indenture in respect of the
assets being sold or conveyed pursuant to such contract;
(k) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced; or
(l) contracts with customers entered into in the ordinary course of
business in the nature of restrictions on cash, other deposits or net
worth, which restrictions are imposed by such customers.
Nothing contained in the foregoing covenant entitled "Dividend and Other
Payment Restrictions Affecting Subsidiaries" shall prevent us or any of our
subsidiaries from creating, incurring, assuming or suffering to exist any Liens
otherwise not prohibited by the covenant entitled "Liens."
Transactions with Affiliates
The indenture provides that we will not, and will not permit any of our
subsidiaries to, sell, lease, transfer or otherwise dispose of, as applicable,
any of our or such subsidiary's assets to, or purchase any property or assets
from, or enter into or make any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to us or the relevant subsidiary than those that would have been obtained
in a comparable transaction by us or such subsidiary with an unrelated
person; and
(2) we deliver to the trustee (a) with respect to any Affiliate
Transaction entered into after the issue date of the old notes involving
aggregate consideration in excess of $1.0 million, a resolution of the
board of directors set forth in an officers' certificate certifying that
such Affiliate Transaction complies with clause (1) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the board of directors and (b) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to us or such subsidiary of such Affiliate
Transaction from a financial point of view issued by an independent
accounting, appraisal or investment banking firm of recognized standing;
provided that the following will not be deemed to be Affiliate Transactions:
(a) the provision of administrative or management services by us or
any of our officers or directors to any of our subsidiaries in the ordinary
course of business consistent with past practice;
(b) any employment agreement entered into by us or any of our
subsidiaries in the ordinary course of business and consistent with our
past practice or the past practice of such subsidiary;
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(c) transactions between or among us and/or our wholly owned
subsidiaries or transactions between a Receivables Subsidiary and any
person in which the Receivables Subsidiary has an Investment;
(d) transactions not restricted by the covenant entitled "Restricted
Payments" (including, without limitation, Permitted Investments);
(e) reasonable fees and compensation paid to, and indemnity provided
on behalf of, our or any of our subsidiaries' officers, directors,
employees, agents or consultants as determined in good faith by the board
of directors; and
(f) any sale or other issuance of our Equity Interests (other than
Disqualified Stock).
Additional Subsidiary Guarantees
The indenture provides that all of our domestic subsidiaries (other than a
Receivables Subsidiary or an Unrestricted Subsidiary) will be subsidiary
guarantors. In addition, the indenture provides that we will not, and will not
permit any of our subsidiary guarantors to, make any Investment in any of our
other subsidiaries that is not a subsidiary guarantor, unless such Investment is
permitted by the covenant entitled "Restricted Payments" (including any
Restricted Payment or Permitted Investment permitted or not restricted by such
covenant).
Impairment of Security Interests
The indenture provides that neither we nor any of our subsidiaries will
take or omit to take any action which action or omission could reasonably be
expected to have the result of adversely affecting or impairing the lien in
favor of the trustee for the benefit of the holders of the exchange notes in the
Collateral, other than as expressly contemplated by the indenture, the
collateral documents or the Intercreditor Agreements.
Line of Business
The indenture provides that we will not, and will not permit any of our
subsidiaries to, engage in any business, other than the business of owning,
operating or managing of pulp and paper manufacturing and converting businesses,
the purchase, refurbishment and sale of pulp, paper and converting equipment and
similar, complementary, ancillary or related lines of business.
Payments for Consent
The indenture provides that neither we nor any of our subsidiaries will,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of exchange notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the indenture or the exchange notes, unless such consideration is offered to
be paid or is paid to all holders of the exchange notes that consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Reports
The indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission, so long as any exchange
notes are outstanding, we will
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furnish to the trustee and all holders of exchange notes (1) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereon by our certified independent accountants and (2) all
current reports that would be required to be filed with the Commission on Form
8-K if we were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations.
In addition, following the consummation of the Exchange Offer, whether or
not required by the rules and regulations of the Commission, we will file a copy
of all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, we and our subsidiary guarantors have agreed that, for so long as any
exchange notes remain outstanding, they will furnish to the trustee, holders of
exchange notes and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Merger, Consolidation or Sale of Assets
The indenture provides that we will not, in a single transaction or series
of related transactions, consolidate or merge with or into (whether or not we
are the surviving entity), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of our properties or assets in one or more
related transactions, to another corporation, person or entity unless:
(1) either
o we are the surviving entity or
o the person formed by or surviving any such consolidation or
merger (if other than us), or to which such sale,
assignment, transfer, lease, conveyance or other disposition
will have been made, is an entity organized or existing
under the laws of the United States, any state thereof or
the District of Columbia;
(2) the surviving entity assumes all of our obligations under the
exchange notes, the indenture and the collateral documents pursuant to a
supplemental indenture in a form reasonably satisfactory to the trustee;
(3) the surviving entity causes such amendments, supplements or other
instruments to be filed and recorded in such jurisdictions as may be
required by applicable law to preserve and protect the lien of the
collateral documents on the collateral owned by or transferred to the
surviving entity, together with such financing statements as may be
required to perfect any security interests in such collateral which maybe
perfected by the filing of a financing statement under the Uniform
Commercial Code of the relevant states;
(4) the collateral owned by or transferred to the surviving entity
will:
(a) continue to constitute collateral under the indenture and the
collateral documents,
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(b) will be subject to the lien in favor of the trustee for the
benefit of the holders of the exchange notes, and
(c) will not be subject to any lien, other than Permitted
Collateral Liens;
(5) the assets of the person which is merged or consolidated with or
into the surviving entity, to the extent that such assets are assets of the
types which would constitute collateral under the collateral documents,
shall be treated as After-Acquired Property and the surviving entity will
take such action as may be reasonably necessary to cause such property and
assets to be made subject to the lien of the collateral documents in the
manner and to the extent required in the indenture;
(6) immediately after giving pro forma effect to such transaction, no
default or event of default exists;
(7) we or the surviving entity:
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and
(b) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;"
and
(8) we will have delivered to the trustee an officers' certificate and
an opinion of counsel addressed to the trustee, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
disposition and such supplemental indenture, if any, comply with the
indenture and that such supplemental indenture is enforceable.
Events of Default and Remedies
The indenture provides that each of the following constitutes an event of
default:
(1) default for 30 days in the payment when due of interest on the
exchange notes;
(2) default in payment when due of the principal of or premium, if
any, on the exchange notes;
(3) failure by us or any of our subsidiaries to comply with the
provisions described under the captions "- Certain Covenants - Change of
Control," "- Certain Covenants Asset Sales," "- Certain Covenants -
Restricted Payments" or "- Certain Covenants -Incurrence of Indebtedness
and Issuance of Preferred Stock;"
(4) continuance of a default in the performance, or breach, of any of
our other covenants or warranties in the indenture for a period of 30 days
after there has been given to us by the trustee, or to us and the trustee
by the holders of at least 25% in principal amount of the
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outstanding exchange notes, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the indenture;
(5) default under any mortgage, security agreement, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by us or any of our
Significant Subsidiaries (or the payment of which is guaranteed by us or
any of our subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the issue date of the old notes, which default:
(a) is caused by a failure to pay principal of, premium, if any,
or interest on such Indebtedness, after the expiration of any grace
period provided in such Indebtedness on the date of such default
(referred to below as a "payment default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(6) failure by us or any of our Significant Subsidiaries to pay final
judgments aggregating in excess of $10.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, default by us or any of our
subsidiary guarantors in the performance of the collateral documents which
adversely affects the enforceability or the validity of the trustee's lien
on the collateral or which adversely affects the condition or value of the
collateral, taken as a whole, in any material respect, repudiation or
disaffirmation by us or any of our subsidiaries of its obligations under
the collateral documents or the determination in a judicial proceeding that
the collateral documents are unenforceable or invalid against us or any of
our subsidiaries for any reason;
(8) except as permitted by the indenture, any subsidiary guarantee is
held in any judicial proceeding to be unenforceable or invalid or ceases
for any reason to be in full force and effect or any subsidiary guarantor,
or any duly authorized person acting on behalf of any subsidiary guarantor,
denies or disaffirms its obligations under its subsidiary guarantee; and
(9) certain events of bankruptcy or insolvency with respect to us or
any of our Significant Subsidiaries or any group of our subsidiaries that,
taken together, would constitute a Significant Subsidiary.
If any event of default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding exchange
notes may declare all the exchange notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an event of default arising from
certain events of bankruptcy or insolvency with respect to us, any Significant
Subsidiary of ours or any group of our subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding exchange notes will become
due and payable without further action or notice. In addition to acceleration of
the maturity of the exchange notes, if an event of default occurs and is
continuing, the trustee will have the right, subject, in the case of the Boise
Collateral and the Secondary Collateral, to the Intercreditor Agreements, to
exercise remedies with respect to the collateral, such as foreclosure, as are
available under the indenture, the collateral
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documents and at law. Holders of the exchange notes may not enforce the
indenture or the exchange notes or exercise remedies with respect to the
collateral, except as expressly provided in the indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
exchange notes may direct the trustee in its exercise of any trust or power. The
trustee may withhold from holders of the exchange notes notice of any continuing
default or event of default (except a default or event of default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
The holders of a majority in aggregate principal amount of the exchange
notes then outstanding by notice to the trustee may on behalf of the holders of
all of the exchange notes waive any existing default or event of default and its
consequences under the indenture, the exchange notes, the subsidiary guarantees
and the collateral documents, except a continuing default or event of default in
the payment of interest on, or the principal of, the exchange notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. In addition, we are required upon becoming aware
of any default or event of default under the indenture, to deliver to the
trustee a statement specifying such default or event of default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of ours or any
of our subsidiaries, as such, will have any liability for any obligations of
ours under the exchange notes, the subsidiary guarantees, the indenture, or the
collateral documents or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each holder of exchange notes by accepting a
exchange note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the exchange notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Securities and Exchange Commission that such a waiver is
against public policy.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have all of its obligations
discharged with respect to the outstanding exchange notes (referred to below as
legal defeasance), except for:
(1) the rights of holders of outstanding exchange notes to receive
payments in respect of the principal of, premium, if any, and interest on
such exchange notes when such payments are due from the trust referred to
below;
(2) our obligations with respect to the exchange notes concerning
issuing temporary exchange notes, registration of exchange notes,
mutilated, destroyed, lost or stolen exchange notes and the maintenance of
an office or agency for payment and money for security payments held in
trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and our obligations in connection therewith; and
(4) the legal defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
indenture (referred to below as covenant
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defeasance) and thereafter any failure or omission to comply or default in
complying with such obligations will not constitute a default or event of
default with respect to the exchange notes.
In the event covenant defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "- Events of Default" will no longer constitute an event of
default with respect to the exchange notes.
In order to exercise either legal defeasance or covenant defeasance,
(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the exchange notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding exchange notes on the stated
maturity or on the applicable redemption date, as the case may be, and we
must specify whether the exchange notes are being defeased to maturity or
to a particular redemption date;
(2) in the case of legal defeasance, we will have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that (a) we have received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the issue
date of the old notes, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel will confirm that, the holders of the outstanding
exchange notes will not recognize income, gain or loss for federal income
tax purposes as a result of such legal defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such legal defeasance had not
occurred;
(3) in the case of covenant defeasance, we will have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that the holders of the outstanding exchange notes
will not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred;
(4) no default or event of default under the indenture will have
occurred and be continuing on the date of such deposit (other than a
default or event of default resulting from the borrowing of funds to be
applied to such deposit) or insofar as events of default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which we or any of
our subsidiaries is a party or by which we or any of our subsidiaries is
bound;
(6) we must have delivered to the trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
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(7) we must deliver to the trustee an officers' certificate stating
that the deposit was not made by us with the intent of preferring the
holders of exchange notes over our other creditors with the intent of
defeating, hindering, delaying or defrauding our creditors or others; and
(8) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent relating to
legal defeasance or covenant defeasance have been complied with.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of
exchange notes) as to all outstanding exchange notes when either:
(1) all such exchange notes theretofore authenticated and delivered
(except lost, stolen or destroyed exchange notes which have been replaced
or paid and exchange notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by us and thereafter
repaid to us or discharged from such trust) have been delivered to the
trustee for cancellation; or
(2) (a) all such exchange notes not theretofore delivered to the
trustee for cancellation have or will (upon the mailing of a notice or
notices deposited with the trustee together with irrevocable instructions
to mail such notice or notices to holders of the exchange notes) become due
and payable and we have irrevocably deposited or caused to be deposited
with the trustee as trust funds in the trust for the purpose an amount of
money sufficient to pay and discharge the entire indebtedness on the
exchange notes not theretofore delivered to the trustee for cancellation,
for principal, premium, if any, and accrued interest to the date of such
deposit; (b) we have paid all sums payable by us under the indenture; and
(c) we have delivered irrevocable instructions to the trustee to apply the
deposited money toward the payment of the exchange notes at maturity or the
redemption date, as the case may be.
In addition, we must deliver to the trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent to satisfaction and
discharge have been complied with.
Transfer and Exchange
A holder may exchange or transfer exchange notes in accordance with the
indenture. The registrar for the exchange notes and the trustee may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and we may require a holder to pay any taxes and fees required by law
or permitted by the indenture.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the indenture,
the exchange notes, the subsidiary guarantees, or the collateral documents may
be amended or supplemented with the consent of the holders of at least a
majority in aggregate principal amount of the exchange notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, exchange notes), and any existing
default or compliance with any provision of the indenture, the exchange notes,
the subsidiary guarantees, or the collateral
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documents may be waived with the consent of the holders of a majority in
principal amount of the then outstanding exchange notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, exchange notes).
Without the consent of each holder of exchange notes affected thereby, an
amendment or waiver may not:
(1) reduce the principal amount of exchange notes whose holders must
consent to an amendment, supplement or waiver of the indenture, exchange
notes, subsidiary guarantees, or collateral documents;
(2) reduce the principal of or change the fixed maturity of any
exchange note or alter the provisions with respect to the redemption of the
exchange notes (other than the covenants described above under the captions
"Change of Control" or "Asset Sales");
(3) reduce the rate of or change the time for payment of interest on
any exchange note;
(4) waive a default or event of default in the payment of principal
of, premium, if any, or interest on the exchange notes (except a rescission
of acceleration of the exchange notes by the holders of at least a majority
in aggregate principal amount of the exchange notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any exchange note payable in money other than that stated in
the exchange notes;
(6) make any change in the provisions of the indenture, exchange
notes, subsidiary guarantees or collateral documents relating to waivers of
past defaults or the rights of holders of exchange notes to receive
payments of principal of or premium, if any, or interest on the exchange
notes;
(7) waive a redemption payment with respect to any exchange note
(other than a payment required by one of the covenants described in clause
(2) above or under the caption "Optional Redemption"); or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of the holders of the
exchange notes, we and the trustee may, from time to time, amend or supplement
the indenture, the exchange notes, the subsidiary guarantees, or the collateral
documents to:
(1) cure any ambiguity, defect or inconsistency;
(2) provide for uncertificated exchange notes in addition to or in
place of certificated exchange notes;
(3) provide for the assumption of our or any of our subsidiary
guarantors' obligations to holders of exchange notes in the case of a
merger or consolidation or sale of all or substantially all of our or any
of our subsidiary guarantors' assets;
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(4) provide for additional subsidiary guarantors as set forth in the
indenture or to provide for the release of a subsidiary guarantor pursuant
to the indenture;
(5) make any change that would provide any additional rights or
benefits to the holders of exchange notes or that does not adversely affect
the legal rights under the indenture of any such holder; or
(6) comply with requirements of the Securities and Exchange Commission
in order to effect or maintain the qualification of the indenture under the
Trustee Indenture Act.
Notwithstanding the foregoing, collateral may be released with the consent
of the holders of at least 75% in aggregate principal amount of the then
outstanding exchange notes in addition to releases of collateral expressly
permitted by the collateral documents.
Concerning the Trustee
The indenture contains certain limitations on the rights of the trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Securities and Exchange Commission
for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
exchange notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture provides that in case an event of
default occurs (which is not cured or waived), the trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the indenture
at the request of any holder of exchange notes, unless such holder has offered
to the trustee security and indemnity satisfactory to the trustee against any
loss, liability or expense.
Book-Entry, Delivery and Form
The exchange notes to be exchanged for the old notes that were sold to
qualified institutional buyers under Rule 144A in the United States initially
will be in the form of one registered global note without interest coupons. Upon
issuance, the global note will be deposited on the date of consummation of the
Exchange Offer with the trustee, as custodian for The Depository Trust Company
("DTC") and registered in the name of Cede & Co., as nominee of DTC, in each
case for credit to an account of a direct or indirect participant in DTC as
described below.
The global note may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the global note may not be exchanged for exchange notes in
certificated form, except in the limited circumstances described below. See "-
Transfer of Interests in the Global Note for Certificated Exchange Notes."
Except in the limited circumstances described below, owners of beneficial
interests in the global note will not be entitled to receive physical delivery
of certificated notes. Transfers of beneficial interests in the global note will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
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Initially, the trustee will act as paying agent and registrar for the
exchange notes. Exchange notes may be presented for registration of transfer and
exchange at the offices of the registrar.
Depository Procedures
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes by them from time to
time. We take no responsibility for these operations and procedures and urge
investors to contact DTC or its participants directly to discuss these matters.
DTC has informed us that it is a limited-purpose trust company created to
hold securities for its participant organizations and to facilitate the
clearance and settlement of transactions in those securities between those
participants through electronic book-entry changes in accounts of the
participants. The participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to indirect participants such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons other
than participants or indirect participants may beneficially own securities held
by or on behalf of DTC only through its participants or the indirect
participants.
We expect that, pursuant to procedures established by DTC,
o (1) upon deposit of the global notes, DTC will credit the accounts of
participants with portions of the principal amount of the global note
and
o (2) ownership of such interests in the global note will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the participants) or by the
participants and the indirect participants (with respect to other
owners of beneficial interests in the global note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the global note to such persons will be limited
to that extent.
So long as the global note holder is the registered holder of any exchange
notes, the global note holder will be considered the sole owner of such exchange
notes. Except as described below, owners of beneficial interests in the global
note will not have exchange notes registered in their names, will not receive
physical delivery of exchange notes in certificated form and will not be
considered the registered owners or "holders" thereof under the indenture for
any purpose. As a result, the ability of a person having a beneficial interest
in the global note to pledge such interest to persons or entities that do not
participate in the DTC system or otherwise take actions in respect of such
interests may be affected by the lack of a physical certificate evidencing such
interest.
Payments in respect of the principal of, premium, if any, and interest and
liquidated damages, if any, on the global note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, we and the trustee will
treat the persons in whose names the exchange notes, including the global note,
are registered as the owners thereof for the purpose of receiving such payments
and for any
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and all other purposes whatsoever. Consequently, none of us, our subsidiary
guarantors, the trustee or any agent of any of the foregoing has or will have
any responsibility or liability for:
(1) any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of beneficial
ownership interest in the global note, or for maintaining, supervising or
reviewing any of DTC's records or any participant's or indirect
participant's records relating to the beneficial ownership interests in the
global note or
(2) any other matter relating to the actions and practices of DTC or
any of its participants or indirect participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities, such as the exchange notes (including principal and
interest), is to credit the accounts of the relevant participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in the principal amount of beneficial interest in the relevant security
as shown on the records of DTC, unless DTC has reason to believe it will not
receive payment on such payment date. Payments by participants and indirect
participants to the beneficial owners of exchange notes will be governed by
standing instructions and customary practices and will be the responsibility of
the participants or the indirect participants and will not be the responsibility
of DTC, the trustee or us. None of us, our subsidiary guarantors, the trustee or
any agent of any of the foregoing will be liable for any delay by DTC or any of
its participants in identifying the beneficial owners of the exchange notes, and
we and the trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the global note will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between participants in DTC will be effected in
accordance with DTC's procedures and will be settled in immediately available
funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of exchange notes only at the direction of one or more participants to
whose account DTC has credited the interests in the global note and only in
respect of such portion of the aggregate principal amount of the exchange notes
as to which such participant or participants has or have given such direction.
However, if there is an event of default under the exchange notes, DTC reserves
the right to exchange the global note for legended exchange notes in
certificated form, and to distribute such exchange notes to its participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the global note among participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of us, our subsidiary
guarantors, the trustee nor any of their respective agents will have any
responsibility for the performance by DTC, its participants or indirect
participants of their obligations under the rules and procedures governing any
of their operations.
We have been informed by DTC that its management is aware that some
computer applications, systems and the like for processing data ("Systems") that
are dependent upon calendar dates, including dates before, on, and after January
1, 2000, may encounter "Year 2000 problems."
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We have also been informed by DTC that it has informed its participants and
other members of the financial community (the "Industry") that it has developed
and is implementing a program so that its Systems, as the same relate to the
timely payments of distributions (including principal and income payments) to
securityholders, book-entry deliveries and settlement of trades within DTC,
continue to function appropriately. According to DTC, this program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC has informed us that its plan includes a testing phase, which
is expected to be completed within appropriate time frames.
However, we have been informed by DTC that its ability to properly perform
its services is also dependent upon other parties, including, but not limited
to, issuers and their agents, as well as third party vendors from whom DTC
licenses software and hardware, and third-party vendors on whom DTC relies for
information or the provision of services, including telecommunications and
electrical utility service providers, among others. DTC has informed us that it
is contacting (and will continue to contact) third-party vendors from whom DTC
acquires services to:
o (1) impress upon them the importance of such services being Year 2000
compliant; and
o (2) determine the extent of their efforts for Year 2000 remediation
(and, as appropriate, testing) of their services.
In addition, DTC has informed us that it is in the process of developing such
contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
Transfers of Interests in the Global Note for Certificated Exchange Notes
The global note is exchangeable for definitive exchange notes in registered
certificated form if:
(1) DTC
(x) notifies us that it is unwilling or unable to continue as
depositary for the global note and we thereupon fail to appoint a
successor depositary within 120 days thereafter, or
(y) has ceased to be a clearing agency registered under the
Securities Exchange Act of 1934,
(2) we, at our option, notify the trustee in writing that we elect to
cause the issuance of the certificated exchange notes or
(3) a default or event of default with respect to the exchange notes
shall have occurred and be continuing.
In addition, beneficial interests in the global note may be exchanged for
certificated exchange notes upon request, but only upon prior written notice
given to the trustee by or on behalf of DTC in accordance with the indenture. In
all cases, certificated exchange notes delivered in
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exchange for the global note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the Depositary (in accordance with its customary procedures).
Same-Day Settlement and Payment
The indenture requires that payments in respect of the exchange notes
represented by the global note (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the global note holder. With respect to certificated
exchange notes, we will make all payments of principal, premium, if any, and
interest, by wire transfer of immediately available funds to the accounts
specified by the holders thereof or, if no such account is specified, by mailing
a check to each such holder's registered address. Exchange notes represented by
the global note are expected to be eligible to trade in the PORTAL market and to
trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such exchange notes will, therefore, be
required by the Depositary to be settled in immediately available funds. We
expect that secondary trading in any Certificated Notes will also be settled in
immediately available funds.
Certain Definitions
Set forth below are some of the defined terms used in the Indenture.
Reference is made to the indenture for a full disclosure of all such terms, as
well as any other capitalized or uncapitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person:
(1) Indebtedness of any other person existing at the time such other
person is merged with or into, or became a subsidiary of, such specified
person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other person merging with or into, or
becoming a subsidiary of, such specified person, and
(2) Indebtedness secured by a lien encumbering any asset acquired by
such specified person.
"Affiliate" of any specified person, means any other person, directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person will be
deemed to be control. Notwithstanding the foregoing, no Person (other than us or
any subsidiary of ours) in which a Receivables Subsidiary makes an Investment in
connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of ours or any of our subsidiaries solely by reason of such
Investment.
"After-Acquired Property" means any and all assets or property acquired
after the issue date of the old notes including any assets or property acquired
by us or any subsidiary guarantor from a transfer from us or a wholly owned
subsidiary of ours that is a subsidiary guarantor.
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"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any non-cash
assets (including, without limitation, by way of a sale and leaseback and
including the issuance, sale or other transfer of any of the capital stock
of any subsidiary of such person) other than to us or to any of our wholly
owned subsidiaries that is a subsidiary guarantor and other than directors'
qualifying shares, in each case in excess of $250,000;
(2) the issuance of Equity Interests in any subsidiaries or the sale
of any Equity Interests in any subsidiaries, in each case, in one or a
series of related transactions (x) that have a fair market value in excess
of $250,000 or (y) with respect to which we shall have received net
proceeds in excess of $250,000; and
(3) the damage or destruction of all or any portion of the collateral
or the taking of all or any portion of the collateral by eminent domain;
provided, that notwithstanding the foregoing, the term "Asset Sale" will not
include:
(a) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of our assets or the assets of any of our
subsidiaries, as permitted pursuant to the covenant entitled "Merger,
Consolidation or Sale of Assets;"
(b) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business consistent with past
practice and to the extent that such sales or leases are not part of a sale
of the business in which such equipment was used or in which such inventory
or accounts receivable arose;
(c) a transfer of assets by us to a wholly owned subsidiary of ours
that is a subsidiary guarantor or by a wholly owned subsidiary of ours to
us or to another of our wholly owned subsidiaries that is a subsidiary
guarantor;
(d) an issuance of Equity Interests by a wholly owned subsidiary of
ours to us or to another of our wholly owned subsidiaries that is a
subsidiary guarantor;
(e) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind;
(f) the grant in the ordinary course of business of any non-exclusive
license of patents, trademarks, registrations therefor and other similar
intellectual property;
(g) sales or transfers of accounts receivable and related assets
pursuant to a Qualified Receivables Transaction to a Receivables Subsidiary
for the fair market value thereof, including cash in an amount at least
equal to 75% of the book value thereof as determined in accordance with
GAAP; provided that such sales shall not exceed the lesser of $25.0 million
or the outstanding balance under the Revolving Credit Facility; provided
further that the entire proceeds of any such sale are used to repay
outstanding indebtedness under the Revolving Credit Facility and
permanently reduce commitments thereunder;
(h) Permitted Investments; or
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(i) a Restricted Payment that is permitted by the covenant entitled
"Restricted Payments."
For the purposes of clause (g), notes received in exchange for the transfer of
accounts receivable and related assets will be deemed cash if the Receivables
Subsidiary or other payor is required to repay said notes as soon as practicable
from available cash collections less amounts required to be established as
reserves pursuant to contractual agreements with entities that are not
Affiliates of us entered into as part of a Qualified Receivables Transaction.
"Boise Agreement" means that certain agreement dated November 23, 1992,
among Boise Cascade Corporation, American Tissue Mills of Oregon, Inc. and
American Tissue Corporation, as amended on January 1, 1999 and as same may be
further amended, modified, extended, renewed, amended and restated or
supplemented from time to time.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association, limited liability company or other
business entity, any and all shares, membership interests or other
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership, partnership interests (whether
general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) securities issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities not more than 12 months from the date of
acquisition;
(2) U.S. dollar denominated (or foreign currency fully hedged) (a)
time deposits, money-market deposits or accounts, certificates of deposit,
Eurodollar time deposits or Eurodollar certificates of deposit and bankers'
acceptance of (i) any domestic commercial bank of recognized standing
having capital and surplus in excess of $500.0 million or (ii) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than 12 months from the date of acquisition, and (b)
overnight bank deposits and federal funds transactions with a bank meeting
the qualifications specified in clauses (a)(i) or (a)(ii) above;
(3) commercial paper and variable or fixed rate notes issued by any
Approved Lender (or by the parent company thereof) or any variable rate
notes issued by, or guaranteed by,
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any domestic corporation rated A-2 (or the equivalent thereof) or better by
S&P or P-2 (or the equivalent thereof) or better by Moody's and maturing
within 12 months of the date of acquisition;
(4) repurchase agreements with a term of not more than 60 days with a
bank or trust company or recognized securities dealer having capital and
surplus in excess of $500.0 million for underlying securities of the types
described in subparagraphs (1), (2), or (3) above, in which the Company
will have a perfected first priority security interest (subject to no other
Liens) and having, on the date of purchase thereof, a fair market value of
at least 100% of the amount of repurchase obligations;
(5) investments in securities with maturities of 12 months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof; and
(6) interests in money market mutual funds which invest solely in
assets or securities of the types described in subparagraphs (1) through
(5) hereof, inclusive.
"Change of Control" means such time as:
(1) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, a "Group"), other than any of the Permitted Holders, has become,
directly or indirectly, the "beneficial owner," of 35% or more of the
voting power of our voting Capital Stock and the Permitted Holders
beneficially own, directly or indirectly, a lesser percentage of the voting
power of our voting Capital Stock than the percentage beneficially owned by
such person or Group; or
(2) the sale, lease or transfer of all or substantially all of the
assets of American Tissue and our subsidiaries to any person or Group
(other than a subsidiary guarantor of ours or any of the Permitted
Holders); or
(3) during any period of two consecutive calendar years, individuals
who at the beginning of such period constituted our board of directors
(together with any new directors whose election by our board of directors
or whose nomination for election by our stockholders was approved by a vote
of a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason (other than
as a result of death) to constitute a majority of our directors, as the
case may be, then in office.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral Account" means the collateral account established pursuant to
the indenture relating to the exchange notes.
"Collateral" means collectively, all of the property and assets (including,
without limitation, Primary Collateral, Boise Collateral and Secondary
Collateral) that are from time to time subject to the lien of the collateral
documents, including the liens, if any, required to be granted pursuant to the
Indenture.
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"Consolidated EBITDA" means, with respect to us and our subsidiaries for
any period, the sum of, without duplication:
(1) the Consolidated Net Income for such period; plus
(2) the Fixed Charges for such period; plus
(3) provision for consolidated taxes based on income or profits for
such period (to the extent such income or profits were included in
computing Consolidated Net Income for such period); plus
(4) consolidated depreciation, amortization and other non-cash charges
of ours and our subsidiaries required to be reflected as expenses on our
books and records, minus
(5) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (4); and
(6) excluding the impact of foreign currency translations.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a subsidiary of a person will be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in the same proportion) that the Net
Income of such subsidiary was included in calculating the Consolidated Net
Income of such person and only if a corresponding amount would be permitted at
the date of determination to be dividended or distributed, directly or
indirectly, to us by such subsidiary without prior approval pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that:
(1) the Net Income (but not loss) of any person that is not a
subsidiary or that is accounted for by the equity method of accounting will
be included only to the extent of the amount of dividends or distributions
paid in cash to the referent person or a wholly owned subsidiary thereof
that is a subsidiary guarantor;
(2) the Net Income of any subsidiary will be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that subsidiary or its stockholders;
(3) the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded;
(4) the cumulative effect of a change in accounting principles will be
excluded; and
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(5) all other extraordinary gains and extraordinary losses will be
excluded.
"Consolidated Net Worth" means, with respect to any person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such person
and its consolidated subsidiaries as of such date, plus
(2) the respective amounts reported on such person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock, less (x) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of tangible assets of a
going concern business made within 12 months after the acquisition of such
business) subsequent to the issue date of the old notes in the book value
of any asset owned by such Person or a consolidated subsidiary of such
Person, (y) all investments as of such date in unconsolidated subsidiaries
of such Person and in other Persons that are not subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount
and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Depositary" means, with respect to the exchange notes issuable or issued
in whole or in part in global form, the person specified in the indenture for
the exchange notes as the Depositary with respect to the Notes, until a
successor will have been appointed and become such Depositary pursuant to the
applicable provision of the indenture, and, thereafter, "Depositary" will mean
or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to 91 days
after the final maturity date of the exchange notes. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require us to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock if the terms of such Capital Stock are
not more favorable to the holders of such Capital Stock than the covenants
entitled "- Change of Control" and "- Asset Sales;" provided that we may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with the covenant entitled "Restricted
Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten public offering pursuant to a
registration statement filed with the SEC in accordance with the Securities Act
of
(1) our Equity Interests (other than Disqualified Stock) or
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(2) Equity Interests (other than Disqualified Stock) of our parent or
indirect parent corporation to the extent that the cash proceeds therefrom
are contributed to our equity capital or are used to purchase our Equity
Interests (other than Disqualified Stock).
"Existing Indebtedness" means the Indebtedness of ours and our subsidiaries
in existence on the issue date of the old notes, until such amounts are repaid.
"Existing Mortgage Collateral" means (1) the property owned or leased by
(i) Coram Realty LLC located at 466-468 Coram-Yaphank Road, Coram, NY, (ii)
Gilpin Realty Corporation located at 45 Gilpin Avenue, Hauppauge, NY, (iii)
Grand LLC located at Route 4 and Bells Lane, Waterford, NY, (iv) Engineers Road
LLC located at 135 Engineers Road, Hauppauge, NY and (v) Saratoga Realty LLC
located at 3 Duplainville Road, Saratoga Springs, NY, (2) the equipment located
at such property described in clause (1) which is encumbered by the Existing
Mortgage Loans, (3) certain documents and intangibles relating to the foregoing
and (4) any and all proceeds relating to the foregoing.
"Existing Mortgage Loans" means the documents or instruments, including any
related notes, guarantees, collateral documents and agreements executed in
connection therewith, and in each case as amended, modified, renewed, extended,
replaced, restated or refinanced from time to time which creates
(1) an obligation of ours or a subsidiary guarantor of ours and
(2) a security interest in any Existing Mortgage Collateral, in each
case, in favor of a lender under the Existing Mortgage Loans.
"Fixed Charges" means, with respect to any person for any period, the sum,
without duplication, of:
(1) the consolidated interest incurred by such person and its
subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations);
(2) the consolidated interest incurred by such person and our
subsidiaries that was capitalized during such period;
(3) any interest expense on Indebtedness of another person that is
guaranteed by such person or one of our subsidiaries or secured by a lien
on assets of such person or one of our subsidiaries (whether or not such
guarantee or lien is called upon); and
(4) the product of (a) all cash dividend payments (and non-cash
dividend payments in the case of a person that is a subsidiary) on any
series of preferred stock of such person payable to a party other than to
us or a wholly owned subsidiary of ours, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the
then current combined federal, state and local statutory tax rate of such
person, expressed as a decimal, on a consolidated basis and in accordance
with GAAP.
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"Fixed Charge Coverage Ratio" means with respect to any person for any
period, the ratio of the Consolidated EBITDA of such person and our subsidiaries
for such period to the Fixed Charges of such person and our subsidiaries for
such period. In the event that we or any of our subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness or issues preferred stock subsequent to
the commencement of the four-quarter reference period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated,
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above:
(1) acquisitions that have been made by us or any of our subsidiaries,
including through mergers or consolidations and including any related
financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
will be deemed to have occurred on the first day of the four-quarter
reference period;
(2) the Consolidated EBITDA attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the referent person or any of its subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the issue date of the old notes.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Hedging Obligations" means, with respect to any person, the obligations of
such person under (1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (2) other agreements or
arrangements, in each case designed to protect such person against fluctuations
in interest rates, currency rates or the prices of commodities actually at that
time used in the ordinary course of business of such person.
"Holdco" means Middle American Tissue Inc., a Delaware corporation, and the
direct parent of the Company.
"Holdco Notes" means the senior secured discount notes in an aggregate
principal amount of $20.0 million issued on the issue date of the old notes to
DLJ Merchant Banking Partners II, L.P. and certain of its affiliates.
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"Indebtedness" means, with respect to any person, any indebtedness of such
person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property (except any such balance that constitutes an
accrued expense or trade payable) or representing any Hedging Obligations if and
to the extent any of the foregoing indebtedness (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
such person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a lien on any asset of such person (whether or not such
indebtedness is assumed by such person) and, to the extent not otherwise
included, the guarantee by such person of any indebtedness of any other person.
"Independent Appraiser" means a person who in the course of its business
appraises property and (1) where real property is involved, who is a member in
good standing of the American Institute of Real Estate Appraisers, recognized
and licensed to do business in the jurisdiction where the applicable real
property is situated, (2) who does not have a direct or indirect financial
interest in the Company and (3) who, in the judgment of our board of directors,
is otherwise independent and qualified to perform the tasks for which it is
engaged.
"Intellectual Property Collateral" means all intellectual property owned by
us or any of our subsidiary guarantors, including, without limitations, all
trademarks, services marks, patents, copyrights, trade secrets and other
proprietary information.
"Intercreditor Agreements" means the Existing Lien Intercreditor Agreement
and the Boise Intercreditor Agreement.
"Investments" means, with respect to any person, all investments by such
person in other persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business) or capital contributions, purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Moody's" means Moody's Investor Services.
"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any
Asset Sale (including, without limitation, dispositions pursuant to sale
and leaseback transactions) or (b) the disposition of any securities by
such person or any of our subsidiaries or the extinguishment of any
Indebtedness of such person or any of our subsidiaries; and
(2) any extraordinary or non-recurring gain (but not loss), together
with any related provision for taxes on such extraordinary or non-recurring
gain (but not loss).
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"Net Insurance Proceeds" means collectively (1) all insurance proceeds
(excluding liability insurance proceeds payable to the trustee for the exchange
notes for any loss, liability or expense incurred by it) actually received by
the trustee or us or any of our subsidiaries as a result of damage to, or the
loss or destruction of, all or any portion of the collateral, less collection
costs, including fees and expenses of attorneys and insurance adjusters paid or
incurred by us or any of our subsidiaries and (2) all proceeds, awards or
payments for any collateral which is taken by eminent domain, expropriation or
similar governmental actions or sold pursuant to the exercise by the United
States of America or any state, municipality, province or other governmental
authority of any right which it may have to purchase, or to designate a
purchaser or to order a sale of, all or any part of the collateral, in each case
less collection costs, including fees and expenses of attorneys paid or incurred
by us or any of our subsidiaries.
"Net Proceeds" means the aggregate cash proceeds received by us or any of
our subsidiaries in respect of any Asset Sale (including, without limitation,
any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees and expenses, and sales and brokerage commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable by us or
any of our subsidiaries as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be applied to the repayment of Indebtedness (other than the exchange
notes or the subsidiary guarantees thereof) secured by a lien on the asset or
assets that were the subject of such Asset Sale and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither we nor any of our subsidiaries (a) provides
credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or
indirectly liable (as a guarantor or otherwise), or (c) constitutes the
lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of ours or any of our subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of ours or of any of our
subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Parent" means Super American Tissue Inc., a Delaware corporation, our
indirect parent and the direct parent of Holdco.
"Permitted Collateral Liens" means the liens expressly permitted by the
applicable Collateral Documents.
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"Permitted Holders" means (x) Nourollah Elghanayan, Mehdi Gabayzadeh and
their respective spouses, lineal descendants and adopted children and spouses of
their respective lineal descendants and adopted children, siblings and lineal
descendants of such siblings and spouses of such persons, any foundation
controlled by any of the foregoing persons, any trusts for the benefit of any of
the foregoing persons, (y) DLJ Merchant Banking Partners II, L.P. and (z) any
Affiliates of the foregoing persons.
"Permitted Investments" means:
(1) any Investments in us or in a wholly owned subsidiary of ours that
is a subsidiary guarantor and that is engaged in the same or a similar,
complementary, ancillary or related line of business as us and our
subsidiaries were engaged in on the issue date of the old notes and
reasonable extensions or expansions thereof;
(2) any Investment by us or a wholly owned subsidiary of ours in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other person in connection with a Qualified Receivables Transaction;
provided, that the foregoing Investment is in the form of a note that the
Receivables Subsidiary or other person is required to repay as soon as
practicable from available cash collections less amounts required to be
established as reserves pursuant to contractual agreements with entities
that are not our Affiliates entered into as part of a Qualified Receivables
Transaction;
(3) any Investments in cash and Cash Equivalents;
(4) Investments by us or any of our subsidiaries in a person if as a
result of such Investment (a) such person becomes a wholly owned subsidiary
of ours that is engaged in the same or a similar line of business as we and
our subsidiaries were engaged in on the issue date of the old notes and
reasonable extensions or expansions thereof or (b) such person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, us or a wholly
owned subsidiary of ours that is a subsidiary guarantor and that is engaged
in the same or a similar, complementary, ancillary or related line of
business as we and our subsidiaries were engaged in on the issue date of
the old notes and reasonable extensions or expansions thereof;
(5) Investments made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant entitled "Asset Sales;"
(6) Investments outstanding as of the issue date of the old notes;
(7) Investments which constitute Existing Indebtedness of ours or of
any of our subsidiaries;
(8) any payments made in connection with the acquisition of the
Berlin- Gorham Mills pursuant to the related asset purchase agreement;
(9) Investments, the payment for which consists exclusively of our
Equity Interests (other than Disqualified Stock);
(10) loans or advances to officers and employees of ours or any of our
subsidiaries in an aggregate amount not exceeding $1.5 million at any one
time outstanding;
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(11) Investments in the form of intercompany Indebtedness to the
extent permitted under the covenant entitled "Incurrence of Indebtedness
and Issuance of Preferred Stock;"
(12) Hedging Obligations;
(13) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, suppliers and customers, in each
case arising in the ordinary course of business; and
(14) other Investments in any person (other than an Affiliate of ours
or an Affiliate of any of our subsidiaries) that do not exceed $10.0
million at any time outstanding.
"Permitted Liens" means:
(1) liens securing obligations under the indenture, the exchange
notes, the subsidiary guarantees thereof and the Collateral Documents;
(2) liens securing the obligations under the Boise Agreement, the
Existing Mortgage Loans and the Revolving Credit Facility in an aggregate
principal amount at any time outstanding not to exceed applicable amounts
permitted under the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;"
(3) liens in favor of us or any subsidiary guarantor of ours;
(4) liens on property of a person existing at the time such person is
merged into or consolidated with us or any of our subsidiaries in
accordance with the provisions of the indenture; provided that such liens
were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the
person merged into or consolidated with us;
(5) liens on property existing at the time of acquisition thereof by
us or any of our subsidiaries; provided that such liens were in existence
prior to the contemplation of such acquisition;
(6) liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(7) liens existing on the issue date of the old notes;
(8) liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted;
provided that any reserve or other appropriate provision as will be
required in conformity with GAAP will have been made therefor;
(9) liens imposed by law or arising by operation of law, including
carriers', warehousemen's, mechanics', materialmen's, vendors',
repairmen's, or other similar liens arising or incurred in the ordinary
course of business;
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(10) liens of landlords or of mortgagees of landlords arising by
operation of law; provided that the rental payments secured thereby are not
yet due and payable;
(11) liens incurred in the ordinary course of our business or the
business of any of our subsidiaries with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by us or such subsidiary;
(12) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security or public utility obligations;
(13) Purchase Money Liens (including extensions and renewals thereof);
(14) liens securing reimbursement obligations with respect to letters
of credit which encumber only documents and other property relating to such
letters of credit and the products and proceeds thereof;
(15) judgment and attachment liens not giving rise to an event of
default under the indenture;
(16) liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements;
(17) liens arising out of consignment or similar arrangements for the
sale of goods;
(18) any interest or title of a lessor in property subject to any
Capital Lease Obligation or operating lease;
(19) liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(20) liens securing Acquired Indebtedness (and any Permitted
Refinancing Indebtedness which refinances such Acquired Indebtedness)
incurred in accordance with the covenant described under "- Certain
Covenants - Incurrence of Indebtedness and Issuance of Preferred Stock;"
provided that (a) such liens secured the Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by us or any
of our subsidiaries and were not granted in connection with, or in
anticipation of the incurrence of such Acquired Indebtedness by us or such
subsidiary and (b) such liens do not extend to or cover any property or
assets of ours or of any of our subsidiaries, other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of ours or of such subsidiary;
(21) liens on assets of a Receivables Subsidiary incurred in
connection with a Qualified Receivables Transaction;
(22) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property and defects,
irregularities and deficiencies in title to real property that
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do not, individually or in the aggregate, materially affect our ability or
the ability of any of our subsidiaries to conduct its business and are
incurred in the ordinary course of business;
(23) liens securing our obligations under Hedging Obligations
permitted to be incurred under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" or any collateral for the
Indebtedness to which such Hedging Obligations relate;
(24) liens upon specific items of inventory or other goods and
proceeds of any person securing such person's obligations in respect of
bankers' acceptance issued or credited for the account of such person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(25) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of American Tissue and our
subsidiaries;
(26) liens encumbering property or other assets under construction
arising from progress or partial payments by a customer or us or any of our
subsidiaries relating to such property or other assets;
(27) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(28) liens securing other Indebtedness not exceeding $10.0 million at
any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of ours or any
of our subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund, Indebtedness of
ours or any of our subsidiaries incurred pursuant to the Fixed Charge Coverage
Ratio test in the first paragraph of, or pursuant to clause (2) or (3) of the
second paragraph of, the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;" provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the exchange
notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of
payment to, the exchange notes on terms at least as favorable to the
Holders of the exchange notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
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(4) such Indebtedness is incurred either by us or by any subsidiary of
our that is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Permitted Tax Payments" means, for so long as we remain a "qualified
Subchapter S subsidiary" (as defined in Section 1361(b)(3)(B) of the Code),
distributions to Holdco to reimburse the shareholders of Holdco:
(1) for tax liabilities, in an amount (not to exceed $2.0 million)
equal to the product of (i) the previously unpaid interest on the Related
Party Debt that will become taxable to the current holder of such debt on
the issue date of the old notes as a result of the assumption of or
transfer of such debt by or to Parent on the issue date of the old notes,
(ii) the percentage of Parent's stock not owned on the issue date of the
old notes by the current holder of the Related Party Debt, his spouse or a
grantor trust of which either of them is grantor (a "Related Trust") and
(iii) the maximum combined individual federal, state and local income tax
rates in effect on the issue date of the old notes;
(2) for tax liabilities in respect of each of our taxable years (or
portion of a taxable year) beginning on or after the issue date of the old
notes, in an amount equal to (i) (A) the amount of original issue discount
on the Related Party Debt accrued during such year minus (B) the product of
(I) the percentage of Parent's stock owned during such time by the current
holder of the Related Party Debt, his spouse or a Related Trust and (II)
the amount of original issue discount specified in clause (A), plus the
amount of original issue discount incurred with respect to the Holdco Notes
for such year (the "Annual Intermediate OID"), plus our taxable loss, if
any for such year, minus our taxable income (to the extent such income does
not exceed the sum of the amount of original issue discount described in
clause (A) and the Annual Intermediate OID for such year), if any, for such
year, multiplied by (ii) the maximum combined individual federal, state,
and local income tax rate for such year; and
(3) for tax liabilities, in an amount equal to the product of (i) (A)
the excess, if any, of
(I) our cumulative net taxable income since April 1, 1999 over
(II) the cumulative interest expense incurred by Holdco with
respect to the Holdco Notes, plus the cumulative interest expense
incurred by Parent with respect to the Related Party Debt since April
1, 1999 and a percentage of any such unpaid interest expense incurred
prior to April 1, 1999 equal to the percentage of Parent's stock not
owned on the issue date of the old notes by the current holder of the
Related Party Debt, his spouse or a Related Trust, increased by (B)
the cumulative amounts included in clause (2) (i) (B) that have
actually reduced a distribution under clause (2) and
(ii) the maximum combined individual federal, state and local
income tax rates in effect from time to time (excluding any state or
locality that treats us, Holdco or Parent as a C corporation), minus
(iii) all prior distributions made under this clause (3) and any
tax payments in respect of any taxable period (or portion thereof)
beginning on or after April 1, 1999 that were made prior to the issue
date of the old notes by us or our Parent to or on behalf of any of
their shareholders.
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If we become taxable as a "C" corporation (as defined in Section 1361(a)(2)
of the Code) and becomes a member (for income tax purposes) of an affiliated,
consolidated, combined or unitary group of which Parent is the common parent (a
"Group Member"), "Permitted Tax Payments" shall mean distributions to Parent for
income tax liabilities imposed on us as a Group Member, in an amount equal to
(a) our cumulative net taxable income from the date on which we
becomes a C corporation and a Group Member, multiplied by the maximum
marginal federal, state and/or local corporate income tax rates in effect
from time to time (excluding any jurisdiction that does not treat us as a
Group Member), minus
(b) all prior distributions made pursuant to this sentence and any
such taxes paid directly by us.
Any combined federal, state and/or local tax rate referred to in this
definition shall be determined taking into account the deductibility of state
and local income taxes for federal income tax purposes.
Notwithstanding the foregoing, no Permitted Tax Payment shall be permitted
if
(x) a default or event of default under the indenture exists or would
result therefrom or
(y) the obligations with respect to any such Permitted Tax Payments are
not subordinated in right of payment to our obligations under the
exchange notes.
"Purchase Money Lien" means a lien granted on an asset or property to
secure a Purchase Money Obligation permitted to be incurred under the Indenture
and incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or property; provided, however, that such lien
encumbers only such asset or property and is granted within 90 days of such
acquisition.
"Purchase Money Obligations" of any person means any obligations of such
person to any seller or any other person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such person or any of our subsidiaries in
an amount that is not more than 100% of the cost, or fair market value, as
appropriate, of such property, and incurred within 90 days after the date of
such acquisition (excluding accounts payable to trade creditors incurred in the
ordinary course of business).
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by us or any of our subsidiaries pursuant
to which we or any of our subsidiaries may sell, convey or otherwise transfer to
(i) a Receivables Subsidiary (in the case of a transfer by us or any of our
subsidiaries) and (ii) any other person (in the case of a transfer by a
Receivables Subsidiary), or may grant a security interest in, any accounts
receivable (whether now existing or arising in the future) of ours or any of our
subsidiaries, and any assets related thereto including, without limitation, all
collateral securing such accounts receivable, all contracts and all guarantees
or other obligations in respect of such accounts receivable, proceeds of such
accounts receivable and other assets which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable.
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"Receivables Subsidiary" means a wholly owned subsidiary of ours which
engages in no activities other than in connection with the financing of accounts
receivable and which is designated by our board of directors (as provided below)
as a Receivables Subsidiary (1) no portion of the Indebtedness or any other
Obligations (contingent or otherwise) of which (a) is guaranteed by us or any of
our subsidiaries (excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness) pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction), (b) is recourse to or
obligates us or any of our subsidiaries in any way other than pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction or (c) subjects any property or asset of ours or any of our
subsidiaries, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction, (2) with which neither we
nor any of our subsidiaries has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to us or such subsidiary
than those that might be obtained at the time from persons who are not our
Affiliates, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable and (3) with which neither we nor
any of our subsidiaries has any obligation to maintain or preserve such
subsidiary's financial condition or cause such subsidiary to achieve certain
levels of operating results. Any such designation by our board of directors will
be evidenced to the trustee by filing with the trustee a certified copy of the
resolution of our board of directors giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing conditions.
"Related Party Debt" means our debt that is assumed by or otherwise
transferred to our direct parent on the issue date of the old notes in an
aggregate amount not in excess of $33.0 million and accruing interest at not
more than 10% per annum.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means the credit agreement among us, certain of
our subsidiary guarantors, certain lenders and LaSalle Bank National
Association, as lender and agent for the other lenders, providing for working
capital and other financing, as the same may be amended, amended and restated,
supplemented or otherwise modified, including any refinancing, refunding,
replacement or extension thereof by the same or any other lender or group of
lenders.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X, promulgated pursuant to
the Act, as such Regulation is in effect on the date hereof.
"S&P" means Standard & Poor's Financial Information Services.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa- 77bbbb) as in effect on the date on which the Indenture is
qualified under the TIA.
"Trust Monies" means, subject to the Intercreditor Agreements, all cash and
Cash Equivalents received by the Trustee:
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(1) upon the release of collateral from the Lien of the Indenture or
the collateral documents, including all Available Amounts and all moneys
received in respect of the principal of all purchase money, governmental
and other obligations;
(2) as Net Insurance Proceeds;
(3) pursuant to the collateral documents;
(4) as proceeds of any sale or other disposition of all or any part of
the collateral by or on behalf of the trustee or any collection, recovery,
receipt, appropriation or other realization of or from all or any part of
the collateral pursuant to the indenture or any of the collateral documents
or otherwise; or
(5) for application as provided in the relevant provisions of the
indenture or any collateral document for which disposition is not otherwise
specifically provided for in the indenture or in any collateral document;
provided, however, that Trust Monies shall in no event include any property
deposited with the Trustee for any redemption, legal defeasance or covenant
defeasance of exchange notes, for the satisfaction and discharge of the
indenture or to pay the purchase price of exchange notes pursuant to a Change of
Control Offer or Asset Sale Offer.
"Unrestricted Subsidiary" means any of our subsidiaries that is designated
by our board of directors as an Unrestricted Subsidiary pursuant to a board
resolution; but only to the extent that such subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with us or any of our other subsidiaries unless the terms of
any such agreement, contract, arrangement or understanding are no less
favorable to us or such subsidiary than those that might be obtained at the
time from persons who are not our Affiliates;
(3) is a person with respect to which neither we nor any of our
subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such person's
financial condition or to cause such person to achieve any specified levels
of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of ours or any of our subsidiaries.
Any such designation by our board of directors will be evidenced to the trustee
by filing with the trustee a certified copy of the board resolution giving
effect to such designation and an officers' certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant entitled "Restricted Payments" hereof. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such subsidiary
will be deemed to be incurred by a subsidiary of ours as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant entitled "-Incurrence of Indebtedness and Issuance of Preferred Stock"
hereof, we will be in default of such
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covenant). Our board of directors may at any time designate any Unrestricted
Subsidiary to be a subsidiary; provided that such designation will be deemed to
be an incurrence of Indebtedness by a subsidiary of ours of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if (a) such Indebtedness is permitted under the covenant entitled "-
Incurrence of Indebtedness and Issuance of Preferred Stock," and (b) no default
or event of default under the indenture would be in existence following such
designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by
(2) the then outstanding principal amount of such Indebtedness.
CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS
General
The following is a summary of the material U.S. federal income tax
considerations relevant to U.S. Holders, as defined below, of the acquisition,
ownership and disposition of the exchange notes acquired in and under the terms
of our exchange offer by holders of old notes that acquired their old notes on
original issuance and for the original offering price, but does not purport to
be complete. It applies only if you are a holder that acquires exchange notes
under our exchange offer. The discussion is based on current provisions of the
Internal Revenue Code of 1986, applicable U.S. Treasury regulations, judicial
authority and administrative rulings and pronouncements of the Internal Revenue
Service, all as in effect as of the date of this prospectus. We cannot assure
that the IRS will not take a contrary view, and we have not sought, and will not
seek, a ruling from the IRS. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the following
statements and conclusions. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders of the exchange
notes.
We assume in our discussion below that the exchange notes are held as
capital assets. This discussion is for general information only, and does not
address all of the tax consequences that may be relevant to particular holders
of the exchange notes in light of their specific circumstances. Moreover, this
discussion does not address U.S. federal tax laws applicable to holders that may
be subject to special tax rules, including, without limitation:
o banks and other financial institutions;
o real estate investment trusts;
o regulated investment companies;
o insurance companies;
o tax-exempt organizations;
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o custodians, nominees or similar intermediaries holding the exchange
notes for others;
o persons who own exchange notes through partnerships, S corporations or
other pass through entities;
o dealers in securities;
o persons that hold a exchange note as part of a "straddle," or as part
of a "hedging," "conversion" or "integrated" transaction for U.S.
federal income tax purposes;
o persons whose functional currency is not the U.S. dollar;
o persons subject to the alternative minimum tax;
o Non-U.S. Holders (as defined below) that are entitled to claim the
benefits of tax treaties to which the United States is a party; or
o Non-U.S. Holders that are engaged in a U.S. trade or business.
Finally, this discussion does not consider the effect of the tax laws of any
foreign, state, local or other tax laws or estate or gift tax considerations
that may be applicable to a particular holder.
When we use the term "U.S. Holder," we mean an initial beneficial owner of
exchange notes who, for U.S. federal income tax purposes:
o is an individual who is a citizen or resident of the United States (as
determined under U.S. federal income tax laws);
o is a corporation organized or formed in or under the laws of the
United States or any political subdivision thereof;
o is an estate whose income is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
o is a trust if (1) a U.S. court is able to exercise primary supervision
over the administration of the trust and (2) one or more U.S. trustees
or fiduciaries have the authority to control all substantial decisions
of the trust.
WE ADVISE YOU TO CONSULT WITH YOUR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP AND SALE OF THE EXCHANGE
NOTES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.
Interest and Original Issue Discount
Each old note was issued with original issue discount ("OID"), and,
accordingly, each exchange note will also have OID. You are required to include
in income, in each year (regardless of whether you are a cash or accrual basis
taxpayer), in advance of the receipt of cash payments on
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such exchange notes, that portion of the OID, computed on a constant
yield-to-maturity basis, attributable to each day during such year on which you
held the exchange notes.
The amount of OID with respect to each exchange note is equal to the excess
of (1) its "stated redemption price at maturity" over (2) its "issue price."
Under OID Regulations, the "issue price" of the exchange notes is the initial
offering price (not including any bond house, broker or similar person or
organization acting in the capacity of an underwriter, placement agent or
wholesaler) at which a substantial amount of the old notes were sold. The
"stated redemption price at maturity" of each exchange note is the sum of all
cash payments (whether denominated as principal or interest) provided by the
exchange note, other than payments of "qualified stated interest". Qualified
stated interest is stated interest that is unconditionally payable at least
annually at a single fixed rate that appropriately takes into account the length
of the interval between payments. Accordingly, the 12 1/2% current interest
payable on an exchange note will constitute qualified stated interest. All other
amounts payable on the exchange notes will be included in the exchange note's
stated redemption price at maturity.
As a U.S. Holder of a debt instrument issued with OID, you will be required
to include in gross income (generally as ordinary interest income) for U.S.
federal income tax purposes an amount equal to the sum of the "daily portions"
of such OID for all days during the taxable year on which you hold the debt
instrument. The daily portions of OID are determined on a constant
yield-to-maturity basis by allocating to each day on which you hold the debt
instrument a pro rata portion of the OID on such debt instrument which is
attributable to the "accrual period" (generally the period between interest
payment or compounding dates) in which such day is included. The amount of the
OID attributable to each "accrual period" is
the product of
(1) the "adjusted issue price" at the beginning of such accrual period
and
(2) the "yield to maturity" of the debt instrument (stated in a manner
appropriately taking into account the length of the accrual period),
less any qualified stated interest attributable to that accrual period.
The "adjusted issue price" of an exchange note at the beginning of an
accrual period generally will be equal to the issue price of the old note you
exchanged for the exchange note plus the aggregate amount of OID that accrued in
all prior accrual periods, less any cash payments that have been made on the
exchange note other than payments of qualified stated interest.
Qualified stated interest paid on an exchange note generally will be
taxable to you as ordinary income at the time it accrues or is received, in
accordance with your method of accounting for federal income tax purposes. Other
payments on the exchange notes are not separately included in your income as
interest, but rather are treated first as payments of previously accrued and
unpaid OID and then as payments of principal.
Disposition of the Exchange Notes.
You must recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of an exchange note. The amount of your
gain or loss generally equals the amount you receive for the exchange note (less
any amounts attributable to accrued and unpaid
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qualified stated interest) minus your adjusted tax basis in the exchange notes.
Your adjusted tax basis in an exchange note generally will equal the cost to
you of the old notes you exchanged for the exchange notes, increased by the
amount of OID previously included in your income with respect to such old notes
and such exchange notes, and decreased by the amount of any principal or
interest payments previously received by you on the exchange notes (other than
payments of qualified stated interest).
Your gain or loss will generally be a long-term capital gain or loss if you
have held the old note and the exchange note you received in the exchange offer
for more than one year. Otherwise, it will be short-term capital gain or loss.
The deductibility of capital losses is subject to limitation.
Information Reporting and Backup Withholding.
We will report to U.S. Holders of the exchange notes and the IRS the amount
of any "reportable payments" and any amount withheld with respect to the
exchange notes during the calendar year.
A noncorporate U.S. Holder may, under certain circumstances, be subject to
"backup withholding" unless such U.S. Holder provides to us a correct taxpayer
identification number and otherwise complies with applicable requirements of the
backup withholding rules. In addition, a U.S. Holder will be subject to backup
withholding if we have been notified by the IRS that backup withholding is
required for such U.S. Holder due to a failure to properly report interest and
dividend payments. The backup withholding rate is 31% of "reportable payments,"
which include interest and, under certain circumstances, principal payments.
PLAN OF DISTRIBUTION
Each holder desiring to participate in the exchange offer will be required
to represent, among other things, that:
(1) it is not an "affiliate" (as defined in Rule 405 of the Securities
Act) of American Tissue,
(2) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the exchange notes, and
(3) it is acquiring the exchange notes in the ordinary course of its
business.
A holder that cannot make such representation will not be able to
participate in the exchange offer, and may only sell its old notes under a
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K under the Securities Act or under an
exemption from the registration requirements of the Securities Act.
Each broker-dealer who holds old notes that were acquired for its own
account as a result of market-making activities or other trading activities,
other than old notes acquired directly from American Tissue, may exchange such
old notes under the exchange offer. However, such participating broker-dealer
may be deemed to be an "underwriter" within the meaning of the Securities Act
and must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of the exchange notes received by
the broker-dealer in the
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exchange offer. Such prospectus delivery requirement may be satisfied by the
delivery by such broker-dealer of this prospectus, as it may be amended or
supplemented from time to time.
Based upon interpretations by the staff of the Securities and Exchange
Commission, we believe that exchange notes issued under the exchange offer to
participating broker-dealers may be offered for resale, resold, and otherwise
transferred by a participating broker-dealer upon compliance with the prospectus
delivery requirements, but without compliance with the registration
requirements, of the Securities Act. We and our subsidiary guarantors have
agreed that for a period of not less than one year following the consummation of
the exchange offer, to make this prospectus, as amended or supplemented,
available to participating broker-dealers for use in connection with any such
resale. During such period of time, delivery of this prospectus, as it may be
amended or supplemented, will satisfy the prospectus delivery requirements of a
participating broker-dealer engaged in market making or other trading
activities. In addition, until __________ , all dealers effecting transactions
on the exchange notes may be required to deliver a prospectus.
Based upon interpretations by the staff of the Securities and Exchange
Commission, we believe that exchange notes issued under the exchange offer may
be offered for resale, resold and otherwise transferred by a holder thereof,
other than a participating broker-dealer, without compliance with the
registration and prospectus delivery requirements of the Securities Act.
Neither we nor our subsidiary guarantors will receive any proceeds from any
sale of the exchange notes by broker-dealers. Exchange notes received by
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions:
o in the over-the-counter market;
o in negotiated transactions;
o through the writing of options on the exchange notes or a combination
of such methods of resale;
o at market prices prevailing at the time of resale;
o at prices related to such prevailing market prices; or
o at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such participating broker-dealer and/or the purchasers of
any such exchange notes. Any participating broker-dealer that resells exchange
notes that were received by it for its own account under the exchange offer and
any broker or dealer that participates in a distribution of such new notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of exchange notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver, and by delivering, a prospectus, a
participating broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We and our subsidiary guarantors have agreed to pay all expenses incidental
to the exchange offer, other than commissions and concessions of any brokers or
dealers, and will indemnify holders
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of the exchange notes, including any broker-dealers, against specified
liabilities, including liabilities under the Securities Act, as set forth in the
registration rights agreement.
LEGAL MATTERS
Mandel & Resnik P.C., New York, New York will issue an opinion for us and
our subsidiary guarantors with respect to the issuance of the exchange notes
offered hereby, including
(1) our existence and good standing under our state of incorporation,
(2) our authorization of the sale and issuance of the exchange notes and
(3) the enforceability of the exchange notes.
EXPERTS
Our consolidated financial statements as of and for the fiscal years ended
September 30, 1997 and 1998 included in this prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report
appearing herein, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
Our consolidated financial statements as of and for the fiscal year ended
September 30, 1996 included in this prospectus have been audited by Holtz
Rubenstein & Co., LLP, independent public accountants, as stated in their report
appearing herein, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the financial
statements of the Berlin-Gorham Pulp and Paper Mill at December 27, 1998 and
December 28, 1997 and for each of the three years in the period ended December
27, 1998, as set forth in their report. We have included the financial
statements of the Berlin-Gorham Pulp and Paper Mill in this prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
CHANGE IN CERTIFYING ACCOUNTANTS
In 1997, we changed our certifying accountants from Holtz Rubenstein & Co.,
LLP to Arthur Andersen LLP. Our board of directors recommended and approved the
appointment of Arthur Andersen LLP as our certifying accountants. During the
fiscal years ended September 30, 1993, 1994, 1995 and 1996, there were no
disagreements with our former accountants on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of our former
accountants, would have caused them to make reference to the subject matter of
the disagreement in their report. None of the our former accountants' reports on
our financial statements for the fiscal years ended September 30, 1994, 1995 and
1996 contained an adverse opinion or disclaimer of opinion, nor was it modified
or qualified as to uncertainty, audit scope or accounting principles.
AVAILABLE INFORMATION
We and our subsidiary guarantors have filed with the Securities and
Exchange Commission a Registration Statement on Form S-4, the "Exchange Offer
Registration Statement," which term
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encompasses all amendments, exhibits, annexes and schedules thereto, pursuant to
the Securities Act of 1933, and the rules and regulations promulgated
thereunder, covering the exchange notes being offered. This prospectus does not
contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to American Tissue, our
subsidiary guarantors and the exchange offer, reference is made to the Exchange
Offer Registration Statement. Statements made in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the exchange offer registration statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Exchange Offer Registration Statement, including the exhibits thereto,
can be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Securities and
Exchange Commission at Seven World Trade Center, Suite 1300, New York, New York
10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Securities and Exchange
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement, we
will become subject to the informational requirements of the Securities Exchange
Act of 1934, and in accordance therewith will be required to file periodic
reports and other information with the Securities and Exchange Commission. Our
obligation to file periodic reports and other information with the Securities
and Exchange Commission will be suspended if the exchange notes are held of
record by fewer than 300 holders as of the beginning of our fiscal year other
than the fiscal year in which the exchange offer registration statement is
declared effective.
We will, nevertheless, be required to continue to file reports with the
Securities and Exchange Commission if the exchange notes are listed on a
national securities exchange. In the event we cease to be subject to the
informational requirements of the Securities Exchange Act of 1934, we will be
required under the indenture relating to the exchange notes to continue to file
with the Securities and Exchange Commission the annual and quarterly reports,
information, documents or other reports, including, without limitation, reports
on Forms 10-K, 10-Q and 8-K, which would be required pursuant to the
informational requirements of the Securities Exchange Act of 1934.
Under the indenture, we will furnish the holders of exchange notes with
annual, quarterly and other reports after we file such reports with the
Securities and Exchange Commission.
Annual reports delivered to the trustee and the holders of exchange notes
will contain financial information that has been examined and reported upon,
with an opinion expressed by a firm of independent public accountants. We will
also furnish such other reports as may be required by law.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
American Tissue Inc.
<S> <C>
Reports of Independent Public Accountants....................................................... F-2, F-3
Consolidated Balance Sheets at June 30, 1999 (unaudited), September 30, 1998 and
1997............................................................................................ F-4
Consolidated Statements of Operations for the nine month periods ended June 30,
1999 and 1998 (unaudited) and the years ended September 30, 1998, 1997 and 1996................. F-5
Consolidated Statements of Stockholders' Equity at June 30, 1999 (unaudited) and
September 30, 1998, 1997, 1996 and 1995......................................................... F-6
Consolidated Statements of Cash Flows for the nine month periods ended June 30,
1999 and 1998 (unaudited) and the years ended September 30, 1998, 1997 and 1996................. F-7
Notes to Consolidated Financial Statements...................................................... F-8-F-22
Berlin-Gorham Mills
Report of Independent Auditors.................................................................. F-23
Balance Sheets at December 27, 1998 and December 28, 1997....................................... F-24
Statements of Operations for the 52 weeks ended December 27, 1998, December 28,
1997 and December 29, 1996..................................................................... F-25
Statements of Changes in Crown Vantage's Investment for the fifty two weeks
ended December 27, 1998, December 28, 1997 and December 29, 1996................................ F-26
Statements of Cash Flows for the fifty two weeks ended December 27, 1998,
December 28, 1997 and December 29, 1996......................................................... F-27
Notes to Financial Statements................................................................... F-28-F-37
Balance sheets at June 27, 1999 (unaudited) and December 27, 1998............................... F-38
Statements of Operations for the 26 weeks ended June 27, 1999 and June 28, 1998
(unaudited)..................................................................................... F-39
Statements of Cash Flows for the 26 weeks ended June 27, 1999 and June 28, 1998
(unaudited)..................................................................................... F-40
Notes to Interim Financial Statements........................................................... F-41-F-43
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of American Tissue Inc.:
We have audited the accompanying consolidated balance sheets of American
Tissue Inc. (the "Company") as of September 30, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended September 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Tissue Inc. as of
September 30, 1998 and 1997, and the results of their operations and their cash
flows for each of the two years in the period ended September 30, 1998 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Melville, New York
February 19, 1999 (except with respect to the matters discussed in Note 15, as
to which the date is August 10, 1999)
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
American Tissue Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of American Tissue Inc. (the "Company") for
the year ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of American
Tissue Inc. for the year ended September 30, 1996 in conformity with generally
accepted accounting principles.
Holtz Rubenstein & Co., LLP
Melville, New York
December 23, 1996
F-3
<PAGE>
AMERICAN TISSUE INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, September 30,
--------- -----------------------
1999 1998 1997
-------- -------- --------
(unaudited)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................................. $ 597 $ 1,480 $ 870
Accounts receivable, net of allowance for doubtful accounts of $408 ................... 35,078 33,229 29,466
(unaudited), $83 and $1,380, respectively
Inventories (Note 3) .................................................................. 57,219 51,988 51,986
Equipment held for sale ............................................................... 3,322 393 1,968
Prepaid expenses and other current assets ............................................. 3,860 2,872 3,620
-------- -------- --------
Total current assets ............................................................... 100,076 89,962 87,910
PROPERTY, PLANT AND EQUIPMENT, net (Note 4) ........................................... 163,900 157,705 128,734
DUE FROM RELATED PARTIES (Note 9) ..................................................... 21,672 19,879 11,334
DEFERRED COSTS, net ................................................................... 2,589 3,148 2,388
OTHER ASSETS .......................................................................... 185 125 151
-------- -------- --------
$288,422 $270,819 $230,517
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 6) ................................................................ $ 74,810 $ 66,317 $ 47,280
Current portion of long-term debt (Note 7) ............................................ 6,427 6,553 5,957
Current portion of capital lease and financing obligations (Note 8) ................... 5,055 5,059 2,866
Accounts payable ...................................................................... 45,859 50,153 46,953
Accrued expenses ...................................................................... 12,200 10,628 5,746
-------- -------- --------
Total current liabilities .......................................................... 144,351 138,710 108,802
DUE TO RELATED PARTIES (Note 9) ....................................................... 27,912 22,743 20,276
LONG-TERM DEBT (Note 7) ............................................................... 48,620 51,280 52,830
CAPITAL LEASE AND FINANCING OBLIGATIONS (Note 8) ...................................... 24,689 24,442 14,751
-------- -------- --------
Total liabilities .................................................................. 245,572 237,175 196,659
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY (Note 1):
Common stock, no par value; 200 shares authorized, 200 shares issued and
outstanding ........................................................................... 1,605 1,605 1,605
Additional paid-in capital ............................................................ 8,225 7,266 6,006
Retained earnings ..................................................................... 33,020 24,773 26,247
-------- -------- --------
42,850 33,644 33,858
-------- -------- --------
$288,422 $270,819 $230,517
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
F-4
<PAGE>
AMERICAN TISSUE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Year Ended September 30,
Ended June 30, ---------------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES:
Paper products .......................................... $ 182,557 $ 152,681 $ 208,334 $ 196,368 $ 152,543
Equipment ............................................... 930 3,617 5,654 1,228 179
--------- --------- --------- --------- ---------
183,487 156,298 213,988 197,596 152,722
--------- --------- --------- --------- ---------
COST OF SALES:
Paper products .......................................... 143,328 127,105 173,509 152,285 122,152
Equipment ............................................... 140 1,379 1,574 285 121
--------- --------- --------- --------- ---------
143,468 128,484 175,083 152,570 122,273
--------- --------- --------- --------- ---------
Gross profit ....................... 40,019 27,814 38,905 45,026 30,449
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Selling ................................................. 15,217 14,677 20,373 15,311 11,110
General and administrative .............................. 6,749 6,573 9,015 11,642 6,071
--------- --------- --------- --------- ---------
21,966 21,250 29,388 26,953 17,181
--------- --------- --------- --------- ---------
Operating income ................... 18,053 6,564 9,517 18,073 13,268
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSES):
Interest expense, net:
Interest forgiven by related party ........... (959) (954) (1,260) -- --
Other interest expense, net .................. (9,931) (8,687) (13,412) (12,272) (9,175)
--------- --------- --------- --------- ---------
Interest expense, net ................................... (10,890) (9,641) (14,672) (12,272) (9,175)
Rental income ........................................... 900 661 1,215 788 502
Other income ............................................ -- -- -- -- --
Income from insurance claims ............................ 184 827 2,466 284 8,587
--------- --------- --------- --------- ---------
(9,806) (8,153) (10,991) (11,200) (86)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) ....................................... $ 8,247 $ (1,589) $ (1,474) $ 6,873 $ 13,182
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
AMERICAN TISSUE INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional Retained
Shares Amount Paid-in Capital Earnings Total
-------- --------- --------------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995 .................... 200 $ 1,605 $ 6,006 $ 6,192 $ 13,803
Net income ....................................... -- -- -- 13,182 13,182
-------- -------- -------- -------- --------
Balance at September 30, 1996 .................... 200 1,605 6,006 19,374 26,985
Net income ....................................... -- -- -- 6,873 6,873
-------- -------- -------- -------- --------
Balance at September 30, 1997 .................... 200 1,605 6,006 26,247 33,858
Net loss ......................................... -- -- -- (1,474) (1,474)
Interest forgiven (Note 9) ....................... -- -- 1,260 -- 1,260
-------- -------- -------- -------- --------
Balance at September 30, 1998 .................... 200 1,605 7,266 24,773 33,644
Interest forgiven (unaudited) .................... -- -- 959 -- 959
Net income (unaudited) ........................... -- -- -- 8,247 8,247
-------- -------- -------- -------- --------
Balance at June 30, 1999 (unaudited) ............. 200 $ 1,605 $ 8,225 $ 33,020 $ 42,850
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated statements.
F-6
<PAGE>
AMERICAN TISSUE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended June 30, Year Ended September 30,
------------------- ----------------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................................. $ 8,247 $ (1,589) $ (1,474) $ 6,873 $ 13,182
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .................................. 8,830 8,018 10,585 8,282 5,593
Provision for bad debts ........................................ 450 -- 560 1,120 497
Forgiveness of interest ........................................ 959 954 1,260 -- --
Other .......................................................... -- 183 -- -- --
Changes in operating assets and liabilities:
Accounts receivable ............................................ (2,299) (900) (4,323) 23,452 (29,688)
Inventories .................................................... (5,231) 4,787 (2) (21,995) (4,172)
Equipment held for sale ........................................ (2,308) 1,380 1,575 310 --
Prepaid expenses and other current assets ...................... (988) (229) 748 (1,644) 1,553
Other assets ................................................... (60) 246 26 (138) 5,085
Accounts payable and accrued expenses .......................... (2,722) (4,657) 8,082 5,625 18,301
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities ............................................. 4,878 8,193 17,037 21,885 10,351
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................... (12,607) (19,178) (27,566) (29,172) (40,933)
-------- -------- -------- -------- --------
Net cash used in investing activities .................. (12,607) (19,178) (27,566) (29,172) (40,933)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving lines of credit .................... 8,851 15,279 16,944 5,462 5,589
Proceeds from notes payable .................................... 632 222 3,195 8,487 13,100
Proceeds from long-term debt ................................... 4,787 13,971 13,800 45,277 8,679
Proceeds from financing obligations ............................ 4,575 11,771 5,091 -- --
Principal payments on notes payable ............................ (991) (4,459) (1,102) (2,035) (8,723)
Principal payments on long-term debt ........................... (4,573) (217) (5,617) (3,535) (494)
Principal payments upon refinancing of mortgages ............... (3,000) (9,150) (9,137) (25,016) (9)
Principal payments on capital leases and financing
obligations .................................................... (6,507) (2,688) (3,660) (20,201) (169)
Increase in deferred costs ..................................... (304) (1,137) (2,297) (1,114) 520
Advances and repayments to related parties, net ................ 3,376 (12,888) (6,078) 680 11,224
-------- -------- -------- -------- --------
Net cash provided by financing activities .............. 6,846 10,704 11,139 8,005 29,717
-------- -------- -------- -------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS ....................................................... (883) (281) 610 718 (865)
CASH AND CASH EQUIVALENTS, beginning of
period ............................................................ 1,480 870 870 152 1,017
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period .......................... $ 597 $ 589 $ 1,480 $ 870 $ 152
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .................................................. $ 9,931 $ 8,687 $ 13,574 $ 10,672 $ 16,474
======== ======== ======== ======== ========
Income taxes paid ................................................. $ 11 $ 45 $ 62 $ 97 $ --
======== ======== ======== ======== ========
Non-cash financing transactions relating to capital lease
obligations entered into .......................................... $ 4,183 $ 6,745 $ 10,453 $ 2,021 $ 8,770
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
American Tissue Inc. (the "Company"), a Delaware corporation, was formed in
August 1998. The Company is the parent of various affiliated entities that were
previously owned by, and were under the common management and control of, the
same stockholders. Effective October 1, 1998, the stockholders of the affiliated
companies transferred their respective stock or membership interests in those
entities to us. The Company issued 200 shares of common stock in exchange for
the prior stock and membership interest certificates. The transaction
constitutes a transfer of interests in commonly controlled entities, and has
been accounted for in a manner similar to a pooling of interests. Accordingly,
the accompanying financial statements include the accounts of each of the
affiliated entities for the periods presented at the historical costs of the
assets and liabilities of such entities. Such financial statements have been
presented on a consolidated basis, as if the Company had been in existence
throughout the periods presented.
The subsidiaries of the Company, all of which are wholly-owned, are as
follows:
Paper Manufacturing and Converting Entities:
American Tissue Corporation ("ATC") Engaged in the conversion and sale
of paper products (see below).
American Tissue Mills of Oregon, Inc. Owns a tissue paper machine in St.
("ATM-Oregon") Helens, Oregon that is used in the
manufacturing of virgin paper. The
paper machine is located in a
facility owned and operated by
Boise Cascade Corporation (Note
11).
American Tissue Mills of New Hampshire, Inc. Engaged in the manufacture of
("ATM-New Hampshire") recycled paper.
American Tissue Mills of New York, Inc. Engaged in the manufacture of
("ATM-New York") recycled paper.
American Tissue Mills of Neenah LLC Engaged in the manufacture of
("ATM-Neenah) virgin and recycled paper and
conversion of paper products.
American Tissue Mills of Wisconsin, Inc. Engaged in the manufacture of
("ATM-Wisconsin") recycled paper. This facility
closed during fiscal 1998 and is
transferring all its equipment
assets to American Tissue Mills of
New Hampshire, Inc. (Note 11).
American Tissue Mills of Greenwich LLC Engaged in the manufacture of
("ATM-Greenwich") virgin and recycled paper.
Real Estate Operations:
100 Realty Management LLC Serves to coordinate payments made
to the real estate companies listed
below by the operating companies
listed above and make payments on
behalf of the real estate companies
to outside vendors.
Engineers Road LLC Owns and operates a facility
located at 135 Engineers Road,
Hauppauge, New York.
Coram Realty LLC Owns and operates a facility
located at 468 Mill Road, Coram,
New York. Gilpin Realty Corp. Owns
and operates a facility located at
45 Gilpin Avenue, Hauppauge, New
York.
Grand LLC Owns and operates a facility
located at 148 Hudson River Road,
Waterford, New York.
F-8
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Saratoga Realty LLC Owns and operates a facility
located at 3 Duplainville
Road, Saratoga Springs, New York.
Markwood LLC and subsidiary Markwood LLC is the parent company
of Fabricaciones Metalicas
Mexicanas, S.A. ("FMMSA"). FMMSA
owns and operates an industrial
park in Mexico with multiple
facilities, two of which are leased
to outside third parties and the
remaining are leased to American
Tissue Mills de Mexico, an
affiliate of our stockholders.
Calexico Tissue Company LLC Owns and operates a facility
located at 2361 Portico Blvd.,
Calexico, California.
Other Entities:
Unique Financing LLC Engaged in the business of
financing the acquisition of
certain used machinery and
equipment.
American Cellulose Mill Corp. Provides trucking services to our
paper manufacturing and converting
entities.
In addition to the above listed operations, the Company engages in the
acquisition, refurbishment and resale of various tissue converting equipment
through its ATC subsidiary. These activities are presented as separate
components of revenues and cost of sales in the accompanying consolidated
financial statements.
The real estate operations of the Company primarily consist of the lease of
facilities owned by the real estate entities and which are used by several of
the paper manufacturing and converting entities. These transactions are
eliminated in the consolidated financial statements, with the exception of
Markwood LLC, as described above.
Our stockholders also own, manage and control other corporations in similar
lines of business that are not included in the accompanying consolidated
financial statements. Any transactions with these companies are entered into at
"arm's length" and any resulting amounts due from or due to these companies are
recorded as due from related parties and due to related parties respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, as described in Note 1. All significant
intercompany accounts and transactions have been eliminated in the consolidated
financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and other
short-term, highly liquid investments with original maturities of three months
or less. The cost of cash equivalents approximates fair value as of September
30, 1998 and 1997.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable from
sales. The Company performs ongoing credit evaluations of its customers'
F-9
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
financial condition and payment history. Generally, accounts receivable are due
within 30 days. Credit losses have historically been consistent with
management's expectations. Most of our business activities are with
distributors, retailers, and paper converters located within the eastern United
States and Canada.
Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
Equipment Held for Sale
Equipment held for sale consists of equipment purchased by us with the
intent of resale. This equipment is not used in our operations and, accordingly,
is not subject to depreciation. The assets are carried at the lower of cost or
their net realizable value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation and amortization. Depreciation is computed principally on the
straight-line method over the following estimated useful lives of the related
assets:
Buildings and building improvements 30 - 39.5 years
Machinery and equipment 5 - 20 years
Leasehold improvements the lesser of the useful life of the asset or the term of
the lease
Deferred Costs
Deferred costs primarily represent loan origination and refinancing costs
and other capitalizable expenses that are either being amortized over the term
of the loan or sixty months depending on the nature of the expense. Amortization
expense on deferred costs was approximately $1,537,000, $1,128,000 and $355,000
for the years ended September 30, 1998, 1997 and 1996.
Long-Lived Assets
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of", requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the assets in
question may not be recoverable. The adoption of SFAS No. 121 in fiscal 1997 did
not have a material effect on our results of operations or financial position.
Fair Value of Financial Instruments
The Company complies with SFAS No. 107, "Disclosure about Fair Value of
Financial Instruments", which requires disclosures about the fair value of our
financial instruments. The methods and assumptions used to estimate the fair
value of the following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash,
current receivables and payables and certain other short-term financial
instruments approximate their fair value.
Long-Term Debt: The fair value of our long-term debt, including the
current portion, was estimated using a discounted cash flow analysis, based
on our assumed incremental borrowing rates for similar
F-10
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
types of borrowing arrangements. The carrying amount of variable and fixed
rate debt at September 30, 1998 and 1997 approximates fair value.
Revenue
Revenue is recognized upon shipment of our products to its customers.
Income Taxes
Our stockholders have elected to be taxed under the provisions of
Sub-chapter "S" of the Internal Revenue Code ("S" Corporation). Prior to the
transfer of ownership discussed in Note 1, our subsidiaries were treated as
either "S" Corporations or limited liability companies treated as partnerships
under the Internal Revenue Code. Accordingly, our stockholders include their
respective shares of our net income in their individual income tax returns. The
amount of corporate level minimum taxes and taxes based on income imposed by
state and local authorities is not material.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards
for the reporting and display of comprehensive income and its components in a
full set of financial statements. Our consolidated financial statements will be
required to include comprehensive income disclosures beginning in fiscal 1999.
Restatement of prior period information must be made for comparative purposes.
The Company currently does not have any items of other comprehensive income.
Accordingly, comprehensive income (loss) is the same as net income (loss) for
each of the periods presented in the consolidated statements of operations.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". SFAS No. 132 requires
additional information about the changes in the benefit obligation and fair
value of plan assets during the period, while standardizing the disclosure
requirements for pensions and other postretirement benefits. The Company is
required to adopt the provisions of SFAS No. 132 in fiscal 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133, as amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of Effective Date of FASB Statement No. 133", will
become effective for the Company as of the quarter ended December 31, 2000 and
will not require retroactive restatement of prior period financial statements.
The Company currently does not use derivative instruments or engage in hedging
activities and, accordingly, does not expect that this statement will have an
impact on its consolidated financial statements when adopted.
SFAS No. 130 and 132 expand and modify financial statement disclosures and,
accordingly, will have no impact on our results of operations or financial
position.
F-11
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVENTORIES:
Inventories, at cost, consist of the following:
September 30,
June 30, -------------------
1999 1998 1997
---- ---- ----
(Unaudited)
(Amounts in 000s)
Raw materials .................. $26,476 $32,645 $27,251
Work-in-process ................ 361 56 297
Finished goods ................. 30,382 19,287 24,438
------- ------- -------
$57,219 $51,988 $51,986
======= ======= =======
4. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
September 30,
June 30, ----------------------
1999 1998 1997
--------- --------- ---------
(Unaudited)
(Amounts in 000s)
<S> <C> <C> <C>
Machinery and equipment ....................... $ 131,439 $ 136,818 $ 113,614
Buildings and building improvements ........... 23,288 19,426 20,592
Leasehold improvements ........................ 4,825 4,650 4,002
Land .......................................... 4,544 4,544 3,537
--------- --------- ---------
164,096 165,438 141,745
Less: accumulated depreciation and amortization (37,053) (30,641) (23,650)
--------- --------- ---------
127,043 134,797 118,095
Projects in progress .......................... 36,857 22,908 10,639
--------- --------- ---------
Total property, plant and equipment, net ... $ 163,900 $ 157,705 $ 128,734
========= ========= =========
</TABLE>
Depreciation and amortization expense on property, plant and equipment was
approximately $9,048,000, $7,154,000 and $5,238,000 during the years ended
September 30, 1998, 1997 and 1996, respectively. Included in the costs of
property, plant and equipment is capitalized interest relating to funding
required for various construction and project development. Capitalized interest
was approximately $599,000 for the year ended September 30, 1998. No interest
was capitalized in 1997.
5. ACCRUED EXPENSES:
Accrued expenses consist of the following:
September 30,
June 30, ---------------------
1999 1998 1997
------- ------- -------
(unaudited)
Compensation and benefits ............ $ 4,831 $ 1,939 $ 1,828
Promotion and incentives ............. 1,323 1,232 295
Occupancy costs ...................... 3,503 2,918 2,166
Other ................................ 2,543 4,539 1,457
------- ------- -------
$12,200 $10,628 $ 5,746
======= ======= =======
F-12
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES PAYABLE:
Notes payable consist of the following:
September 30,
June 30, -----------------
1999 1998 1997
------- ------- -------
(Unaudited)
(Amounts in 000s)
Secured note payable to LaSalle Bank National
Association(a) ................................... $67,192 $57,531 $42,769
Secured note payable to Mashreq Bank(b) .......... 4,365 5,175 2,993
Unsecured note payable to A.I. Credit Corp.(c) ... -- 428 423
Other(d) ......................................... 3,253 3,183 1,095
------- ------- -------
$74,810 $66,317 $47,280
======= ======= =======
- -----------
(a) The Company and its affiliates have entered into loan and security
agreements with this bank whereby it may borrow an aggregate of (i) 85% of
eligible accounts receivable and (ii) the lesser of $34,000,000 or 65% of
the lower of the cost or market value of eligible inventory. The aggregate
loan limit under the loan agreement, as amended, is $60,000,000. All
borrowings are due on demand with interest payable monthly at 3/4% above
the bank's prime rate (9% and 9.25% at September 30, 1998 and 1997,
respectively). The loan agreement is in effect until June 16, 1999 and is
renewable on a year to year basis thereafter. The loan is collateralized by
our accounts receivable, inventory, tangible and intangible assets, and is
guaranteed by our principal stockholders. The loan agreement requires,
among other things, the maintenance of a minimum level of tangible net
worth. The Company was in compliance with these loan covenants at September
30, 1998 and 1997. However, the default discussed in Note 6 with respect to
the GECC debt triggered a default under the LaSalle agreement. The Company
received a waiver of default from LaSalle Bank National Association.
(b) The Company has a current borrowing facility with this bank for the purpose
of financing machinery and equipment purchases. Borrowings under this
facility have a maximum term of one year from the date of initiation. All
borrowings are collateralized by the assets financed, as well as personal
and corporate guarantees. The facility limit is $5,700,000 and borrowings
bear interest at an annual rate of prime plus three-quarters of one percent
(9% and 9.25% at September 30, 1998 and 1997, respectively).
(c) This note was issued in connection with the financing of certain insurance
premiums by A.I. Credit Corp. The borrowings outstanding at September 30,
1998 are payable in monthly installments of approximately $76,000 through
April 1, 1999 and bear interest at a rate of 6.25% per annum. The note at
September 30, 1997 required monthly payments of approximately $70,000
through March 29, 1998 and bore interest at an annual rate of 6.1%.
(d) The Company has also received loans from other unrelated individuals and
entities. Amounts outstanding are payable upon demand and carry stated
rates of interest ranging between 10% and 13% per annum.
F-13
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
June 30, --------------------
1999 1998 1997
-------- -------- --------
(Unaudited)
(Amounts in 000s)
<S> <C> <C> <C>
General Electric Capital Corporation ("GECC")(a) $ 30,773 $ 34,220 $ 38,851
Israel Discount Bank ("IDB")(b) ................ 1,491 2,050 1,650
Curtiss-Wright Flight Systems/Shelby, Inc.(c) .. 718 773 847
Mortgage loans payable(d) ...................... 21,615 20,340 17,439
Community Redevelopment Agency of Calexico(e) .. 450 450 --
-------- -------- --------
55,047 57,833 58,787
Less: current portion of long-term debt ........ (6,427) (6,553) (5,957)
-------- -------- --------
$ 48,620 $ 51,280 $ 52,830
======== ======== ========
</TABLE>
- -----------
(a) On June 1, 1997, the Company entered into a six year financing agreement
with GECC for long-term financing to refinance existing debt. Such
financing agreement provides for two term loans-term loan A in the amount
of $30,000,000 and term loan B in the amount of $10,000,000. Borrowings
under term loan A bear interest at a fixed rate of 9.31% per annum.
Borrowings under term loan B bore interest at a rate of prime plus 1% (9.5%
at September 30, 1997) per annum. Effective October 21, 1997, the interest
rate on term loan B was converted to a fixed rate of 9.01% per annum by
GECC, with a balloon payment of $12,807,000 on the two loans due on June
20, 2003. The financing agreement requires, among other things, the
maintenance of minimum tangible net worth, a fixed charge coverage ratio,
and a maximum leverage ratio. As of September 30, 1998, the Company was not
in compliance with certain financial covenant requirements. However,
subsequent to year-end, GECC amended the agreement, resulting in the
Company being in compliance with such financial covenants. Additionally,
the most recent of such amendments shortened the maturity of such term
loans to June 30, 2000, as discussed in Note 12.
(b) The Company has issued two notes to IDB. The first note had an original
face value of $1,500,000, was issued in June 1996 and is collateralized by
substantially all of the assets of ATM-Greenwich. This note bears interest
at an annual rate of prime plus one and one-half percent (9.75% and 10% at
September 30, 1998 and 1997, respectively). This note requires monthly
principal payments of $50,000. The second note was issued for $1,000,000 in
October 1997 and is collateralized by substantially all of the assets of
Grand LLC. The note requires monthly principal payments of $50,000
commencing November 1998, with a final balloon payment of $450,000 in
October 1999. This second note bears interest at an annual rate of prime
plus three-quarters of one percent (9% at September 30, 1998).
(c) On July 29, 1996, the Company entered into a term loan with Curtiss-Wright
Flight Systems/Shelby, Inc. ("Curtiss-Wright") in order to borrow funds for
certain renovations to our New Jersey distribution center (the
"Distribution Center"). The Company leases the Distribution Center from
Curtiss-Wright. The principal balance outstanding on this term loan is
being amortized through
F-14
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 1, 2006 at a fixed interest rate of 8% per annum and is subordinated
to our debt to LaSalle Bank National Association (see Note 5).
(d) Mortgage loans payable consist of several mortgage loans on certain
properties owned by us. All properties under the mortgage loans serve as
collateral for the debt. During fiscal 1998, the Company obtained a new
mortgage loan in the amount of $2,850,000 relating to its Saratoga property
and paid-off the existing mortgage loan held by LaSalle Bank National
Association in the amount of $2,837,000. The Company refinanced existing
mortgage loans on properties owned by Grand LLC, Coram Realty LLC,
Engineers Road LLC and Gilpin Realty Corp. The Grand LLC refinancing
consisted of the repayment of $6,300,000 to the existing lender and receipt
of proceeds of $6,500,000 from a new lender. The other mortgage loans
refinanced were made by the existing lender and were included as part of a
consolidated $14,325,000 mortgage loan encompassing these entities as well
as an unconsolidated affiliate. During fiscal 1998, the Company obtained a
secured 8.75% note payable from Valley Independent Bank for $3,000,000 in
connection with the financing of certain construction at its Calexico
facility. The note had an original maturity of August 5, 1998, however, no
payments have been made. See Note 14 for information regarding the April
19, 1999 refinancing of this note into a long-term mortgage. The
outstanding balances at September 30, 1998 have interest rates ranging from
7.5% to 8.05%. The refinanced mortgage loans had interest rates ranging
from 8.375% to 8.625% as of September 30, 1997. Mortgage loans payable have
varying maturity dates between October 2007 and February 2018, with the
exception of the mortgage loan on Markwood LLC. The mortgage loan on
Markwood LLC's property was subsequently amended in December 1998, calling
for extinguishment by March 1, 1999 in the amount of $175,000; the carrying
amount of this note at September 30, 1998 is $354,000.
(e) The loans from the Community Redevelopment Agency of the City of Calexico
are in the principal amounts of $166,000 and $284,000 at September 30,
1998. These loans were obtained to finance certain construction at the
Calexico facility. The promissory note evidencing the $166,000 obligation
is amortized on a quarterly basis over a 15 year period and bears interest
at a rate of 3% per annum. The $284,000 reimbursement loan is due in 2004,
however, this loan may be forgiven as of the fifth year of the loan (2002)
provided that the Company provides certain documentation to the lender
demonstrating that the Company employs at least 100 Qualified Employees, as
defined in the loan agreement, for a minimum period of five years. The
reimbursement loan is non-interest bearing, subject to certain provisions
that may require interest in the event of a default by us, as defined in
the relevant agreement.
Reference is made to Note 12 for presentation of the annual maturities of
long-term debt, as amended.
8. CAPITAL LEASE AND FINANCING OBLIGATIONS:
Capital lease and financing obligations require future minimum payments as
follows at September 30, 1998:
Year Ending September 30, Amount (in 000s)
- ------------------------- ----------------
1999 ............................................................ $ 7,598
2000 ............................................................ 7,274
2001 ............................................................ 7,377
2002 ............................................................ 8,436
2003 ............................................................ 4,942
Thereafter ...................................................... 1,265
--------
36,892
Less: portion attributable to interest .......................... (7,391)
--------
Present value of capital lease and financing obligations at
September 30, 1998 .............................................. $ 29,501
========
F-15
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These instruments are collateralized by the specific machinery and
equipment covered under each obligation. The balances of assets leased and
financed are as follows at September 30,:
1998 1997
-------- --------
(Amounts in 000s)
Gross assets ............................... $ 41,018 $ 25,474
Accumulated amortization ................... (5,968) (3,015)
-------- --------
Net book value .......................... $ 35,050 $ 22,459
======== ========
Amortization relating to these assets has been included in the amounts
reported in Note 4.
9. RELATED PARTY TRANSACTIONS:
Due from related parties consist of the following:
September 30,
June 30, ----------------------
1999 1998 1997
------- ------- -------
(Unaudited)
(Amounts in 000s)
Affiliated entities ............... $20,540 $18,659 $11,020
Stockholders ...................... 1,132 1,220 314
------- ------- -------
$21,672 $19,879 $11,334
======= ======= =======
The receivables from the affiliated entities have arisen in the normal
course of business, primarily from sales between companies in the consolidated
group to other entities owned by our stockholders. These receivables have no
definite repayment date.
Amounts due from stockholders primarily represent loans made to certain of
our stockholders. The loans have no stated rates of interest and have no
definite repayment date prior to September 30, 1999.
Due to related parties consist of the following:
September 30,
June 30, ----------------------
1999 1998 1997
------- ------- -------
(Unaudited)
(Amounts in 000s)
Affiliated entities ............... $ 6,937 $ 2,236 $ 41
Stockholders ...................... 20,975 20,507 20,235
======= ======= =======
$27,912 $22,743 $20,276
======= ======= =======
The amounts due to affiliated entities have arisen in the ordinary course
of business between the Company and the affiliated entities. The stockholders of
the affiliated entities have represented to us that they do not intend to
require any payment of our obligations prior to September 30, 1999.
F-16
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts owed to our stockholders and their families carried original stated
interest rates of 10%. Of this amount, $10,965,000 is subordinated to other debt
agreements. Effective October 1, 1997, one of our stockholders released the
Company from its obligation to pay interest from October 1, 1997 and forward,
for an indefinite period of time. Accordingly, interest expense of $1,260,000
for the period of October 1, 1997 through September 30, 1998, on the loans from
this stockholder has been imputed at 7.75% per annum and recorded as a capital
contribution through additional paid-in capital. The stockholder has also
represented that any accrued interest prior to October 1, 1997 will not be
required to be repaid prior to September 30, 1999. The stockholders have
represented to us that they do not intend to seek repayment of any amounts of
indebtedness prior to September 30, 1999. Interest expense on the outstanding
borrowings from the stockholders and their immediate families approximated
$1,390,000, $1,385,000 and $1,580,000 for the years ended September 30, 1998,
1997 and 1996, respectively.
10. EMPLOYEE RETIREMENT PLANS:
The Company, through some of its subsidiaries, offers various retirement
benefits to its employees. The following is a brief summary of the plans offered
by the entities included in the consolidated results of the Company:
401(k) Plans
The Company sponsors two 401(k) plans. One plan covers certain union
employees at one of our facilities. The other plan covers substantially all
other employees of the Company, subject to certain plan eligibility
requirements. Both plans allow for employee contributions based on a percentage
of compensation, ranging between 1% and 15%. We will match employee
contributions to the union plan in amounts equal to 75% of the first 2% and 50%
of the next 3% of employees' compensation. The Company can make matching
contributions to the other plan up to 6% of employee contributions, at the
discretion of the Board of Directors. The discretionary contribution rate for
the years ended September 30, 1998 and 1997 was 2%. Total Company contributions
made to the 401(k) Plans were approximately $353,000, $305,000 and $71,600 for
the years ended September 30, 1998, 1997 and 1996, respectively.
Pension Plan
The Company maintains a noncontributory defined benefit pension plan, the
American Tissue Pension Plan for Hourly Employees (the "Plan"). The Plan
provides certain employees of ATM-Neenah with retirement benefits. The Plan's
assets are invested in a money market fund.
The following tables set forth the funded status of the Plan based on
actuarial valuations at October 1, 1998 and 1997 covering the fiscal years
ending:
September 30,
-------------
1998 1997
---- ----
(Amounts in 000s)
Actuarial present value of accumulated benefit obligation:
Vested benefits .............................................. $ -- $ --
Nonvested benefits ........................................... 483 171
----- -----
Accumulated benefit obligation ............................... $ 483 $ 171
----- -----
Projected benefit obligation for service rendered to date .... $ 871 $ 312
Plan assets at fair value .................................... 219 25
----- -----
Plan assets less than projected benefit obligation ........... (652) (287)
Unrecognized net loss (gain) ................................. 134 (11)
----- -----
Accrued pension cost ......................................... $(518) $(298)
===== =====
F-17
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net pension cost for the years ended September 30, 1998 and 1997, include
the following components:
1998 1997
---- ----
(Amounts in 000s)
Service costs-benefits earned during the period ........... $ 395 $ 323
Interest costs on the projected benefit obligation ........ 23 --
Expected return on assets ................................. (8) --
Net pension cost ............................... $ 410 $ 323
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the average actuarial present values of
the projected benefit obligations were 7.5% and 4.5% and 6.75% and 4.5%,
respectively, for the years 1998 and 1997, respectively. The average expected
long-term rate of return on assets was 9.5% for the years 1998 and 1997.
11. INSURANCE SETTLEMENT:
During fiscal 1998, the Company incurred various losses relating to
physical damage of machinery and equipment and property damages. The Company has
submitted claims to their insurance companies and any resulting gains are
reported as income from insurance claims in the accompanying consolidated
statement of operations.
On November 16, 1995, a fire destroyed one of our operating facilities that
included its executive and administrative offices. The Company held fire,
property and business interruption insurance in the amount of $35,000,000. The
Company settled its insurance claim in October 1996 for approximately
$27,400,000. Substantially, all of the gain on the insurance settlement, as
reported in the statement of operations, represents the difference between the
replacement value and the carrying value of the equipment destroyed in the fire.
On September 30, 1996, the Company accrued $4,500,000 to cover additional costs
relating to the clean-up of the property and amounts due to the property owner.
Included in the cost of the insurance settlement is approximately $1,118,000 of
interest expense.
12. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases operating facilities under non-cancelable leases, with
unrelated parties and affiliated entities, which expire at various dates through
December 31, 2012. These leases require minimum future rental payments as
follows:
Year Ending September 30, Amount (in 000s)
- ------------------------- ----------------
1999 .................................................. $ 2,133
2000 .................................................. 2,170
2001 .................................................. 1,416
2002 .................................................. 969
2003 .................................................. 1,051
Thereafter ............................................ 2,977
-------
$10,716
=======
F-18
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Company is obligated to pay certain real estate taxes
under these lease arrangements. Rent expense approximated $2,065,000, $2,010,000
and $1,642,000 for the years ended September 30, 1998, 1997 and 1996.
Boise Cascade
Concurrent with the acquisition of its tissue paper machine, ATM Oregon
entered into an agreement with Boise Cascade Corporation ("Boise") whereby Boise
will operate and maintain the machine through December 2012. ATM Oregon will
reimburse Boise each month for the cost of such operations and maintenance. Fees
under this agreement approximated $11,911,000, $11,782,000 and $10,200,000 for
the years ended September 30, 1998, 1997 and 1996 including approximately
$695,000, $659,000 and $565,000 of fees capitalized relating to fixed asset
improvements.
Under certain circumstances, Boise has the option to acquire and ATM Oregon
has the option to sell the machine through December 31, 2012. The calculation of
the sales price under these options is based on the net book value of the
machine, as defined. Boise has a priority security interest in the equipment.
In addition, ATM Oregon has an obligation to purchase a minimum quantity of
paper pulp from Boise each year during the term of the agreement. Paper pulp
purchases from Boise approximated $16,199,000, $15,574,000 and $15,826,000 for
the years ended September 30, 1998, 1997 and 1996.
At September 30, 1998 and 1997, accounts payable and accrued expenses
included approximately $2,685,000 and $2,626,000 due to Boise.
Independent Broker
Certain subsidiaries of the Company have obligations to purchase a minimum
quantity of paper pulp from, and to supply a maximum quantity of jumbo rolls to,
an independent broker for a term of three years under certain conditions.
Wisconsin
The Company closed its facility in Tomahawk, Wisconsin in October 1997. As
discussed in Note 1, all equipment assets at this facility were transferred to
our New Hampshire mill. As of September 30, 1998, the net book value of the
remaining property was not material.
Litigation
The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. The outcome of such
current legal proceedings, claims and litigation could have a material effect on
our operating results or cash flows when resolved in a future period. Reference
is made to Note 14 for discussion of certain matters that occurred subsequent to
the date of these financial statements.
13. SUBSEQUENT EVENTS:
New Mortgage
In October 1998, the Company obtained an additional mortgage on the
property owned by Grand LLC in the amount of $800,000. The loan requires monthly
payments of approximately $6,000 commencing on
F-19
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 1, 1998, bears interest at a rate of 7.5% per annum, and requires a
balloon payment at maturity on November 1, 2008.
GECC Agreement
During January 1999, GECC amended its financing agreement with the Company
to, among other things, change the maturity of the term loans outstanding
thereunder from June 30, 2003 to June 30, 2000, to fix the interest rate at
10.5% per annum and to amend certain covenants effective with the quarter ending
March 31, 1999.
As a result of the foregoing, transactions, discussed herein, the schedule
of annual principal maturities of long-term debt as of September 30, 1998 and
including the new mortgage on the Calexico facility discussed in Note 14 is as
follows:
Year Ending September 30, Amount (in 000s)
- ------------------------- ----------------
1999 .................................................. $ 6,553
2000 .................................................. 31,138
2001 .................................................. 635
2002 .................................................. 687
2003 .................................................. 741
Thereafter ............................................ 18,079
-------
$57,833
=======
14. UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION:
The unaudited consolidated balance sheet and statement of stockholders
equity as of June 30, 1999 and the unaudited consolidated statements of
operations and cash flows for the nine months ended June 30, 1999 and 1998, in
the opinion of management, have been prepared on the same basis as the audited
consolidated financial statements and include all significant adjustments
(consisting primarily of normal recurring adjustments) considered necessary for
a fair presentation of the results of these interim periods. Operating results
for the nine month period ended June 30, 1999 are not necessarily indicative of
the results for the entire year.
15. EVENTS SUBSEQUENT TO THE DATE OF AUDITORS' REPORT:
Berlin-Gorham Mills Acquisition
On March 24, 1999, the Company entered into an asset purchase agreement
with Crown Paper Co., a wholly-owned subsidiary of Crown Vantage Inc., covering
the purchase of the inventory and fixed assets and the assumption of certain
liabilities of two paper and converting mills located in Berlin and Gorham, New
Hampshire. The purchase price of $47,100,000 in cash, is subject to adjustment,
based upon inventory values being higher or lower than $31,400,000 at a date
that approximates the closing of this transaction.
This transaction closed on July 9, 1999 and the Company paid $45,000,000 to
Crown Paper Co. as an initial payment for the acquisition, pending final
resolution of inventory values.
Refinancing
On April 19, 1999 the Company refinanced its 8.75% note payable from Valley
Independent Bank of $3,000,000 (see Note 6) with a $4,000,000 mortgage note from
Bank United. The term of this note is five years with principal amortization
based on a twenty year term. The rate of interest on this mortgage is 8.00%. As
a
F-20
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
result of the refinancing the 8.75% note payable has been reflected as long-term
debt in the accompanying consolidated balance sheets as of September 30, 1998
and March 31, 1999.
Senior Secured Note Offering
On July 9, 1999, the Company sold $165.0 million aggregate principal amount
of its 12 1/2% senior secured notes due 2006 (the "Notes") in a private
placement. The initial purchaser of the Notes has informed the Company that it
promptly resold the Notes to "qualified institutional buyers" in reliance on
Rule 144A under the Securities Act of 1933. Repayment of the Notes is guaranteed
by all of the Company's subsidiaries. After deduction of an original issue
discount, the Company received net proceeds of $159,446,100 from the sale of the
Notes, excluding expenses.
The Notes are secured by first priority liens on, among other things, all
of the paper mill plant and property, substantially all of the equipment,
intellectual property and related general intangibles of the Company's
subsidiaries and all of the stock and membership interests of each of the
Company's subsidiaries. In addition, the Notes are secured by second priority
liens on, among other things, certain other real property, accounts receivable,
inventory and related general intangibles of the Company's subsidiaries.
Middle American Tissue Notes and Equity Investment
On July 9, 1999, the Company's immediate parent, Middle American Tissue
Inc., raised approximately $20,000,000 through the sale of senior secured
discount notes due 2007 ("Middle American Notes") in a private transaction. The
Middle American Notes have a face value of $35,755,788 and were issued with
warrants to purchase up to 12% of Middle American Tissue's common stock at a
nominal exercise price. The Middle American Notes are structurally subordinate
to the New Credit Facility and the Notes because such notes were issued by the
Company's parent and are not guaranteed by the Company.
In addition, on July 9, 1999, Super American Tissue Inc., the Company's
indirect parent, made an equity investment in Middle American Tissue Inc. in the
amount of $5,000,000.
Middle American Tissue used both this amount and the net proceeds raised in
connection with the sale of the Middle American notes to make a $24.5 million
equity contribution to the Company.
At July 9, 1999, the total proceeds received by the Company from these
transactions was approximately $179,038,000, which amount was net of the
discount on the Notes of $5,553,900 and commissions and expenses of
approximately $5,408,000. The Company used the proceeds to make the asset
purchase from Crown Paper (see Note 7 above) and to pay down certain outstanding
debt as of the closing date.
Transfer of Related Party Debt
On July 9, 1999, approximately $27,900,000 representing all amounts owed by
the Company's subsidiaries to beneficial owners of the Company's common stock
and to certain affiliated entities as of such date were assumed by Super
American Tissue Inc., the Company's ultimate parent. This transaction has been
treated as an equity contribution from Super American Tissue Inc. to Middle
American Tissue Inc. and thereafter to the Company. The Company's subsidiaries
have been released from liabilities to such stockholders and affiliated
entities.
F-21
<PAGE>
AMERICAN TISSUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Litigation Settlement
In August 1999, the Company settled an action that was filed in the United
States District Court for the Eastern District of New York in June 1998
containing various claims of natural origin discrimination brought on behalf of
21 former employees of ATC. This action was settled without determination of
liability, for approximately $10,000 per plaintiff and $405,000 in the
aggregate. Additionally, ATC is a party to an action brought before the National
Labor Relations Board by the Service Employees International Union, Local 339,
AFL-CIO in August 1996, whereby ATC has been charged with certain violations of
employees' rights under the National Labor Relations Act. In November 1998, an
Administrative Law Judge rendered a decision against ATC and awarded back pay to
the same 21 employees in the case discussed above. No amount for the back pay
award has been determined and it is presently not possible to estimate the
amount of the award.
F-22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Management and Board of Directors
of Crown Vantage Inc.
We have audited the accompanying balance sheets of Crown Vantage Inc.'s
Berlin-Gorham Pulp and Paper Mill (the "Berlin-Gorham Mills") as of December 27,
1998 and December 28, 1997 and the related statements of operations, cash flows
and changes in Crown Vantage's investment for the 52 weeks ended December 27,
1998, December 28, 1997 and December 29, 1996. These statements are the
responsibility of the Berlin-Gorham Mills' management. Our responsibility is to
express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1, the financial statements referred to above include
the historical assets, liabilities and results of operations of the
Berlin-Gorham Mills and are not intended to be a complete presentation of the
Berlin-Gorham Mills' or Crown Vantage Inc.'s historical assets, liabilities and
results of operations. These financial statements were prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in a Registration Statement Form S-4 of American Tissue
Inc.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Berlin-Gorham Mills as
of December 27, 1998 and December 28, 1997 and the results of its operations and
cash flows for the 52 weeks ended December 27, 1998, December 28, 1997 and
December 29, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
April 23, 1999
San Francisco, California
F-23
<PAGE>
BERLIN-GORHAM MILLS
BALANCE SHEETS
(dollars in thousands)
December 27, December 28,
1998 1997
------------ ------------
Assets
Current Assets:
Cash and cash equivalents .......................... $ 1,753 $ 5,166
Accounts receivable ................................ 6,537 3,564
Inventories ........................................ 27,371 29,913
Prepaid expenses and other current assets .......... 115 679
-------- --------
Total current assets ............................ 35,776 39,322
-------- --------
Property, plant and equipment, net ................. 46,185 202,916
Other assets ....................................... 19,081 17,228
-------- --------
Total Assets .................................... $101,042 $259,466
======== ========
Liabilities and Equity
Current Liabilities:
Accounts payable ................................... $ 6,912 $ 5,525
Accrued liabilities ................................ 21,180 21,676
-------- --------
Total current liabilities ....................... 28,092 27,201
-------- --------
Long-term debt ..................................... 30,255 30,255
Accrued post retirement benefits other than pensions 30,724 31,389
Other long-term liabilities ........................ 2,033 1,937
-------- --------
Total Liabilities ............................... 91,104 90,782
-------- --------
Crown Vantage's Investment ......................... 9,938 168,684
-------- --------
Total Liabilities and Equity .................... $101,042 $259,466
======== ========
See notes to financial statements.
F-24
<PAGE>
BERLIN-GORHAM MILLS
STATEMENTS OF OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
December 27, December 28, December 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales ......................... 174,423 $ 183,398 $ 177,916
Cost of goods sold ................ 185,820 179,648 189,173
Severance charge .................. 1,932 -- --
--------- --------- ---------
Gross margin ...................... (13,329) 3,750 (11,257)
Selling and administrative expenses (9,155) (6,542) (3,698)
Asset impairment charge ........... (143,632) -- --
Gain on timberlands sale .......... -- 13,518 --
Corporate allocation .............. (7,764) (5,726) (5,412)
--------- --------- ---------
Operating income (loss) ........... (173,880) 5,000 (20,367)
Interest expense .................. (2,547) (2,547) (1,573)
Other income, net ................. 85 75 99
--------- --------- ---------
Income (loss) before income taxes . (176,342) 2,528 (21,841)
Income tax provision (benefit) .... (68,287) 1,077 (8,303)
--------- --------- ---------
Net income (loss) ................. $(108,055) $ 1,451 $ (13,538)
========= ========= =========
</TABLE>
See notes to financial statements.
F-25
<PAGE>
BERLIN-GORHAM MILLS
STATEMENTS OF CHANGES IN CROWN VANTAGE'S INVESTMENT
(dollars in thousands)
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
December 27, December 28, December 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Crown Vantage's Investment
Beginning Balance .............................. $ 168,684 $ 187,420 $ 219,002
Net Income (Loss) .............................. (108,055) 1,451 (13,538)
Capital investment (withdrawal):
Settlement of income taxes with Crown Vantage (68,287) 1,077 (8,303)
Capital investment (withdrawal) ............. 17,596 (21,264) (9,741)
--------- --------- ---------
Ending Balance ................................. $ 9,938 $ 168,684 $ 187,420
========= ========= =========
</TABLE>
See notes to financial statements.
F-26
<PAGE>
BERLIN-GORHAM MILLS
STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
December 27, December 28, December 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash provided by (used for) operating activities:
Net income (loss) ................................................... $(108,055) $ 1,451 $ (13,538)
Items not affecting cash:
Depreciation and cost of timber harvested ................ 23,966 24,179 24,061
Gain on sale of timberlands .............................. -- (13,518) --
Asset impairment charge .................................. 143,632 -- --
Other, net ............................................... (439) 164 (924)
Tax provision (benefit) .................................. (68,287) 1,077 (8,303)
Change in current assets and liabilities:
Accounts receivable ...................................... (2,973) 2,759 8,697
Inventories .............................................. 1,042 (5,713) 1,442
Other current assets ..................................... 564 (269) (274)
Accounts payable ......................................... 1,387 (52) (671)
Other current liabilities ................................ (496) 243 3,083
Other, net .......................................................... (2,471) (1,737) 870
--------- --------- ---------
Cash (used for) provided by operating ............... (12,130) 8,584 14,443
--------- --------- ---------
activities
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment ...................... (9,146) (13,084) (10,872)
Proceeds from sale of property, plant and equipment ................. 488 25,008 56
Other, net .......................................................... (221) (165) 101
--------- --------- ---------
Cash (used for) provided by investing activities .................... (8,879) 11,759 (10,715)
--------- --------- ---------
Cash provided by (used for) financing activities:
Proceeds from issuance of Industrial
Revenue Bonds, less underwriting costs .............................. -- -- 12,100
Crown Vantage's capital investment (withdrawal) ..................... 17,596 (21,264) (9,741)
--------- --------- ---------
Cash provided by (used for) financing ............... 17,596 (21,264) 2,359
activities
Increase (decrease) in cash and cash equivalents .................... (3,413) (921) 6,087
Cash and cash equivalents, beginning of year ........................ 5,166 6,087 --
--------- --------- ---------
Cash and cash equivalents, end of year .............. $ 1,753 $ 5,166 $ 6,087
========= ========= =========
</TABLE>
See notes to financial statements.
F-27
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
Note 1
The accompanying financial statements comprise the historical assets,
liabilities and operating results of the Berlin-Gorham Mills located in Berlin
and Gorham, New Hampshire, respectively. The Berlin-Gorham Mills are owned by
Crown Paper Co., a wholly-owned subsidiary of Crown Vantage Inc. (collectively
"Crown Vantage"). Subject to the successful consummation of the Asset Purchase
Agreement and related agreements by and between Crown Paper and American Tissue
Inc. ("American Tissue"), the Berlin-Gorham Mills will be sold to Pulp & Paper
of America LLC, an affiliate of American Tissue (the "Sale").
The accompanying financial statements have been prepared as if the
Berlin-Gorham Mills had operated as an independent stand-alone entity for all
periods presented. There are no allocations of Crown Vantage borrowings or
related interest expense in the accompanying financial statements except for
borrowings and interest expense of certain industrial revenue bonds incurred by
Crown Vantage that are restricted to environmental expenditures at the
Berlin-Gorham Mills. The Berlin- Gorham Mills engaged in various transactions
with Crown Vantage and its other mills that are characteristic of a group of
entities under common control. Throughout the period covered by these financial
statements, the Berlin-Gorham Mills participated in Crown Vantage's centralized
cash management system and, as such, its cash funding requirements were met by
Crown Vantage. The Berlin-Gorham Mills' operational transactions resulted in
amounts receivable from and payable to Crown Vantage, which fluctuate over time
and have not been settled through cash transfers. Accordingly, the amounts have
been presented net in the balance sheet as Crown Vantage's Investment.
Crown Vantage general and administrative costs not directly attributable to
the Berlin-Gorham Mills have been allocated based primarily on tons sold. Such
allocations totaled $6.9 million in 1998, $5.2 million in 1997 and $5.2 million
in 1996.
The Berlin-Gorham Mills are fully integrated pulp and paper mills. The
Berlin pulp mill produces approximately 220,000 tons of northern bleached
hardwood kraft pulp and 60,000 tons of northern bleached softwood kraft pulp
annually. Approximately 45% of the hardwood kraft is used by the Gorham mill in
the production of paper and the remaining hardwood kraft is dried and either
sold to other Crown Vantage mills or as market pulp. All of the softwood kraft
pulp is consumed by the Gorham mill in the production of paper. The
Berlin-Gorham Mills purchase a small quantity of pulp (approximately 15,000 tons
annually) to supply pulp grades not produced internally and to supply the paper
mill during the annual pulp mill outage.
The Gorham paper mill operates four paper machines that produce
approximately 150,000 tons of paper annually and one commercial toweling machine
with production capacity of approximately 40,000 tons annually. The four paper
machines produce a variety of printing and publishing papers including premium
text and cover grades, book papers, opaques, and forms bond.
On December 27, 1998, the Berlin-Gorham Mills employed approximately 850
individuals of which approximately 85% were hourly employees and 15% were
salaried employees. All of the hourly employees are represented under
collectively bargained union contracts.
Note 2
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements include the results of operations,
assets and liabilities of the Berlin-Gorham Mills for the 52 weeks ended
December 27, 1998, and December 28, 1997. The accompanying
F-28
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
financial statements also include the results of operations of the Berlin-Gorham
Mills for the 52 weeks ended December 29, 1996. The Berlin-Gorham Mills' fiscal
year includes the 52 or 53 weeks ending on the last Sunday in December.
Cash
Cash of approximately $1.8 million and $5.2 million at December 27, 1998
and December 28, 1997, respectively, represents remaining proceeds from an
industrial revenue bond offering that can be used only for qualified
environmental projects.
Inventories
Inventories are stated at the lower of cost or market and include the cost
of materials, labor and manufacturing overhead. The last-in, first-out cost flow
assumption is used for valuing all inventories other than stores and supplies,
which are valued using the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation, including related delivery and installation costs and interest
incurred on significant capital projects during their construction periods.
Expenditures for improvements that increase asset values or extend useful lives
are capitalized. Maintenance and repair costs are expensed as incurred. For
financial reporting purposes, depreciation is computed using the straight-line
method over the estimated useful lives of the respective assets, which range
from 20 to 45 years for buildings and 5 to 20 years for machinery and equipment.
Management assesses the recoverability of its investments in long-lived
assets to be held and used in operations whenever events or circumstances
indicate that their carrying amounts may be impaired. Such assessment requires
that the future cash flows expected to result from use of the assets are
estimated and an impairment loss recognized when future cash flows are less than
the carrying value of such assets. Estimating future cash flows requires an
estimate of useful lives of its long-lived assets, future production volumes and
costs, future sales volumes, demand for the mills' product mix and prices that
reflect the use of its long-lived assets and market conditions. Based on this
assessment, a $143.6 million charge was recorded during the fourth quarter of
1998 to write down impaired assets to the present value of their estimated
future cash flows. Although management believes it has a reasonable basis for
its estimates, it is reasonably possible that the estimate of future cash flows
could change from current estimates which could result in recognizing, in future
periods, additional material impairment losses on its long-lived assets at the
Berlin-Gorham Mills. (See "Note 11").
Landfill Closure and Post-Closure Costs
The Berlin-Gorham Mills accrue for landfill closure and post-closure costs
over the periods that benefit from the use of the landfills. Management
regularly reviews the adequacy of cost estimates and adjusts the accrued amounts
as necessary.
Income Taxes
The Berlin-Gorham Mills have historically been included in the consolidated
federal income tax returns and combined/unitary state income tax and value added
tax returns of Crown Vantage. The benefit/provision for income taxes is
management's estimate of the Berlin-Gorham Mills' share of Crown Vantage's
income tax benefit
F-29
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
that is intended to approximate the current provision/benefit that would have
been recognized had the Berlin-Gorham Mills filed separate income tax returns.
All taxes are domestic.
Current income taxes payable/receivable and deferred income tax assets and
liabilities have been treated as if settled immediately through Crown Vantage's
investment. Because the Berlin-Gorham Mills are included in the consolidated
Crown Vantage returns, net operating loss carryforwards, investment and other
tax credit carryforwards included in the calculation of the Crown Vantage income
tax benefit cannot be utilized on a standalone basis. As the Berlin-Gorham Mills
are not a separate legal or tax entity they are considered to have no reportable
net operating loss, tax credit carryforwards, or deferred tax assets and
liabilities.
Interest Expense
Interest expense included in the accompanying financial statements
represents interest expense on the industrial revenue bonds specifically
restricted for use in funding certain environmental capital improvements at the
Berlin-Gorham Mills. Interest expense reflected in the statements of operations
and the amount of debt reflected in the balance sheets are not intended to
reflect interest expense that the Berlin-Gorham Mills may have incurred nor the
amount of debt which would have been outstanding had the Berlin-Gorham Mills
been a standalone company for the years presented. As discussed below under
"Crown Vantage's Investment," transactions with Crown Vantage are treated as
settled immediately through the investment account. As a result, there were no
advances from Crown Vantage outstanding that would require recognition of
interest expense.
Sale of Accounts Receivable
In 1996, Crown Vantage entered into a five-year agreement with certain
banks which provides for the sale of undivided interests in a revolving pool of
trade accounts receivable, including trade receivables attributable to the
Berlin-Gorham Mills. As collections reduce accounts receivable included in the
pool, Crown Vantage sells undivided interests in new receivables to bring the
amount sold up to the amount permitted. Accounts receivable reported in the
accompanying balance sheets represent the Berlin-Gorham Mills receivables net of
the undivided interests in the Berlin-Gorham Mills receivables sold ($6.9
million and $8.4 million at December 27, 1998 and December 28, 1997,
respectively).
The proceeds from sales are less than the face amount of undivided
interests in accounts receivable sold and this discount ($.9 million in 1998,
$.5 million in 1997, and $.2 million in 1996) is included in corporate
allocations in the statement of operations.
Selected Sales Information
During 1998, 1997, and 1996 export sales to foreign markets from the
Berlin-Gorham Mills represented less than 10% of net sales for that year. The
Berlin-Gorham Mills have one significant customer that purchases both pulp and
uncoated paper. Pulp sold to this customer accounted for 13.6% of net sales in
1998, 9.6% in 1997 and 10.0% in 1996. Uncoated papers sold to this customer
accounted for 10.3% of net sales in 1998, 9.3% in 1997 and 3.1% in 1996. Sales
of pulp to other Crown Vantage mills, which are included in the accompanying
Statement of Operations, totaled $11.5 million in 1998, $15.9 million in 1997
and $17.1 million in 1996.
Crown Vantage's Investment
Crown Vantage's Investment reflects the historical intercompany activity
between the Berlin-Gorham Mills and Crown Vantage, and the Berlin-Gorham Mills'
cumulative results of operations. Transactions with Crown Vantage are reflected
as though they were settled immediately as an addition to or reduction of Crown
F-30
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
Vantage's Investment and there are no amounts due to or from Crown Vantage at
December 27, 1998 or December 28, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Note 3
Concentration of Credit Risk
Credit risk represents the accounting loss that would be recognized at the
reporting date if customers failed completely to perform as contracted.
Concentrations of credit risk that arise from financial instruments exist for
groups of customers when they have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. The Berlin-Gorham Mills do not have any
significant concentration of credit risk.
Note 4
Supplemental Balance Sheet Information
1998 1997
-------- --------
(dollars in
thousands)
Inventories
Raw Materials .................................. $ 3,950 $ 3,482
Work-in-process ................................ 586 677
Finished goods ................................. 13,031 14,545
Stores and supplies ............................ 11,702 13,391
29,269 32,095
Last-in, first-out reserve ..................... (1,898) (2,182)
-------- --------
Total Inventories ........................... $ 27,371 $ 29,913
======== ========
Valued at lower of cost or market:
Last-in, first-out ............................. $ 15,669 $ 16,522
First-in, first-out ............................ 11,702 13,391
-------- --------
Total inventories ........................... $ 27,371 $ 29,913
======== ========
1998 1997
-------- --------
(dollars in
thousands)
Property, Plant and Equipment
Land and improvements ........................ $ 17,499 $ 23,157
Buildings .................................... 35,447 43,716
Machinery and equipment ...................... 280,294 342,106
Construction in progress ..................... 3,633 4,690
--------- ---------
336,873 413,669
Accumulated depreciation ..................... (290,688) (210,753)
--------- ---------
Net property, plant and equipment ............ $ 46,185 $ 202,916
========= =========
F-31
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
1998 1997
------- -------
(dollars in thousands)
Accrued Liabilities
Compensated absences ............................... $ 2,948 $ 3,133
Employee insurance benefits ........................ 3,272 4,950
Accrued interest ................................... 1,154 1,161
Taxes payable, other than income taxes ............. 8,568 7,475
Other accrued liabilities .......................... 5,238 4,957
------- -------
Total accrued liabilities .......................... $21,180 $21,676
======= =======
Note 5
Long-term Debt
Long term debt consists of the following industrial revenue bonds (in
thousands) for both 1998 and 1997:
7.75% Refunding Bonds, due 2022 ............................. $17,955
7.875% Project Bonds, due 2026 .............................. 12,300
-------
$30,255
=======
Proceeds from the sale of the 7.875% Project Bonds are used to finance
eligible environmental project costs. At December 27, 1998 and December 28, 1997
approximately $1.8 million and $5.2 million, respectively had not yet been
spent. At December 27, 1998 and December 28, 1997, the fair value of the
industrial revenue bonds approximated book value. Cash paid for interest totaled
$2.4 million for 1998, $2.4 million for 1997 and $1.2 million for 1996.
Note 6
Pension and Other Benefit Plans
In connection with a spin-off transaction in 1995, Crown Vantage and James
River Corporation of Virginia (now "Fort James Corporation") entered into an
agreement with the Pension Benefit Guaranty Corporation (the "PBGC") whereby
U.S. pension plans transferred to Crown Vantage (including the Berlin-Gorham
Mills pension plans) and corresponding accumulated participant benefits were
frozen (the "Frozen Plans"). New pension plans (the "New Plans") were then
established by Crown Vantage that have terms substantially similar to the Frozen
Plans. An agreement exists between Fort James Corporation and the PBGC which
provides that, if the PBGC institutes proceedings to terminate a Frozen Plan,
Fort James Corporation may either assume sponsorship of the plan or will be
responsible for all liabilities arising from the termination of the plan. Fort
James Corporation's contingent obligation with respect to the Frozen Plans will
generally end when there are no unfunded benefit obligations for the Frozen
Plans. Fort James Corporation and Crown Vantage have entered into an agreement
that establishes minimum funding requirements by Crown Vantage for the Frozen
Plans that are at least equal to minimum funding requirements pursuant to
Section 412 of the Internal Revenue Code. All hourly plans at the Berlin-Gorham
Mills are for employees and retirees of that facility. The salary plan is for
all salaried employees of Crown Vantage. The Berlin-Gorham Mills were allocated
a portion of the salaried plan balances and income/expense based on actuarial
calculations.
Hourly employees at the Berlin-Gorham Mills who retire after having
attained at least age 55 with 10 years of service are eligible for post-retiree
medical benefits ("Other Benefits"). Salaried employees hired
F-32
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
before January 1, 1993, generally become eligible for retiree medical benefits
after reaching age 55 with 15 years of service or after reaching age 65.
Salaried employees hired after January 1, 1993 are not eligible for retiree
medical benefits. The retiree medical plans are unfunded.
The financial statements include the present value of benefit obligations,
related components of pension and other benefit costs, unrecognized net gains,
prior service costs, transition liabilities and plan assets that were derived
from actuarial calculations.
Summary information on the Berlin-Gorham Mills' pension and other benefit
plans is as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year ...... $ 71,224 $ 69,979 $ 19,901 $ 22,117
Service cost ................................. 1,298 1,030 408 371
Interest cost ................................ 5,167 5,586 1,441 1,420
Amendment .................................... 73 -- -- --
Plan participants' contributions ............. 294 249 727 688
Actuarial (gain) loss ........................ 3,201 320 1,125 (2,521)
Benefits paid ................................ (5,936) (5,940) (2,062) (2,174)
-------- -------- -------- --------
Benefit obligation at end of year ............ $ 75,321 $ 71,224 $ 21,540 $ 19,901
======== ======== ======== ========
Change in plan assets
Fair value of plan assets at beginning of year $ 97,907 $ 83,949
Actual return on plan assets ................. 1,667 19,024
Company contributions ........................ 1,095 625
Plan participants' contributions ............. 294 249
Benefits paid ................................ (5,936) (5,940)
-------- --------
Fair value of plan assets at end of year ..... $ 95,027 $ 97,907
======== ========
</TABLE>
Plan assets are invested primarily in domestic equity and fixed income
mutual funds. The following table sets forth the funded status of the
Berlin-Gorham Mill's pension plans and other benefit plans at December 27, 1998,
and December 28, 1997:
<TABLE>
<CAPTION>
Pension Plans Other Benefits Plans
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Funded status (over/(under)funded) ... $ 19,706 $ 26,683 $(21,540) $(19,901)
Unrecognized net gain ................ (5,535) (15,356) (3,892) (5,181)
Unrecognized prior service cost (gain) 2,546 3,006 (5,292) (6,307)
Unrecognized net transition liability 1,153 1,635 -- --
-------- -------- -------- --------
Net asset (liability) ................ $ 17,870 $ 15,968 $(30,724) $(31,389)
======== ======== ======== ========
</TABLE>
F-33
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
The components of the Berlin-Gorham Mill's net pension and other benefit
costs, were as follows:
<TABLE>
<CAPTION>
Pension Plans Other Benefit Plans
----------------------------------- -----------------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service cost ................................... $ 1,298 $ 1,030 $ 1,804 $ 408 $ 371 $ 469
Interest cost .................................. 5,167 5,586 8,073 1,441 1,420 1,655
Net investment income on plan assets ........... (7,733) (7,546) (9,994) -- -- --
Net amortization ............................... 351 518 1,170 (1,179) (1,341) (1,052)
------- ------- ------- ------- ------- -------
Net benefit cost (income) ...................... $ (917) $ (412) $ 1,053 $ 670 $ 450 $ 1,072
======= ======= ======= ======= ======= =======
</TABLE>
Net amortization of pension and other benefit costs includes amortization
of the net transition assets, net experience gains and losses, and prior service
costs over 15 to 20 years. The actuarial assumptions used in determining net
pension and other benefit costs and related pension and other benefit
obligations were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Discount Rate .................................................... 7.0% 7.5% 7.0% 7.5%
Assumed rate of increase in compensation levels .................. 4.0% 4.0%
Expected long-term rate of return on plan assets ................. 10.0% 10.0%
</TABLE>
Changes in actuarial assumptions for 1998 resulted in an increase to other
benefit costs of $.1 million and the related accumulated benefit obligation of
$1 million. The assumed health care cost trend rate used in measuring the
accumulated benefit obligation for other benefits was 6.5% in 1998, declining by
0.5% per year through 2002 to an ultimate rate of 4.5%. The effect of a 1%
change in the health care cost trend rate assumptions is as follows:
1% increase 1% decrease
----------- -----------
(dollars in thousands)
Service and interest cost ........................... $ 262 $ 215
Accumulated postretirement benefit obligation ....... $2,520 $2,197
Prepaid pension assets are included in other assets.
F-34
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
Note 7
Commitments and Contingent Liabilities
Leases
As of December 27, 1998, future minimum rental payments under noncancelable
operating leases were as follows:
Minimum
Rentals
-------------
(dollars
in thousands)
1999 ........................................................ $ 748
2000 ........................................................ 732
2001 ........................................................ 559
2002 ........................................................ 471
2003 ........................................................ 471
Later years ................................................. 579
------
Total future minimum rentals ................................ $3,560
======
Rent expense totaled $1.1 million in 1998, $.5 million in 1997 and $.6
million in 1996.
Environmental Matters
The Berlin-Gorham Mills have accrued $2.4 million at December 27, 1998 and
$2.5 million at December 28, 1997 primarily for estimated landfill site
restoration, post-closure and monitoring costs.
The Environmental Protection Agency signed final rules affecting pulp and
paper industry discharges of wastewater and gaseous emissions ("Cluster Rules")
which became effective on April 15, 1998. These Cluster Rules require changes in
the pulping, bleaching and/or wastewater treatment processes presently used in
some U.S. pulp and paper mills, including the Berlin pulp mill. Management
estimates that approximately $12.9 million of capital expenditures may be
required to comply with the rules with compliance dates beginning in 1999 and
extending over the next two to five years. 1998 environmental capital spending
includes $.2 million for compliance with the Cluster Rules. There are risks and
uncertainties associated with the estimate that could cause total capital
expenditures and timing of such expenditures to be materially different from
current estimates, including changes in technology, interpretation of the rules
by government agencies that is substantially different from Management's
interpretation, or other items.
Note 8
Timberland Gain
During the fourth quarter of 1997, the Berlin-Gorham Mills sold
approximately 24,000 acres of timber-producing properties for approximately
$24.5 million and recognized a gain of $13.5 million. Proceeds of the sale were
used to pay down Crown Vantage debt.
F-35
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
Note 9
Severance
During 1998, the Berlin-Gorham Mills accrued $1.9 million relating to a 5%
work force reduction. The accrual is for anticipated expenses resulting from the
work force reduction, primarily for severance and benefit payments to the
approximately 100 affected employees. Both hourly and salaried employees from
manufacturing, maintenance, and office staff were affected. As of December 27,
1998 approximately $1.0 million had been paid and the remainder will be paid
during the first half of 1999.
Note 10
Year 2000 Issue (Unaudited)
The Year 2000 issue concerns the potential inability of computer
applications, information technology systems, and certain software-based
"embedded" control systems to properly recognize and process date-sensitive
information as the Year 2000 approaches and beyond. The Berlin-Gorham Mills
could suffer material adverse impacts on their operations and financial results
if the applications and systems used by the Berlin-Gorham Mills, or by third
parties with whom the Berlin-Gorham Mills do business, do not accurately or
adequately process or manage dates or other information as a result of the Year
2000 issue.
The Berlin-Gorham Mills use a variety of software applications, business
information systems, accounting subsystems, process control systems and related
software, communication devices, and networking and other operating systems. The
Berlin-Gorham Mills have completed an inventory of all such systems and are
currently in the process of testing, upgrading, replacing, or otherwise
modifying these systems to adequately address the Year 2000 issue. The
Berlin-Gorham Mills believe they will be able to timely modify or replace
affected systems to prevent any material detrimental effects on operations and
financial results. However, the Berlin-Gorham Mills can give no assurance that
all critical Year 2000 issues will be resolved in a timely manner or that
potentially unresolved issues would not have a material adverse impact on the
results of operations.
The Berlin-Gorham Mills have certain key relationships with customers,
vendors and outside service providers. Failure by the Berlin-Gorham Mills' key
customers, vendors and outside service providers to adequately address the Year
2000 issue could have a material adverse impact on the Berlin-Gorham Mills'
operations and financial results. The Berlin-Gorham Mills are currently
assessing the Year 2000 readiness of these key customers, vendors and outside
service providers and, at this time, cannot determine what the impact of their
readiness will be on the Berlin-Gorham Mills.
Note 11
Subsequent Event
In March 1999, Crown Vantage reached an agreement with American Tissue for
the sale of substantially all of the Berlin-Gorham Mills' assets and certain
liabilities. In connection with Crown Vantage's decision to sell the
Berlin-Gorham Mills, the net assets to be sold will be written down to their net
realizable value in the first quarter of 1999. As a result, a charge will be
recognized in the Berlin-Gorham Mills' 1999 first quarter of approximately $16.2
million.
Settlement of Berlin Property Tax Case
On February 1, 1999, the Berlin-Gorham Mills finalized an agreement with
the City of Berlin, New Hampshire concerning assessed values and taxability of
factory machinery. Over the next three years the
F-36
<PAGE>
BERLIN-GORHAM MILLS
Notes to Financial Statements
agreement significantly reduces the assessed value from recent valuations of the
Berlin-Gorham Mills' pulp mill. The Berlin-Gorham Mills will reverse a property
tax accrual of approximately $9 million in the first quarter of 1999, which
relates to amounts over-accrued for previous tax years.
F-37
<PAGE>
BERLIN-GORHAM MILLS
BALANCE SHEET
(dollars in thousands)
<TABLE>
<CAPTION>
June 27, 1999 December 27, 1998
------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ..................................... $ 1,675 $ 1,753
Accounts receivable ........................................... 5,759 6,537
Inventories ................................................... 26,282 27,371
Prepaid expenses and other current assets ..................... 386 115
-------- --------
Total current assets .......................... 34,102 35,776
-------- --------
Property, plant and equipment, net ............................ 30,838 46,185
Other assets .................................................. 16,340 19,081
-------- --------
Total Assets ....................................... 81,280 $101,042
======== ========
Liabilities and Equity
Current Liabilities:
Accounts payable .............................................. 6,459 $ 6,912
Accrued liabilities ........................................... 13,407 21,180
-------- --------
Total current liabilities .......................... 19,866 28,092
-------- --------
Long-term debt ................................................ 30,255 30,255
Accrued post retirement benefits other than pensions .......... 24,337 30,724
Other long-term liabilities ................................... 2,179 2,033
-------- --------
Total Liabilities .................................. 76,637 91,104
-------- --------
Crown Vantage's Investment .................................... 4,643 9,938
-------- --------
Total Liabilities and Equity .................. 81,280 $101,042
======== ========
</TABLE>
See notes to financial statements.
F-38
<PAGE>
BERLIN-GORHAM MILLS
STATEMENTS OF OPERATIONS
(dollars in thousands)
26 Weeks Ended June(2)
------------------------
1999 1998
-------- --------
(unaudited)
Statements of Operations Data:
Net sales ...................................... $ 86,372 $ 87,439
Cost of sales .................................. 83,268 98,360
Severance charge ............................... -- 1,932
-------- --------
Gross margin ................................... 3,104 (12,853)
Adjustment to net realizable value ............. 16,175 --
Selling and administrative expenses ............ 4,693 5,136
Property tax accrual reversal .................. (8,957) --
Gain on timberland sale ........................ -- --
Asset impairment charge ........................ -- --
Corporate overhead allocation(3) ............... 3,783 3,342
-------- --------
Operating income (loss) ........................ (12,590) (21,331)
Interest expense and other income, net ......... 1,240 1,244
-------- --------
Loss before income taxes ....................... (13,830) (22,575)
Income tax benefit(4) .......................... (5,366) (8,759)
-------- --------
Net loss ....................................... $ (8,464) $(13,816)
======== ========
F-39
<PAGE>
BERLIN-GORHAM MILLS
STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
26 Weeks Ended
-----------------------------------
June 27, 1999 June 28, 1998
------------- -------------
(unaudited)
<S> <C> <C>
Cash provided by (used for) operating activities:
Net loss ..................................................... (8,464) (13,816)
Items not affecting cash:
Depreciation and cost of timber harvested 2,676 12,083
Property tax accrual reversal (8,957) --
Adjustment to net realizable value 16,175 --
Other, net 25 25
Tax benefit (5,366) (8,759)
Change in current assets and liabilities:
Accounts receivable 777 298
Inventories 1,090 156
Other current assets (271) (524)
Accounts payable (452) (28)
Other current liabilities (2,777) 6,290
Other, net ................................................... 146 121
-------- --------
Cash used for operating activities ........... (5,398) (4,154)
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment ............... (3,211) (2,812)
Proceeds from sale of property, plant and equipment .......... -- (212)
Other, net ................................................... (3) 208
-------- --------
Cash used for investing activities ........... (3,214) (2,816)
Cash provided by (used for) financing activities:
Crown Vantage's capital investment ........................... 8,534 6,742
-------- --------
Cash provided by financing activities ........ 8,534 6,742
-------- --------
Decrease in cash and cash equivalents ........................ (78) (228)
Cash and cash equivalents, beginning of year 1,753 5,167
======== ========
Cash and cash equivalents, end of period ..... $ 1,675 $ 4,939
======== ========
</TABLE>
See notes to financial statements.
F-40
<PAGE>
BERLIN-GORHAM MILLS
Notes to Interim Financial Statements
(unaudited)
Note 1-Organization and Basis of Presentation
The Berlin-Gorham Mills are owned by Crown Paper Co., a wholly-owned
subsidiary of Crown Vantage Inc. (collectively "Crown Vantage"). Subject to the
successful consummation of the Asset Purchase Agreement and related agreements
by and between Crown Paper Co. and American Tissue Inc. ("American Tissue"), the
Berlin-Gorham Mills will be sold to Pulp & Paper of America LLC, an affiliate of
American Tissue (the "Sale"). The accompanying condensed financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for annual financial statements. The condensed balance sheet as of December 27,
1998 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 26 weeks ended June 27, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 26, 1999. For further information, refer to the Berlin-Gorham Mills'
financial statements and footnotes thereto included in financial statements for
the year ended December 27, 1998.
The accompanying financial statements have been prepared as if the
Berlin-Gorham Mills had operated as an independent stand-alone entity for all
periods presented. There are no allocations of Crown Vantage borrowings or
related interest expense in the accompanying financial statements except for
borrowings and interest expense of certain industrial revenue bonds incurred by
Crown Vantage that are restricted to environmental expenditures at the
Berlin-Gorham Mills. The Berlin-Gorham Mills engaged in various transactions
with Crown Vantage and its other mills that are characteristic of a group of
entities under common control. Throughout the period covered by these financial
statements, the Berlin-Gorham Mills participated in Crown Vantage's centralized
cash management system and, as such, its cash funding requirements were met by
Crown Vantage. The Berlin-Gorham Mills' operational transactions resulted in
amounts receivable from and payable to Crown Vantage, which fluctuate over time
and have not been settled through cash transfers. Accordingly, the amounts have
been presented net in the balance sheet as Crown Vantage's Investment. For a
description of all significant intercompany transactions effecting the
Berlin-Gorham Mills please see the Berlin-Gorham Mills financial statements for
the year ended December 27, 1998.
Crown Vantage general and administrative costs not directly attributable to
Berlin-Gorham have been allocated based primarily on tons sold. Such allocations
for the first six months totaled $3.8 million in 1999, and $3.3 million in 1998.
Note 2-Sale of Accounts Receivable
In 1996, Crown Vantage entered into a five-year agreement with certain
banks which provides for the sale of undivided interests in a revolving pool of
trade accounts receivable, including trade receivables attributable to the
Berlin-Gorham Mills. As collections reduce accounts receivable included in the
pool, Crown Vantage sells undivided interests in new receivables to bring the
amount sold up to the amount permitted. Accounts receivable reported in the
accompanying balance sheets represent the Berlin-Gorham Mills receivables net of
the undivided interests in the Berlin-Gorham Mills receivables sold ($6.2
million at June 27, 1999 and $6.9 million at December 27, 1998).
The proceeds from sales are less than the face amount of undivided
interests in accounts receivable sold and this discount ($0.4 million in 1999
and 1998) is included in corporate allocations in the statement of operations.
Note 3-Sales to Crown Vantage Locations
Net sales of pulp to other Crown Vantage mills, which are included in the
accompanying Statement of Operations, totaled $5.6 million in 1999, and $6.0
million in 1998.
F-41
<PAGE>
BERLIN-GORHAM MILLS
Notes to Interim Financial Statements
(unaudited)
Note 4-Inventories
(amounts in thousands) June 27, 1999 December 27, 1998
- ---------------------- ------------- -----------------
Raw Materials .............................. $ 2,943 $ 3,950
Work-in-process ............................ 615 586
Finished goods ............................. 11,877 13,031
Stores and supplies ........................ 11,848 11,702
-------- --------
27,283 29,269
Last-in, first-out reserve ................. (1,001) (1,898)
-------- --------
Total Inventories .......................... $ 26,282 $ 27,371
======== ========
- -----------
Note 5-Long-term Debt
Long term debt consists of the following industrial revenue bonds (in
thousands) for periods presented:
7.75% Refunding Bonds, due 2022 ............................. $17,955
7.875% Project Bonds, due 2026 .............................. 12,300
- ----- ---- -------
$30,255
=======
Proceeds from the sale of the 7.875% Project Bonds are used to finance
eligible environmental project costs. At June 27, 1999 and December 27, 1998
approximately $1.7 million and $1.8 million, respectively had not yet been
spent.
Note 6-Environmental Matters
The Berlin-Gorham Mills have accrued $2.8 million at June 27, 1999 and $2.4
million at December 27, 1998 primarily for estimated landfill site restoration,
post-closure and monitoring costs.
The Environmental Protection Agency signed final rules affecting pulp and
paper industry discharges of wastewater and gaseous emissions ("Cluster Rules")
which became effective on April 15, 1998. These Cluster Rules require changes in
the pulping, bleaching and/or wastewater treatment processes presently used in
some U.S. pulp and paper mills, including the Berlin pulp mill. Management
estimates that approximately $12.9 million of capital expenditures may be
required to comply with the rules with compliance dates beginning in 1999 and
extending over the next two to five years. As of June 27, 1999, $0.2 million had
been spent in 1999 and Cluster Rule capital spending from inception to date
totals $0.4 million. There are risks and uncertainties associated with the
estimate that could cause total capital expenditures and timing of such
expenditures to be materially different from current estimates, including
changes in technology, interpretation of the rules by government agencies that
is substantially different from Management's interpretation, or other items.
Note 7-Year 2000 Issue (Unaudited)
The Year 2000 issue concerns the potential inability of computer
applications, information technology systems, and certain software-based
"embedded" control systems to properly recognize and process date-sensitive
information as the Year 2000 approaches and beyond. The Berlin-Gorham Mills
could suffer material adverse impacts on its operations and financial results if
the applications and systems used by the Berlin-Gorham Mills, or by third
parties with whom the Berlin-Gorham Mills do business, do not accurately or
adequately process or manage dates or other information as a result of the Year
2000 issue.
The Berlin-Gorham Mills use a variety of software applications, business
information systems, accounting subsystems, process control systems and related
software, communication devices, and networking and other operating systems. The
Berlin-Gorham Mills have completed an inventory of all such systems and are
currently in the process of testing, upgrading, replacing, or otherwise
modifying these systems to adequately address the Year 2000 issue. The
F-42
<PAGE>
Berlin-Gorham Mills
Notes to Intermim Financial Statements
(unaudited)
Berlin-Gorham Mills believe they will be able to timely modify or replace its
affected systems to prevent any material detrimental effects on operations and
financial results. However, the Berlin-Gorham Mills can give no assurance that
all critical Year 2000 issues will be resolved in a timely manner or that
potentially unresolved issues would not have a material adverse impact on the
results of operations.
The Berlin-Gorham Mills have certain key relationships with customers,
vendors and outside service providers. Failure by the Berlin-Gorham Mills' key
customers, vendors and outside service providers to adequately address the Year
2000 issue could have a material adverse impact on the Berlin-Gorham Mills'
operations and financial results. The Berlin-Gorham Mills are currently
assessing the Year 2000 readiness of these key customers, vendors and outside
service providers and, at this time, cannot determine what the impact of their
readiness will be on the Berlin-Gorham Mills.
Note 8-Berlin-Gorham Sale
In March 1999, Crown Vantage reached an agreement with American Tissue for
the sale of substantially all of the Berlin-Gorham Mills' assets and certain
liabilities. Management expects to consummate the sale during the second quarter
of 1999. In connection with Crown Vantage's decision to sell the Berlin-Gorham
Mills, a charge for $16.2 million was recorded in the first quarter of 1999 in
order to adjust the Berlin-Gorham Mills' net book value to its net realizable
value. The charge consisted of the following elements:
(amounts in millions)
- ---------------------
Fixed asset write-down................................................. $16.5
Accrued transaction fees............................................... 2.5
Loss on curtailment of pension plans................................... 3.4
Gain on curtailment/settlement of other benefit plans.................. (6.2)
-----
Total charge........................................................... $16.2
=====
Note 9-Settlement of Berlin Property Tax Case
On February 1, 1999, the Berlin-Gorham Mills finalized an agreement with
the City of Berlin, New Hampshire concerning assessed values and taxability of
factory machinery. Over the next three years the agreement significantly reduces
the assessed value from recent valuations of the Berlin-Gorham Mills' pulp mill.
The Berlin-Gorham Mills reversed a property tax accrual of approximately $9
million in the first quarter of 1999, which relates to amounts over-accrued for
previous tax years.
F-43
<PAGE>
AMERICAN TISSUE INC.
OFFER FOR
ALL OUTSTANDING 12 1/2% SERIES A
SENIOR SECURED NOTES DUE 2006
IN EXCHANGE FOR
12 1/2% SERIES B SENIOR SECURED NOTES DUE 2006
--------------------------------------------
PROSPECTUS
--------------------------------------------
____________, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law ("Section 145"), inter alia,
provides that a Delaware corporation may indemnify any persons who were, are or
are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Company's certificate of incorporation, as amended, provides for the
indemnification of directors and officers of the Company to the fullest extent
permitted by the Delaware General Corporation Law.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Company has applied for insurance covering all of the Company's
directors and officers against certain liabilities for actions taken in such
capacities, including liabilities under the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) A list of exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
incorporated herein by reference
ITEM 22. UNDERTAKINGS.
The undersigned registrants undertake:
(1) To file, during any period in which offers or sales are being
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II - 1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) that, for purposes of determining any liability under the Securities
Act of 1933 (the "Securities Act"), each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) that, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(6) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(7) insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II - 2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and
Stockholders of American Tissue Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of American Tissue Inc. (the "Company")
included in this registration statement and have issued our report thereon dated
February 19, 1999 (except for the matters discussed in Note 15, as to which the
date is August 10, 1999). Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The accompanying
schedule is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Melville, New York
February 19, 1999
II - 3
<PAGE>
SCHEDULE II
AMERICAN TISSUE INC.
VALUATION AND QUALIFYING ACCOUNTS
AMOUNTS IN 000s
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------ ---------------- ------------------ -------------------- --------------
Balance at Write-off of
beginning of Charged to uncollectible Balance at
Description period expenses accounts end of period
- ------------------------------------------ ---------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
September 30, 1996 ......................... $ 363 $ 497 $ 407 $ 453
September 30, 1997 ......................... $ 453 $1,120 $ 193 $1,380
September 30, 1998 ......................... $1,380 $ 560 $1,857 $ 83
</TABLE>
II - 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Hauppauge, State of
New York, on September , 1999.
AMERICAN TISSUE INC.
By: /s/ Mehdi Gabayzadeh
------------------------------------------------
Name: Mehdi Gabayzadeh
Title: President and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned constitutes and appoints Mehdi Gabayzadeh, Edward
I. Stein and Nourollah Elghanayan and each of them (with full power to act
alone), as attorneys and agents for the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign and file with the Securities
Exchange Commission under the Securities Act any or all amendments (including
post-effective amendments) and exhibits to this Registration Statement and any
and all applications, instruments and other documents to be filed with the
Commission pertaining to the registration of the securities covered hereby, with
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Nourollah Elghanayan Chairman of the Board and Director September 28, 1999
- -------------------------
Nourollah Elghanayan
/s/ Mehdi Gabayzadeh
- --------------------------
Mehdi Gabayzadeh President and Chief Executive September 28, 1999
Officer (Principal Executive Officer
and Director)
/s/ Edward I. Stein Executive Vice President and Chief September 28, 1999
- -------------------------
Edward I. Stein Financial Officer (Principal
Financial and Accounting Officer)
Director September , 1999
- -------------------------
Andrew Rush
</TABLE>
II - 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
subsidiary guarantors listed on Schedule A to the cover page of this
registration statement has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Village of
Hauppauge, State of New York, on September , 1999.
On behalf of each Subsidiary Guarantor listed on Schedule A
to the cover page of this registration statement
By: /s/ Mehdi Gabayzadeh
-----------------------------------------------
Name: Mehdi Gabayzadeh
Title: President and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints Mehdi Gabayzadeh and Nourollah
Elghanayan and each of them (with full power to act alone), as attorneys and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, in any and all capacities, to sign and
file with the Securities and Exchange Commission under the Securities Act any or
all amendments (including post-effective amendments) and exhibits to this
Registration Statement and any and all applications, instruments and other
documents to be filed with the Commission pertaining to the registration of the
securities covered hereby, with full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mehdi Gabayzadeh President and Chief Executive September 28, 1999
- ----------------------------
Mehdi Gabayzadeh Officer (Principal Executive Officer
and Director)
/s/ Nourollah Elghanayan Chairman of the Board and Director September 28, 1999
- ----------------------------
Nourollah Elghanayan
</TABLE>
II - 6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
subsidiary guarantors listed on Schedule B hereto has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Village of Hauppauge, State of New York, on September ,
1999.
On behalf of each Subsidiary Guarantor listed on Schedule A hereto
By: /s/ Mehdi Gabayzadeh
-----------------------------------------------
Name: Mehdi Gabayzadeh
Title: President and Chief Executive Officer
By: /s/ Nourollah Elghanayan
-----------------------------------------------
Name: Nourollah Elghanayan
POWER OF ATTORNEY
Each person of the undersigned hereby appoints Mehdi Gabayzadeh, Edward I.
Stein and Nourollah Elghanayan and each of them (with full power to act alone),
as attorneys and agents for the undersigned, with full power of substitution,
for and in the name, place and stead of the undersigned, in any and all
capacities, to sign and file with the Securities and Exchange Commission under
the Securities Act any or all amendments (including post-effective amendments)
and exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated on September , 1999.
II - 7
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of American Tissue Inc., as amended
3.2 By-Laws of American Tissue Inc.
3.3 Certificate of Incorporation of American Tissue Corporation, as
amended
3.4 By-Laws of American Tissue Corporation, as amended
3.5 Certificate of Incorporation of American Cellulose Mill Corp., as
amended
3.6 By-Laws of American Cellulose Mill Corp.
3.7 Articles of Organization of American Tissue Mills of Greenwich LLC
3.8 Operating Agreement of American Tissue Mills of Greenwich LLC, as
amended
3.9 Articles of Organization of American Tissue Mills of Neenah LLC
3.10 Operating Agreement of American Tissue Mills of Neenah LLC, as
amended
3.11 Certificate of Incorporation of American Tissue Mills of New
Hampshire, Inc., as amended
3.12 By-Laws of American Tissue Mills of New Hampshire, Inc., as amended
3.13 Certificate of Incorporation of American Tissue Mills of New York,
Inc., as amended
3.14 By-Laws of American Tissue Mills of New York, Inc.
3.15 Certificate of Incorporation of American Tissue Mills of Oregon,
Inc., as amended
3.16 By-Laws of American Tissue Mills of Oregon, Inc.
3.17 Certificate of Incorporation of American Tissue Mills of Wisconsin,
Inc., as amended
3.18 By-Laws of American Tissue Mills of Wisconsin, Inc.
3.19 Record of Organization of Berlin Mills Railway, Inc.
3.20 By-Laws of Berlin Mills Railway, Inc.
3.21 Articles of Organization Calexico Tissue Company LLC
3.22 Operating Agreement of Calexico Tissue Company LLC, as amended
3.23 Certificate of Incorporation of American Tissue - New Hampshire
Electric Inc., as amended
3.24 By-Laws of American Tissue - New Hampshire Electric Inc., as amended
3.25 Articles of Organization of Coram Realty LLC
3.26 Operating Agreement with Coram Realty LLC, as amended
3.27 Articles of Organization of Engineers Road, LLC
3.28 Operating Agreement of Engineers Road, LLC, as amended
3.29 Articles of Organization of Grand LLC, as amended
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.30 Operating Agreement of Grand LLC, as amended
3.31 Certificate of Incorporation of Gilpin Realty Corp., as amended
3.32 By-Laws of Gilpin Realty Corp.
3.33 Certificate of Formation of Hydro of America LLC
3.34 Operating Agreement of Hydro of America LLC, as amended
3.35 Certificate of Formation of Landfill of America LLC
3.36 Operating Agreement of Landfill of America LLC, as amended
3.37 Articles of Organization of Markwood LLC
3.38 Operating Agreement of Markwood LLC, as amended
3.39 Articles of Organization of 100 Realty Management LLC,
3.40 Operating Agreement of 100 Realty Management LLC, as amended
3.41 Certificate of Formation of Paper of America LLC
3.42 Operating Agreement of Paper of America LLC, as amended
3.43 Articles of Organization of Pulp & Paper of America LLC, as amended
3.44 Operating Agreement of Pulp & Paper of America LLC, as amended
3.45 Certificate of Formation of Pulp of America LLC
3.46 Operating Agreement of Pulp of America LLC, as amended
3.47 Certificate of Formation of Railway of America LLC
3.48 Operating Agreement of Railway of America LLC, as amended
3.49 Articles of Organization of Saratoga Realty LLC
3.50 Operating Agreement of Saratoga Realty LLC, as amended
3.51 Certificate of Incorporation of Tagsons Papers, Inc., as amended
3.52 By-Laws of Tagsons Papers, Inc.
3.53 Articles of Organization of Unique Financing LLC, as amended
3.54 Operating Agreement of Unique Financing LLC, as amended
4.1 Indenture dated as of July 9, 1999 among American Tissue Inc., each
Subsidiary Guarantor and The Chase Manhattan Bank, as Trustee
4.2 Form of 12 1/2% Series B Senior Secured Notes
4.3 Form of Subsidiary Guarantees
4.4 Purchase Rights Agreement dated as of July 9, 1999 among American
Tissue Inc., each Subsidiary Guarantor and Donaldson, Lufkin &
Jenrette Securities Corporation
4.5 Registration Rights Agreement dated as of July 9, 1999, by and among
American Tissue Inc., each Subsidiary Guarantor and Donaldson,
Lufkin & Jenrette Securities Corporation
- 2 -
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.6 Security Agreement dated as of July 9, 1999, made by American Tissue
Inc. and each of the Subsidiary Guarantors in favor of the Trustee
4.7 Form of Mortgage, Assignment of Leases, Security Agreement and
Fixture Filing dated as of July 9, 1999 between each of the
following Subsidiary Guarantors in favor of the Trustee: American
Tissue Mills of Greenwich LLC relating to premises at Mill Road,
Greenwich, New York; America Tissue Mills of New Hampshire, Inc.
relating to premises at 116 Lost Road, Winchester, New Hampshire;
American Tissue Mills of Neenah LLC relating to premises at 249 Lake
Street, Neenah, Wisconsin; American Tissue Mills of New York, Inc.
relating to premises at 510 South Main Street, Mechanicville, New
York; American Tissue Mills of Wisconsin, Inc. relating to premises
at 858 West Leather Avenue, Tomahawk, Wisconsin; Berlin Mills
Railway, Inc. relating to premises in Gorham, New Hampshire; Coram
LLC relating to premises at 466-468 Mill Road, Coram, New York;
Crown Vantage-New Hampshire Electric, Inc., relating to premises in
Berlin and Gorham, New Hampshire; Engineers Road LLC relating to
premises at 135 Engineers Road, Hauppauge, New York; Gilpin Realty
Corp. relating to premises at 45 Gilpin Avenue, Hauppauge, New York;
Landfill of America LLC relating to premises in Success, New
Hampshire; Paper of America LLC relating to premises in Gorham, New
Hampshire; Pulp of America LLC relating to premises in Berlin, New
Hampshire; and Saratoga Realty LLC relating to premises at 3
Duplainville Road, Saratoga Springs, New York
4.8 Leasehold Mortgage, Assignment of Leases, Security Agreement and
Fixture Filing dated as of July 9, 1999 between Grand LLC, as
mortgagor, and the Trustee, as mortgagee
4.9 Leasehold Deed of Trust, Assignment of Leases, Security Agreement
and Fixture Filing dated as of July 9, 1999 made by American Tissue
Mills of Oregon, Inc., as grantor, to Ticor Title Insurance Company,
as trustee for the benefit of the Trustee, as beneficiary
5.1 Opinion of Mandel & Resnik P.C.*
10.1 Amended and Restated Loan and Security Agreement dated July 9, 1999
among American Tissue Inc., certain subsidiaries of American Tissue
Inc., certain lenders and LaSalle Bank National Association, for
itself and as agent for the other lenders
10.2 Existing Lien Intercreditor Agreement dated as of July 9, 1999 among
American Tissue Inc., each of the Subsidiary Guarantors, the
Trustee, Bank United, The Roslyn Savings Bank and LaSalle Bank
National Association
10.3 Consent and Intercreditor Agreement dated as of July 9, 1999 among
American Tissue Mills of Oregon, Inc., American Tissue Corporation,
the Trustee and Boise Cascade Corporation
10.4 Asset Purchase Agreement dated March 24, 1999 by and among Crown
Paper Co., Crown Vantage-New Hampshire Electric, Inc., Berlin Mills
Railway, Inc., as Seller, and American Tissue Holdings Inc. (now
known as American Tissue Inc.) and Pulp & Paper of America LLC, as
Buyer
10.5 Instrument of Assumption of Liabilities dated July 9, 1999 made by
Pulp & Paper of America LLC and its subsidiaries in favor of Crown
Vantage, Inc. and its subsidiaries
10.6 Pulp Purchase Agreement dated March 24, 1999 between Crown Paper Co.
and Pulp & Paper of America LLC*
- 3 -
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.7 Paper Brokerage Agreement dated March 24, 1999 between Crown Paper
Co. and Pulp & Paper of America LLC*
10.8 Strategic Alliance Agreement dated March 24, 1999 between Crown
Paper Co. and Pulp & Paper of America LLC*
10.9 Lease dated August 1, 1998 between American Tissue Mills of Neenah
LLC and Lakeview Real Estate LLC relating to premises located at 249
North Lake Street, Neenah, Wisconsin
10.10 Lease dated June 1, 1998 between American Tissue Corporation and
Huntington LLC relating to premises located 1 Arnold Drive,
Huntington, New York
10.11 Lease dated January 18, 1996 between American Tissue Corporation and
Reckson Operating Partnership, L.P. relating to premises located at
85 Nicon Court, Hauppauge, New York
10.12 Lease dated in February 1990 between American Tissue Corporation and
Vanderbilt Associates relating to premises located at 110 Plant
Avenue, Hauppauge, New York
10.13 NOVATION AGREEMENT dated as of July 9, 1999 among Super American
Tissue Inc., Nourollah Elghanayan, Mehdi Gabayzadeh, Lakeview Real
Estate LLC and Huntington LLC
10.14 Lease dated August 15, 1996 between American Tissue Corporation and
Swimline Corporation relating to premises located at 56 Vanderbilt
Motor Parkway, Commack, New York
10.15 Lease Agreement dated as of March 20, 1998 between Waterford
Industrial Development Authority and Grand LLC relating to premises
located in Waterford, New York
10.16 Agreement dated November 23, 1992 between American Tissue Mills of
Oregon, Inc. and Boise Cascade, as amended by the Amendment dated
January 1, 1999 among the same parties and American Tissue
Corporation
10.17 Lease Agreement dated December 15, 1995 between American Tissue
Corporation and Curtiss-Wright Flight Systems/Shelby, Inc. relating
to premises located at Passaic Street, Wood-Ridge, New Jersey
10.18 Loan Agreement dated December 15, 1995 between American Tissue
Corporation and Curtiss-Wright Flight Systems/Shelby, Inc.
10.19 Lease Agreement dated as of November 1, 1997 between St. Lawrence &
Atlantic Railroad Company and Berlin Mills Railway Inc.
10.20 Service Agreement dated as of November 1, 1997 between Crown Paper
Co. and St. Lawrence & Atlantic Railroad Company
10.21 Note and Mortgage dated October 27, 1998 made by Grand LLC in favor
of Security Mutual Life Insurance Company of New York relating to
premises located in Halfmoon, New York
10.22 Consolidated Mortgage Note and Consolidated Mortgage dated December
29, 1997 made by Saratoga Realty LLC in favor of Bank United
relating to premises located at 3 Duplainville Road, Saratoga
Springs, New York
- 4 -
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.23 Consolidated Mortgage Note and Consolidated Mortgage dated October
17, 1997 made by Grand LLC in favor of Bank United relating to
premises located at Bell's Lane, Waterford, New York
10.24 Consolidated Mortgage Note and Consolidated Mortgage dated July 21,
1998 made by Gilpin Realty Corp., Coram Realty LLC, Engineers Road
LLC and Huntington LLC in favor of The Roslyn Savings Bank relating
to premises located at 135 Engineers Road, Hauppauge, New York,
466-468 Mill Road, Coram, New York and 45 Gilpin Avenue, Hauppauge,
New York
10.25 Mortgage Note and Deed of Trust dated as of April 19, 1999 made by
Calexico Tissue Company LLC in favor of Bank United
10.26 Agency Loan Promissory Note and Agency Loan Deed of Trust dated in
May 1997 made by Calexico Tissue Company LLC in favor of Community
Development Agency of the City of Calexico
10.27 Reimbursement Promissory Note and Reimbursement Deed of Trust dated
in July 1997 made by Calexico Tissue Company LLC in favor of
Community Development Agency of the City of Calexico
10.28 Agreement to Supply Sand and Gravel in Place dated October 30, 1997
between John Hancock Mutual Life Insurance Company and Crown Paper
Co.
10.29 Roundwood Supply Agreement dated June 28, 1999 between Prime Timber
Company LLC and Crown Paper Co.
10.30 Northeast Roundwood Supply Agreement dated October 30, 1997 between
John Hancock Mutual Life Insurance Company and Crown Paper Co.
10.31 Cooperative Agreement dated June 19, 1995 between Kimberly-Clark
Corporation and United Paperworker's International Union, AFL-CIO,
and Local No. 482
10.32 Labor Agreement dated as of June 24, 1997 between Crown Vantage and
United Paperworkers International Union, AFL-CIO, and its United
Brotherhood Local Union No. 75
10.33 Labor Agreement dated July 15, 1997 between Crown Paper Co. and
Office and Professional Employees International Union, Local 6
10.34 Agreement dated December 12, 1994 between American Tissue
Corporation and American Tissue Mills de Mexico S.A. de C.V.
12.1 Computation of ratio of earnings to fixed charges
21.1 Subsidiaries of American Tissue Inc.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Holtz Rubenstein & Co., LLP
- 5 -
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
23.3 Consent of Ernst & Young LLP
23.4 Consent of Mandel & Resnik P.C. (included in Exhibit 5.1)*
24.1 Powers of Attorney (included in signature pages)
25.1 Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Record Holders of Old Notes
99.4 Form of Letter to Beneficial Holders of Old Notes
- ------------------
*To be filed by amendment
- 6 -
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE HOLDINGS INC.
It is hereby certified that:
1. The name of the Corporation is:
American Tissue Holdings. Inc.
2. The Certificate of Incorporation is hereby amended by striking out
Article 1 thereof and by substituting in lieu of said Article the following new
Article 1:
The name of the Corporation is: American Tissue Inc.
3. The Amendment to the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
The effective time of the amendment herein certified shall be April 16, 1999.
/s/ Mehdi Gabayzadeh
----------------------------
Mehdi Gabayzadeh, President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/22/1999
991159716 -- 2933958
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BALLANTINE INC.
----------------------------
It is hereby certified that:
1. The name of the Corporation is:
Ballantine Inc.
2. The Certificate of Incorporation is hereby amended by striking out
Article 1 thereof and by substituting in lieu of said Article the following new
Article 1:
The name of the Corporation is: American Tissue Holdings Inc.
3. The Amendment to the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
The effective time of the amendment herein certified shall be August 21, 1998.
/s/ Mehdi Gabayzadeh
----------------------------
Mehdi Gabayzadeh, President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/10/1998
981353323 - 2933958
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 08/17/1998
981321165 - 2933958
CERTIFICATE OF INCORPORATION
OF
BALLANTINE INC.
FIRST: The name of this corporation is BALLANTINE INC.
SECOND: Its registered office in the State of Delaware is to be located at 15
North Street, in the City of Dover, County of Kent, 19901. The
registered agent in charge thereof is Nationwide Information Services,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this corporation
is 200 without par value.
FIFTH: The name and mailing address of the incorporator is as follows: Gina
Carney, c/o Nationwide Information Services, Inc., 52 James Street,
Albany, NY 12207.
I, the undersigned, for the purpose of forming a corporation under the laws
of the State of Delaware, do make, file and record this Certificate, and do
certify that the facts herein stated are true, and I have accordingly hereunto
set my hand this 17th day of August, 1998.
/s/ Gina Carney
------------------------
Gina Carney
Incorporator
<PAGE>
State of Delaware
Office of the Secretary of State
----------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "AMERICAN TISSUE INC.", FILED IN THIS OFFICE ON THE EIGHTH DAY OF SEPTEMBER,
A.D. 1999, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[SEAL] /s/ Edward J. Freel, Secretary of State
---------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9959228
DATE: 09-08-99
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE INC.
It is hereby certified that:
1. The name of the Corporation is:
American Tissue Inc.
2. The Certificate of Incorporation is hereby amended by adding the
following new Article Sixth:
SIXTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by
such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law, (i) for
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
No amendment to or repeal to this Article Sixth shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
3. The Amendment to the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 228 and 242 of
the General Corporation Law of the State of Delaware.
The effective time of the amendment herein certified shall be July 30,
1999.
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
BY-LAWS
OF
AMERICAN TISSUE INC.
(Formed under the laws of the State of Delaware)
<PAGE>
ARTICLE I
SHAREHOLDERS
1.1. Annual Meeting. A meeting of the shareholders shall be held annually for
the election of directors (each, a "Director", and collectively, the
"Directors") and the transaction of other business on such date in each year as
may be determined by the Board of Directors (the "Board"), but in no event later
than 180 days following the end of the fiscal year of the Corporation.
1.2. Special Meetings. Special meetings of the shareholders may be called by the
Board or, subject to the control of the Board, by the President and shall be
called by the Board upon the written request of the holders of record of a
majority of the outstanding shares of the Corporation entitled to vote at the
meeting requested to be called. Such request shall state the purpose or purposes
of the proposed meeting. At such meetings the only business which may be
transacted is that relating to the purpose or purposes set forth in the notice
thereof.
1.3. Place of Meetings. Meetings of shareholders shall be held at such place,
within or without the State of Delaware, as may be fixed by the Board. If no
place is so fixed, such meetings shall be held at the office of the Corporation
in the State of New York.
1.4. Notice of Meetings. Notice of each meeting of shareholders shall be given
in writing and shall state the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called. Notice of a special meeting
shall indicate that it is being issued by or at the direction of the person or
persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
1.5. Waiver of Notice. Notice of meeting need not be given to any shareholder
who submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any shareholder at a meeting, in person or
by proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
1.6. Inspectors of Election. The Board, in advance of any shareholders' meeting,
may appoint one or more inspector to act at the meeting or any adjournment
thereof. If inspectors are not so appointed, the person presiding at a
shareholders' meeting may, and on the request of any shareholder entitled to
vote thereat shall, appoint two inspectors. In case any person appointed fails
to appear or act, the vacancy may be filled by appointment made by the Board in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, before entering upon the
- 1 -
<PAGE>
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum,and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
1.7. List of Shareholders at Meetings. A list of shareholders as of the record
date, certified by the Secretary, any Assistant Secretary or by a transfer
agent, shall be produced at any meeting of shareholders upon the request thereat
or prior thereto of any shareholder. If the right to vote at any meeting is
challenged, the inspectors of election, or person presiding thereat, shall
require such list of shareholders to be produced as evidence of the right of the
persons challenged to vote at such meeting, and all persons who appear from such
list to be shareholders entitled to vote thereat may vote at such meeting.
1.8. Qualification of Voters. Unless otherwise provided in the Certificate of
Incorporation, every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the record of
shareholders.
Treasury shares as of the record date and shares held as of the record date by
another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator, committee, or
other fiduciary, except a trustee, may be voted by him, either in person or by
proxy, without transfer of such shares into his name. Shares held by a trustee
may be voted by him, either in person or by proxy, only after the shares have
been transferred into his name as trustee or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation of any
type or kind may be voted by such officer, agent or proxy as the by-laws of such
corporation may provide, or, in the
- 2 -
<PAGE>
absence of such provision, as the board of directors of such corporation may
determine.
A shareholder shall not sell his vote or issue a proxy to vote to any person for
any sum of money or anything of value except as permitted by law.
1.9. Quorum of Shareholders. The holders of a majority of the shares entitled to
vote thereat shall constitute a quorum at a meeting of shareholders for the
transaction of any business.
When a quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled to
vote may, by a majority of votes cast, adjourn the meeting despite the absence
of a quorum.
1.10. Proxies. Every shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize another person
or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy
shall be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary of any Assistant
Secretary.
1.11. Vote or Consent of Shareholders. Directors shall, except as otherwise
required by law or by written agreement among the shareholders, be elected by a
plurality of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to be
taken by vote of the shareholders, it shall, except as otherwise required by law
or by written agreement among the shareholders, be authorized by a majority of
the votes cast at a meeting of shareholders by the holders of shares entitled to
vote thereon.
Whenever shareholders are required or permitted to take any action by vote, such
action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
- 3 -
<PAGE>
1.12. Fixing Record Date. For the purpose of determining the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board may fix, in advance, a date as the record
date for any such determination of shareholders. Such date shall not be more
than fifty (50) nor less than ten (10) days before the date of such meeting, nor
more then fifty (50) days prior to any other action.
When a determination of shareholders of record entitled to notice of or to vote
at any meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, unless the Board fixes a
new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
2.1. Power of Board and Qualification of Directors. The business of the
Corporation shall be managed by the Board. Each Director shall be at least
eighteen (18) years of age.
2.2. Number of Directors. The number of directors constituting the entire Board
shall be two (2) as follows: Mehdi Gabayzadeh and Nourollah Elghanayan.
2.3. Election and Term of Directors. At each annual meeting of shareholders,
Directors shall be elected to hold office until the next annual meeting and
until their successors have been elected and qualified.
2.4. Quorum of Directors and Action by the Board. A majority of the entire Board
shall constitute a quorum for the transaction of business, and, except where
otherwise provided by these by-laws or by written agreement among the
shareholders, the vote of a majority of the directors present at a meeting at
the time of such vote, if a quorum is then present, shall be the act of the
Board.
Any action required or permitted to be taken by the Board or any committee
thereof may be taken without a meeting if all members of the Board or the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
2.5. Meetings of the Board. An annual meeting of the Board shall be held in each
year directly after the annual meeting of shareholders. Regular meetings of the
Board shall be held at such times as may be fixed by the Board. Special meetings
of the Board
- 4 -
<PAGE>
may be held at any time upon the call of the President or a majority of the
Directors.
Meetings of the Board shall be held at such places as may be fixed by the Board
for annual and regular meetings and in the notice of meeting for special
meetings. If no place is so fixed, meetings of the Board shall be held at the
principal office of the Corporation. Any one (1) or more members of the Board
may participate in meetings by means of a conference telephone or similar
communications equipment.
No notice need be given of annual or regular meetings of the Board. Notice of
each special meeting of the Board shall be given to each director either by mail
not later than noon, Delaware time, on the third day prior to the meeting or by
telegram, written message or orally to the Director not later than noon,
Delaware time, on the day prior to the meeting. Notices are deemed to have been
given: by mail, when deposited in the United States mail; by telegram at the
time of filing; and by messenger at the time of delivery. Notices by mail,
telegram or messenger shall be sent to each Director at the address designated
by him for that purpose, or, if none has been so designated, at his last known
residence or business address.
Notice of a meeting of the Board need not be given to any Director who submits a
signed waiver of notice whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting of
the Board.
A majority of the Directors present, whether or not a quorum is present, may
adjourn any meeting to another time and place. Notice of any adjournment of a
meeting to another time or place shall be given, in the manner described above,
to the Directors who were not present at the time of the adjournment and, unless
such time and place are announced at the meeting, to the other Directors.
2.6. Resignations. Any Director of the Corporation may resign at any time by
giving written notice to the Board or to the President or to the Secretary of
the Corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
2.7. Removal of Directors. Any one or more of the Directors may be removed for
cause by a vote of the majority of the shares. For purposes of these by-laws,
"cause" shall mean gross negligence, dishonesty and/or a willful failure to
perform the duties of a Director as set forth in these by-laws. Any and all of
the Directors may be removed with or without cause by vote of the shareholders.
- 5 -
<PAGE>
2.8. Newly Created Directorships and Vacancies. Newly created directorships
resulting from an increase in the number of Directors and/or vacancies occurring
in the Board for any reason, except the removal of Directors by shareholders,
may be filled by vote of a majority of the Directors then in office, although
less than a quorum exists, unless otherwise agreed upon by the Corporation or
its shareholders. Vacancies occurring as a result of the removal of Directors by
shareholders shall be filled by the shareholders, unless otherwise agreed upon
by the Corporation or its shareholders. A Director elected to fill a vacancy
shall be elected to hold office for the unexpired term of his predecessor.
2.9. Executive and Other Committees of Directors. The Board, by resolution
adopted by a majority of the entire Board, may designate from among its members
an executive committee and other committees each consisting of two (2) or more
directors and each of which, to the extent provided in the resolution, shall
have all the authority of the Board, except that no such committee shall have
authority as to the following matters:
(1) The submission to shareholders of any action that needs shareholders'
approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the Directors for serving on the Board
or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by its
term, shall not be so amendable or repealable; or
(6) The removal or indemnification of Directors.
The Board may designate one or more Directors as alternate members of any such
committee, who may replace any absent member or members at any meeting of such
committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board.
2.10. Compensation of Directors. The Board shall have authority to fix the
compensation of Directors for services in any capacity.
- 6 -
<PAGE>
2.11. Interest of Directors in a Transaction. Unless shown to be unfair and
unreasonable as to the Corporation, no contract or other transaction between the
Corporation and one (1) or more of its Directors, or between the Corporation and
any other corporation, firm, association or other entity in which one (1) or
more of the Directors are directors or officers, or are financially interested
shall be either void or voidable, irrespective of whether such interested
Director or Directors are present at a meeting of the Board, or of a committee
thereof, which authorizes such contract or transaction and irrespective of
whether his or their votes are counted for such purpose. In the absence of
fraud, any such contract or transaction may be conclusively authorized or
approved as fair and reasonable by:
(1) the Board, or a duly empowered committee thereof, by a vote sufficient
for such purpose without counting the vote or votes of such interested
Director(s) (although he or they may be counted in determining the
presence of a quorum at the meeting which authorizes such contract or
transaction), if the fact of such common directorship, officership or
financial interest is disclosed or known to the Board or committee (as
the case may be); or
(2) the shareholders entitled to vote for the election of Directors, if
such common directorship, officership or financial interest is
disclosed or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any Director unless it is
authorized by vote of the shareholders without counting any shares of the
Director who would be the borrower.
ARTICLE III
OFFICERS
3.1. Officers. The Board, as soon as may be practicable after the annual
election of Directors, shall elect a President, Treasurer and Secretary and from
time to time may elect or appoint one (1) or more Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents and such other officers as it may
determine. Any two (2) or more offices may be held by the same person, except
that the same person may not hold the offices of President and Secretary unless
there be only (1) shareholder. The Board may also elect one (1) or more
Assistant Secretaries and Assistant Treasurers.
3.2. Other Officers. The Board may appoint such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
- 7 -
<PAGE>
3.3. Compensation. The salaries of all officers and agents of the Corporation
shall be fixed by the Board. Any payments made to an officer of the Corporation
such as a salary, commission, bonus, interest or rent, or entertainment expenses
incurred by him or her, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be reimbursed by such
officer of the Corporation to the full extent of such disallowance. It shall be
the duty of the Board to enforce payment of each such amount disallowed. In lieu
of payment by the officer, subject to the determination of the Directors,
proportionate amounts may be withheld from future compensation payments until
the amount owed to the Corporation has been recovered.
3.4. Term of Office and Removal. Each officer shall hold office for the term for
which he is elected or appointed, and until his successor has been elected or
appointed and qualified. Unless otherwise provided in the resolution of the
Board electing or appointing an officer, his or her term of office shall extend
to and expire at the meeting of the Board following the next annual meeting of
shareholders. Any officer may be removed by the Board, with or without cause, at
any time. Removal of an officer without cause shall be without prejudice to his
or her contract rights, if any, and the election or appointment of an officer
shall not of itself create contract rights.
3.5. Powers and Duties.
(a) President: The President shall be the chief operating officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board are
carried into effect. He shall also preside at all meetings of the shareholders
and the Board.
He shall execute bonds, mortgages and other contracts requiring a seal, under
the seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board to some other officer or agent of the
Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board, or in the absence of any designation, then in the order of their
election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice
- 8 -
<PAGE>
of all meetings of the shareholders and special meetings of the Board, and shall
perform such other duties as may be prescribed by the Board or President, under
whose supervision the Secretary shall be. The Secretary shall have custody of
the corporate seal of the Corporation and he or she, or an Assistant Secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by his or her signature or by the signature of
such Assistant Secretary. The Board may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature.
The Assistant Secretary or, if there be more than one, the Assistant Secretaries
in the order designated by the Board (or in the absence of any designation, then
in the order of their election), shall, in the absence of the Secretary or in
the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board may from time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board.
He shall disburse the funds of the Corporation as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the President
and the Board, at its regular meetings, or when the Board so requires, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation.
If required by the Board, the Treasurer shall give the Corporation a bond (which
shall be renewed every six (6) years) in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful performance of
the duties of his or her office and for the restoration to the Corporation, in
case of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one (1), the Assistant
Treasurers in the order designated by the Board (or in the absence of any
designation, then in the order of their election), shall, in the absence of the
Treasurer or in the event of his or her inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board may from time to time prescribe.
3.6. Books to be Kept. The Corporation shall keep (a) correct and complete books
and records of account, (b) minutes of the
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<PAGE>
proceedings of the shareholders, Board and any committees of Directors, and (c)
a current list of the Directors and officers and their residence addresses. The
Corporation shall also keep at its office in the State of Delaware or at the
office of its transfer agent or registrar in the State of Delaware, if any, a
record containing the names and addresses of all shareholders, the number and
class of shares held by each and the dates when they respectively became the
owners of the record thereof.
The Board may determine whether and to what extent and at what times and places
and under what conditions and regulations any accounts, books, records or other
documents of the Corporation shall be open to inspection, and no creditor,
security holder or other person shall have any right to inspect any accounts,
books, records or other documents of the Corporation except as conferred by
statute or as so authorized by the Board.
3.7. Checks, Notes, etc. All checks and drafts on, and withdrawals from the
Corporation's accounts with banks or other financial institutions, and all bills
of exchange, notes and other instruments for the payment of money, drawn, made,
indorsed, or accepted by the Corporation, shall be signed on its behalf by the
person or persons thereunto authorized by, or pursuant to resolution of, the
Board.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
4.1. Forms of Share Certificates. The shares of the Corporation shall be
represented by certificates, in such forms as the Board may prescribe, signed by
the President or a Vice-President and the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation or its employee.
In case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Corporation with the same effect as if he or
she were such officer at the date of issue.
Each certificate representing shares issued by the Corporation shall set forth
upon the face or back of the certificate, or shall state that the Corporation
will furnish to any shareholder upon request and without charge, a full
statement of the designation, relative rights, preferences and limitations of
the shares of each class of shares, if more than one (1), authorized to be
issued and the designation, relative rights, preferences and limitations of each
series of any class of preferred shares authorized to be issued so far as the
same have been fixed, and the authority of the
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<PAGE>
Board to designate and fix the relative rights, preferences and limitations of
other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of
Delaware;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series, if
any, which such certificate represents.
4.2. Transfers of Shares. Shares of the Corporation shall be transferable on the
record of shareholders upon presentment to the Corporation or a transfer agent
of a certificate or certificates representing the shares requested to be
transferred, with proper indorsement on the certificate or on a separate
accompanying document, together with such evidence of the payment of transfer
taxes and compliance with other provisions of law as the Corporation or its
transfer agent may require.
4.3. Lost, Stolen or Destroyed Share Certificates. No certificate for shares of
the Corporation shall be issued in place of any certificate alleged to have been
lost, destroyed or wrongfully taken, except, if and to the extent required by
the Board, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents against
any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced
certificate or the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred in
connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be imposed.
ARTICLE V
OTHER MATTERS
5.1. Corporate Seal. The Board may adopt a corporate seal, alter such seal at
pleasure, and authorize it to be used by causing it or a facsimile to be affixed
or impressed or reproduced in any other manner.
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<PAGE>
5.2. Fiscal Year. The fiscal year of the Corporation shall be the period of
twelve (12) months ending September 30 of each year.
5.3. Amendments. By-laws of the Corporation may be adopted, amended or repealed
by vote of the holders of the shares at the time entitled to vote in the
election of Directors. By-laws may also be adopted, amended or repealed by the
Board, but any by-law adopted by the Board may be amended or repealed by the
shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of Directors is adopted, amended
or repealed by the Board, there shall be set forth in the notice of the next
meeting of shareholders for the election of Directors the by-law so adopted,
amended or repealed, together with a concise statement of the changes made.
5.4. Indemnification. The Corporation shall, to the extent legally permissible,
indemnify any person serving or who has served as a Director or officer of the
Corporation, or at its request as a Director, officer, trustee, employee or
other agent of any organization in which the Corporation owns shares or of which
it is a creditor, against all liabilities and expenses, including amounts paid
in satisfaction of judgments, in compromise, or as fines or penalties, and
counsel fees, reasonably incurred by him or her in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, in which he or she may be involved or with which he or she may be
threatened, while serving, or thereafter, by reason of his or her being or
having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(1) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the Directors, then in office; or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to vote for Directors, voting as a
single class, exclusive of any stock owned by any interested Director
or officer; or
(2) in the absence of action by disinterested Directors or shareholders,
there has been obtained at the request of a majority of the Directors then in
office an opinion in writing of
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<PAGE>
independent legal counsel to the effect that such Director, officer, trustee,
employee or agent appears to have acted in good faith in the reasonable belief
that his or her action was in the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such Director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an undertaking by such individual to repay the amounts so paid by the
Corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any such Director, officer, trustee, employee or agent may be entitled. Nothing
contained in this Article shall affect any rights to indemnification to which
corporate personnel other than Directors, officers, trustees, employees or
agents may be entitled by contract or otherwise under law. As used in this
section, the terms "Director", "officer", "trustee", "employee" and "agent"
include their respective heirs, executors and administrators, and an
"interested" Director, officer, trustee, employee or agent is one against whom
in such capacity the proceedings in question, or other proceedings on the same
or similar grounds, are then pending.
- 13 -
CERTIFICATE OF MERGER
CERTIFICATE OF MERGER OF UNITED DISPOSABLE PRODUCTS CORP.,
AND AMERICAN TISSUE CORPORATION, INTO AMERICAN TISSUE CORPORATION,
UNDER ss.904 OF THE BUSINESS CORPORATION LAW
We, Nourollah Elghanayan and Yahya Gabayzadeh, being respectively President
and Secretary of United Disposable Products Corp. ("United"), and we, Yahya
Gabayzadeh and Medhi Gabayzadeh, being respectively President and Secretary of
American Tissue Corporation ("ATC") do hereby certify that, pursuant to the plan
of merger hereinafter set forth, said corporations have mutually agreed to, and
hereby do, unite and merge into a single corporation under the name of American
Tissue Corporation, pursuant to ss.904 of the New York Business Corporation Law.
The date when the certificate of incorporation of United was filed by the
Department of State of New York was September 24, 1984. The date when the
certificate of incorporation of ATC was filed by the said State Department was
October 5, 1981. ATC now has 99 shares of capital stock outstanding, all
of which is common stock and fully entitled to vote, and United now has 99
shares of capital stock outstanding, all of which is likewise common stock with
full voting rights.
A plan of merger was agreed upon by unanimous written consent of the
directors and shareholders of the above-named constituent corporations dated
July 8, 1986, in accordance with ss.903 of the Business Corporation Law.
Terms of this merger, as authorized and adopted, are as follows:
1. The names of the constituent corporations are United Disposable Products
Corp. and American Tissue Corporation.
2. The name of the surviving corporation is American Tissue Corporation.
The name under which ATC was formed is American Tissue Converters, Inc.
United was formed under the name American Disposable Products Corp. and
subsequently changed its name to American Hygienic Products Corp. and thereafter
to United Disposable Products Corp.
3. As to each constituent corporation, the designation and number of
outstanding shares and the nature of the interests, are as follows:
<PAGE>
A. There are 99 shares of capital stock of ATC outstanding, all duly
authorized and issued and fully paid and non-assessable, there are no other
securities of ATC or warrants, options or other rights therein authorized,
issued or outstanding. The following is a complete and accurate list of all
those persons owning securities of ATC.
NAME AND NUMBER AND TYPE NATURE OF
ADDRESS OF SHARES INTEREST
- ---------- --------------- ---------
Nourollah Elghanayan
19 Markwood Road 33 Common Direct
Forest Hills, NY
Nasser Damaghi
12 Ballantine Lane 33 Common Direct
Kings Point, NY
Medhi Gabayzadeh
5 Pleasant Lane 16 1/2 Common Direct
Kings Point, NY
Yahya Gabayzadeh
11 Dock Lane 16 1/2 Common Direct
Kings Point, NY
B. There are 99 shares of capital stock of United outstanding, all duly
authorized and issued and fully paid and non-assessable; there are no other
securities of United or warrants, options or other rights therein authorized,
issued or outstanding. The following is a complete and accurate list of all
those persons owning securities of United:
NAME AND NUMBER AND TYPE NATURE OF
ADDRESS OF SHARES INTEREST
- ------------------ --------------- ----------
Nourollah Elghanayan
19 Markwood Road 33 Common Direct
Forest Hills, NY
Nasser Damaghi
12 Ballantine Lane 33 Common Direct
Kings Point, NY
Medhi Gabayzadeh
5 Pleasant Lane 16 1/2 Common Direct
Kings Point, NY
Yahya Gabayzadeh
11 Dock Lane 16 1/2 Common Direct
Kings Point, NY
<PAGE>
4. It will be noted from the above that American Tissue Corporation will be
the surviving corporation and will continue to operate under the name of
American Tissue Corporation when this merger becomes effective. The certificate
of incorporation of said American Tissue Corporation shall not be amended as a
result of the above merger plan.
5. Such plan is to become effective on September 1, 1986 and the surviving
corporation shall have, thereupon and thereafter, such additional rights, powers
and liabilities, as are conferred or imposed by ss.906 of the Business
Corporation Law and by the terms and conditions of the said merger plan.
IN WITNESS WHEREOF, this Certificate has been signed and the statements
made herein are affirmed as true under the penalties of perjury this 12th day of
August, 1986.
UNITED DISPOSABLE PRODUCTS CORP.
/s/ Yahya Gabayzadeh By: /s/Nourollah Elghanayan
- --------------------------- -----------------------------------
Yahya Gabayzadeh, Secretary Nourollah Elghanayan, President
AMERICAN TISSUE CORPORATION
/s/ Medhi Gabayzadeh By: /s/ Yahya Gabayzadeh
- --------------------------- -----------------------------------
Medhi Gabayzadeh, Secretary Yahya Gabayzadeh, President
<PAGE>
================================================================================
CERTIFICATE OF MERGER OF UNITED DISPOSABLE PRODUCTS CORP., AND
AMERICAN TISSUE CORPORATION, INTO AMERICAN TISSUE CORPORATION,
UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW
================================================================================
STATE OF NEW YORK
CERTIFICATE OF MERGER [STAMP] DEPARTMENT OF STATE
FILED AUG. 15, 1986
================================================================================
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE CONVERTERS INC.
Under Section 402 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
1. The name of the Corporation is:
AMERICAN TISSUE CONVERTERS INC.
2. The purpose or purposes for which the corporation is formed as follows,
to wit:
To engage in any manufacturing, merchantile or trading business or businesses of
any kind and to do all things incidental thereto. To maintain and operate
property and facilities for the production and sale of any articles; to purchase
or otherwise acquire, own, mortgage, pledge, create security interest in, sell
assign, and transfer or otherwise dispose of, invest, trade and deal in goods,
wares, and merchandise and real and personal property, of every class and
description. More particularly, but without limiting the generality of the
foregoing, to manufacture, produce, prepare, finish, buy sell, trade and deal in
any and all kinds of woodpulp, pulp, paper, disposable paper products, hygienic
paper products and other cellulose fiber paper products and other cellulose
fiber products, and any and all products and by-products, of such manufacture;
to manufacture, produce, prepare, buy, sell, trade and deal in any and all
materials, chemicals, and other substances which now or hereafter may be used or
conveniently manufactured or dealt in, to manufacture, produce, prepare,
convert, coast, laminate, print, lithograph, finish, buy, sell, trade and deal
in any and all types of packaging materials, packages, bags, envelopes, pouches,
and other containers, whether or not the same are made of, utilized or
incorporated, woodpulp, pulp, paper, disposable paper products, hygienic paper
or cellulose fiber products and to manufacture, produce, buy, sell, trade and
deal in machinery, machines, equipment, materials plastics, synthetics, chemical
and other substances.
To export from and import into the United States of America and its territories
and possessions, and any and all foreign countries as principal or agent,
merchandise of every kind and nature, and to purchase, sell and deal in and
with, at wholesale and retail, merchandise of every kind for exportation from
and importation into the United States, and to and from all countries foreign
thereto.
1
<PAGE>
To own, operate, manage, acquire and deal in property, real and personal, which
may be necessary to the conduct of the business.
Without limiting any of the purposes or powers of the corporation it shall have
the power to do any one or more of all of the things set forth, and all other
things likely, directly or indirectly, to promote the interests of the
corporation. In the carrying on of its business it shall have the power to do
any and all things and powers which a co-partnership or a natural person could
do, either as a principal, agent, representative, lessor, lessee or otherwise,
either alone or in conjunction with others, and in any part of the world. In
addition, it shall have and exercise all rights, powers and privileges now
belonging to or conferred upon corporations organized under the Business
Corporation Law.
3. The office of the corporation is to be located in the Town of
Huntington, County of Suffolk, State of New York.
4. The aggregate number of shares which the corporation shall have
authority to issue is 200 shares, no par value.
5. The Secretary of State is designated as agent of the corporation upon
whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is:
The corporation
10 Hub Drive
Melville, N.Y. 11746
IN WITNESS WHEREOF, the undersigned incorporator, being at least eighteen
years of age, hereby affirms that the statements are true under penalties of
perjury. Dated: October 2, 1981
/s/ Sherry Noonan
-----------------------------
Sherry Noonan
90 South Swan Street
Albany, New York 12210
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE CONVERTERS, INC.
FILED BY:
William Hecht, Esq.
233 Broadway
New York, New York 10279
STATE OF NEW YORK
[STAMP] DEPARTMENT OF STATE
FILED OCT. 5, 1981
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF
AMERICAN TISSUE CONVERTERS, INC.
FILED BY:
William M. Hecht, Esq.
1501 Broadway
New York, New York 10036
STATE OF NEW YORK
DEPARTMENT OF STATE
[STAMP]
FILED JAN 10, 1983
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE CONVERTERS INC.
Under Section 805 of the Business Corporation Law IT IS HEREBY CERTIFIED
THAT:
1. The name of the corporation is AMERICAN TISSUE CONVERTERS INC.
2. The certificate of incorporation was filed by the department of state on the
5th day of October, 1981.
3. The certificate of incorporation of this corporation is hereby amended to
effect the following change: The name of the corporation shall read as follows:
AMERICAN TISSUE CORPORATION
4. The amendment to the certificate of incorporation was authorized by a vote of
the majority of all the outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned hereby affirms that the statements made
herein are true under penalties of perjury.
Yahya Gabayzadeh President /s/ Yahya Gabayzadeh
- ---------------- --------- -----------------------
David Emrani Secretary /s/ David Emrani
- ---------------- --------- -----------------------
Dated: 12/28/82
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE CORPORATION
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is American Tissue Corporation. The
original name under which it was formed as American Tissue Converters Inc.
SECOND: The Certificate of Incorporation of the Incorporation of the
Corporation was filed by the Department of State on the 5th day of October 1981.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article 6
is hereby added to the Certificate of Incorporation:
6. No director shall be personally liable to the Corporation or its
shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
State of New York }
ss
Department of State}
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on Sep 13 1999
[SEAL] /s/ [ILLEGIBLE]
Special Deputy Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE CORPORATION
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
BY-LAWS
OF
AMERICAN TISSUE CORPORATION
(Formed under the laws of the State of New York)
----------
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or, subject to the control of the Board, by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be
<PAGE>
called. Such request shall state the purpose or purposes of the proposed
meeting. At such meetings the only business which may be transacted is that
relating to the purpose or purposes set forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
-2-
<PAGE>
Section 5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint two inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the
-3-
<PAGE>
shares represented at the meeting, the existence of a quorum, and the validity
and effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them. Any report or certificate made by them
shall be prima facie evidence of the facts stated and of the vote as certified
by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the
-4-
<PAGE>
persons challenged to vote at such meeting, and all persons who appear from such
list to be shareholders entitled to vote thereat may vote at such meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as trustee or into the name of his
nominee.
-5-
<PAGE>
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a
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<PAGE>
majority of votes cast, adjourns the meeting despite the absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law, be elected by a plurality of the votes cast at a
meeting of
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<PAGE>
shareholders by the holders of shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law, be authorized by a majority of the votes cast at a meeting of shareholders
by the holders of shares entitled to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board
-8-
<PAGE>
of Directors may fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than 50 nor less than
ten days before the date of such meeting, nor more then 50 days prior to any
other action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least 18 years of age.
Section 2. Number of Directors. The number of directors constituting the
entire Board of Directors shall be the number, not less than one nor more than
five, fixed from time to time by a majority of the total number of directors
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<PAGE>
which the Corporation would have, prior to any increase or decrease, if there
were no vacancies, provided, however, that no decrease shall shorten the term of
an incumbent director, and provided further, however, that if all of the shares
of the Corporation are owned beneficially and of record by less than three
shareholders, the number of directors may be less than three but not less than
the number of shareholders. Until otherwise fixed by the directors, the number
of directors constituting the entire Board shall be three.
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors Shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws, the vote of a
majority of the directors present at a meeting at the time of such vote, if a
quorum is then present, shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be
-10-
<PAGE>
taken without a meeting if all members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consent thereto by the members of the Board or committee shall
be filed with the minutes of the proceedings of the Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or any two directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one or more members of the
Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each
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special meeting of the Board shall be given to each director either by mail not
later than noon, New York time, on the third day prior to the meeting or by
telegram, written message or orally to the director not later than noon, New
York time, on the day prior to the meeting. Notices are deemed to have been
given: by mail, when deposited in the United States mail; by telegram at the
time of filing; and by messenger at the time of delivery. Notices by mail,
telegram or messenger shall be sent to each director at the address designated
by him for that purpose, or, if none has been so designated, at his last known
residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the
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time of the adjournment and, unless such time and place are announced at the
meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring as a result of the removal of directors by shareholders shall be
filled by the shareholders.
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A director elected to fill a vacancy shall be elected to hold office for the
unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
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<PAGE>
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one or more of the directors are
-15-
<PAGE>
directors or officers, or are financially interested shall be either void or
voidable, irrespective of whether such interested director or directors are
present at a meeting of the Board of Directors, or of a committee thereof, which
authorizes such contract or transaction and irrespective of whether his or their
votes are counted for such purpose. In the absence of fraud any such contract or
transaction may be conclusively authorized or approved as fair and reasonable
by:
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known to the Board or
committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
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<PAGE>
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one or more Vice Presidents, a
Treasurer and such other officers as it may determine. Any two or more offices
may be held by the same person, except that the same person may not hold the
offices of President and Secretary. The Board of Directors may also elect one or
more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall
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<PAGE>
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer of the Corporation to the full extent of such
disallowance. It shall be the duty of the Directors, as a Board, to enforce
payment of each such amount disallowed. In lieu of payment by the officer,
subject to the determination of the directors, proportionate amounts may be
withheld from future compensation payments until the amount owed to the
Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his term of office
shall extend to and expire at the
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meeting of the Board following the next annual meeting of shareholders. Any
officer may be removed by the Board, with or without cause, at any time. Removal
of an officer without cause shall be without prejudice to his contract rights,
if any, and the election or appointment of an officer shall not of itself create
contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the
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order of their election, during the absence or disability of or refusal to act
by the President, shall perform the duties and exercise the powers of the
President, and shall perform such other duties as the Board of Directors shall
prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the
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order designated by the Board of Directors (or in the absence of any
designation, then in the order of their election), shall, in the absence of the
Secretary or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he shall give the Corporation a bond
(which shall be
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renewed every six years) in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one, the Assistant
Treasurers in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Treasurer or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors and officers and their residence addresses. The
Corporation shall also keep at its office in
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the State of New York or at the office of its transfer agent or registrar in the
State of New York, if any, a record containing the names and addresses of all
shareholders, the number and class of shares held by each and the dates when
they respectively became the owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security holder or other person shall have any right to inspect any
accounts, books, records or other documents of the Corporation except as
conferred by statute or as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
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<PAGE>
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences
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and limitations of the shares of each class of shares, if more than one,
authorized to be issued and the designation, relative rights, preferences and
limitations of each series of any class of preferred shares authorized to be
issued so far as the same have been fixed, and the authority of the Board of
Directors to designate and fix the relative rights, preferences and limitations
of other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper indorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with
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other provisions of law as the Corporation or its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
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<PAGE>
ARTICLE V
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be such
period as may be fixed by the Board of Directors.
Section 3. Amendments. By-Laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors
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the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, in which he may be involved or with which he may be threatened, while
serving, or thereafter, by reason of his being or having been such a director,
officer, trustee, employee or agent, except with respect to any matter as to
which he shall have been adjudicated in any proceeding not to have acted in good
faith in the reasonable belief that his action was in the best interests of the
Corporation; provided, however, that as to any matter disposed of by a
compromise payment by such director, officer, trustee, employee or agent,
pursuant to a consent
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decree or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors, then in office; or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested director
or officer; or
(b) in the absence of action by disinterested directors or shareholders,
there has been obtained at the request of a majority of the directors then
in office an opinion in writing of independent legal counsel to the effect
that such director, officer, trustee, employee or agent appears to have
acted in good faith in the reasonable belief that his action was in the
best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the
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Corporation in advance of the final disposition thereof upon receipt of an
undertaking by such individual to repay the amounts so paid by the Corporation
if it is ultimately determined that indemnification for such expenses is not
authorized under this section. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which any such director,
officer, trustee, employee or agent may be entitled. Nothing contained in this
Article shall affect any rights to indemnification to which corporate personnel
other than directors, officers, trustees, employees or agents may be entitled by
contract or otherwise under law. As used in this section, the terms "director",
"officer", "trustees", "employee" and "agent" include their respective heirs,
executors and administrators, and an "interested" director, officer, trustee,
employee or agent is one against whom in such capacity the proceedings in
question, or other proceedings on the same or similar grounds, are then pending.
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CERTIFICATE OF AMENDMENT
OF
AMERICAN CELLULOSE PRODUCTS CORP.
(Under Section 805 of the Business Corporation Law)
The undersigned, Nourollah Elghanayan (President) and Mehdi Gabayzadeh
(Secretary) of American Cellulose Products Corp., certify and set forth:
1. The name of the Corporation is American Cellulose Products Corp.
2. The date that the Certificate of Incorporation of American Cellulose
Products Corp. was filed by the Department of State is the 18th day of December,
1984 under the name American Cellulose Mill Corp.
3. The Certificate of Incorporation is hereby changed, pursuant to Section
801 (b) (1) of the Business Corporation Law, to effect a change in the name of
the Corporation.
4. Paragraph First of the Certificate of Incorporation of American
Cellulose Products Corp. is hereby changed to read as follows:
First: The name of the corporation is American Cellulose Mill Corp.
5. This change to the Certificate of Incorporation of American Cellulose
Products Corp. was authorized by the resolution of the Board of Directors of the
Corporation, dated October 16, 1993 and the unanimous written consent of the
shareholders of the Corporation, dated October 14, 1993.
<PAGE>
In witness whereof, the undersigned, who affirm that the statements made
herein are true under the penalties of perjury, have executed this certificate
this 14th day of October, 1993.
/s/ Nourollah Elghanayan
------------------------------
Nourollah Elghanayan,
President
/s/ Mehdi Gabayzadeh
------------------------------
Mehdi Gabayzadeh,
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMERICAN CELLULOSE PRODUCTS CORP.
----------------------------
Section 805 of the Business Corporation Law
[STAMP]
Filer: Tracey Ann Mccormick
Corporation Service Company
4 Central Avenue
Albany, NY 12210
DEC 15 1993
[STAMP]
BILLED
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CELLULOSE MILL CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the president and the secretary of AMERICAN
CELLULOSE MILL CORPORATION, do hereby certify
1. The name of the corporation is AMERICAN CELLULOSE MILL CORPORATION.
2. The certificate of incorporation of AMERICAN CELLULOSE MILL CORPORATION
was filed by the Department of State on the 18th day of December, 1984.
3. Paragraph First of the certificate of incorporation of AMERICAN
CELLULOSE MILL CORPORATION which sets forth the name of the Corporation, is
hereby amended to read:
First: The name of the corporation is AMERICAN
CELLULOSE PRODUCTS CORP.
4. This above amendment to the Certificate of Incorporation was authorized
by vote of the holders of a majority of all outstanding shares entitled to vote
thereon at a meeting of the shareholders of said corporation, after
authorization by the Board of Directors.
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 11th day of October, 1985.
/s/ Nourollah Elghanayan
-----------------------------
Nourollah Elghanayan,
President
/s/ Yahya Gabayzadeh
-----------------------------
Yahya Gabayzadeh,
Secretary
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
Yahya Gabayzadeh, being duly sworn, deposes and says that he is the
secretary of American Cellulose Mill Corporation, the corporation, and one of
the persons who signed the foregoing Certificate of Amendment, that he has read
the Certificate of Amendment and knows the contents thereof, and that the same
is true to his own knowledge.
/s/ Yahya Gabayzadeh
----------------------------
Yahya Gabayzadeh, Secretary
Sworn to before me this
11th day of October, 1985
/s/ [ILLEGIBLE]
- ---------------
Notary Public
Comm. Exp. 3/30/87
<PAGE>
[STAMP]
================================================================================
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
================================================================================
AMERICAN CELLULOSE
MILL CORPORATION
================================================================================
OCTOBER 11, 1985
================================================================================
MILLER, MANNIX, LEMERY & KAFIN, P.C.
ATTORNEYS AND COUNSELORS AT LAW
11 CHESTER STREET
P.O. BOX 785
GLENS FALLS, NEW YORK 12801
================================================================================
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED OCT 23 1985
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN CELLULOSE MILL CORPORATION
(Under Section 402 of the Business Corporation Law)
I, the undersigned, for the purpose of forming a corporation under Section
402 of the Business Corporation Law of the State of New York, CERTIFY:
FIRST: The name of the corporation shall be:
AMERICAN CELLULOSE MILL CORPORATION
SECOND: The purposes for which it is to be formed are as follows:
(a) To engage in any manufacturing, mercantile, or trading business of any
kind, and to do all things incidental thereto; to maintain and operate
properties and facilities for the production and sale of any articles of
commerce; and to purchase or otherwise acquire, own, mortgage, pledge, create
security interests in, sell, assign, and transfer or otherwise dispose of,
invest, trade, and deal in goods, wares and merchandise, and real and personal
property, of every class and description. More particularly, but without
limiting the generality of the foregoing, to manufacture, produce, prepare,
finish, buy, sell, trade and deal in any and all kinds of woodpulp, pulp, paper
and other cellulose
<PAGE>
fiber products, and any and all products and by-products of such manufacture; to
manufacture, produce, prepare, buy, sell, and trade and deal in any and all
materials, chemicals, and other substances which now or hereafter may be used,
or conveniently manufactured or dealt in, in connection with the manufacture or
use of woodpulp, pulp, paper, and other cellulose fiber products; to
manufacture, produce, prepare, process, convert, coat, laminate, print,
lithograph, finish, buy, sell, trade, and deal in any and all types of packaging
materials, packages, bags, envelopes, pouches, and other containers, whether or
not the same are made of or utilize or incorporate woodpulp, pulp, paper, or
cellulose fiber products; and to manufacture, produce, buy sell, trade, and deal
in machinery, machines, equipment, materials, plastics, synthetics, chemicals,
and other substances.
(b) To purchase, lease or otherwise acquire, and to hold, own, use,
maintain, occupy, manage, operate, repair, remodel, improve, develop, erect,
construct, alter, demolish, divide, sell, lease, hire, exchange, assign,
mortgage, pledge, encumber, convey, transfer, and otherwise deal in, trade in
and dispose of any and all real estate, lands, easements, licenses, leases,
mortgages thereof, interests and rights therein, including but not limited to,
leaseholds, mineral, oil or timer rights, claims or concessions, royalty
interests or any other similar interests, buildings, hotels, apartment houses,
tenements, offices, dwellings, stores, plants, factories, works, structures,
improvements, fixtures,
<PAGE>
and other real, personal or mixed property of every kind and description,
wheresoever situated, and to do any or all of the foregoing alone or in
conjunction with others and as principal agent, broker, or in any capacity
(including without limitation business enterprises or ventures) and to do any
and all acts and things for the preservation, protection and enhancement of the
value thereof.
(c) To hold, invest and reinvest its funds and to purchase or otherwise
acquire, on margin or otherwise, trade and deal in, or hold for investment or
otherwise, sell, assign, negotiate, transfer, exchange or otherwise dispose of,
or turn to account or realize upon, securities of every kind (including without
limitation stocks, shares, bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
representing any other rights or interests therein, or any property or assets)
created or issued by any persons, firms, associations, trusts, corporations,
syndicates, combinations, organizations, governments or subdivisions thereof,
and generally deal in any such securities; to exercise as owner or holder of any
securities; all rights, powers and privileges in respect thereof, including
without limitation the right to vote thereon and assent or consent with respect
thereto; and to do any and all acts and things for the preservation, protection
and enhancement of the value thereof.
<PAGE>
(d) To acquire by purchase, subscription, or otherwise all or part of any
interest in the property, assets, business or goodwill of any persons, firms,
associations, trust, corporations, syndicates, combinations or organizations,
and to dispose of or otherwise deal with such property, assets, business or
goodwill.
(e) To manufacture, acquire, invest in, dispose of, import, export, buy,
sell, trade or otherwise deal in and with, as principal or agent, on commission
or otherwise, goods, wares, merchandise, articles of trade, commodities and
personal property, and contracts for the future delivery thereof, or any
interest therein, or every class and description wherever situated.
(f) To apply for, obtain, register, acquire, hold, use, operate, introduce,
assign, and dispose of any trademarks, trade names, service marks, service
names, copyrights, patents, inventions, improvements, formulae, know-how and
processes used in connection with or held under letters patent of the United
States, or elsewhere, which may be used in connection with or appertaining to
any kind of business or service; and to exercise, develop, grant licenses in
respect of, or otherwise to turn to account, any such trademarks, trade names,
service marks, service names, copyrights, patents, inventions, improvements,
formulae, know-how, processes, and, the like or any such property or rights.
(g) To purchase, receive, take, or otherwise acquire,
<PAGE>
own, hold, cancel, reissue, sell, land, exchange, transfer, or otherwise dispose
of, pledge, use, or otherwise deal in and with, its own shares, bonds or other
obligations and securities, insofar as the same may be permitted by law.
(h) To advance or lend money, with or without security; to aid by
endorsement, guaranty or otherwise others, whether engaged in any business
similar to or different from this corporation; and to take and hold real and
personal property as security for the payment of funds so loaned or invested,
all insofar as the same may be permitted by law, and to discharge and cancel
without payment any indebtedness thus arising.
(i) To borrow money, with or without pledge or mortgages or any or all of
its property, real or personal as security, and issue its notes, bonds and other
obligations thereof.
(j) To do all such acts and things as are incidental to the foregoing
purposes or necessary or convenient to carry on the business of said
corporation, or to effect or promote any or all of the purposes for which the
corporation is formed, and to conduct its business in all its branches in any
jurisdiction within or without the United States. It is the intention that each
of the purposes specified in Paragraph "SECOND" of this Certificate of
Incorporation shall be regarded as an independent purpose and be in no manner or
to any extent limited by reference to or inference from the terms of any other
clauses of this or any other
<PAGE>
paragraph contained in the Certificate. It is also the intention that, to the
extent permitted by law, the Corporation have as powers each of the purposes
specified in all of the subdivisions of the "SECOND" paragraph and all of the
powers specified in Section 202 of the New York Business Corporation Law.
The foregoing shall not be deemed to limit or restrict in any manner the
general powers of the corporation and the enjoyment and exercise thereof as
conferred by the laws of the State of New York upon corporations organized under
the provisions of the Business Corporation Law.
THIRD: The office of the corporation within this State shall be located in
the City of Mechanicville, County of Saratoga, New York.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue shall be Two Hundred (200) Common Shares without par value.
FIFTH: The Secretary of State of the State of New York is hereby designated
as agent of the corporation upon whom processes against it may be served, and
the post office address to which the Secretary of State shall mail a copy of any
process against it served upon him is Miller, Mannix, Lemery & Kafin, P.C., 11
Chester Street, P.O. Box 765, Glen Falls, New York 12801.
IN WITNESS WHEREOF, this Certificate has been signed
<PAGE>
and the statements made herein are affirmed as true under the penalties of
perjury this 13th day of December, 1984.
/s/ Marian A. Wait
----------------------------
Marian A. Wait
11 Chester Street
Glens Falls, New York 12801
<PAGE>
[STAMP]
================================================================================
CERTIFICATE
OF
INCORPORATION
================================================================================
OF
AMERICAN CELLULOSE
MILL CORPORATION
================================================================================
Dated: December 13, 1984
================================================================================
MILLER, MANNIX, LEMERY & KAFIN, P.C.
ATTORNEYS AND COUNSELORS AT LAW
11 CHESTER STREET
P.O. BOX 785
GLENS FALLS, NEW YORK 12801
================================================================================
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED DEC 18 1984
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMERICAN CELLULOSE PRODUCTS CORP.
(Under Section 805 of the Business Corporation Law)
The undersigned, Nourollah Elghanayan (President) and Yahya Gabayzadeh
(Secretary) of American Cellulose Products Corp., certify and set forth:
1. The name of the Corporation is American Cellulose Products Corp.
2. The date that the Certificate of Incorporation of American Cellulose
Products Corp. was filed by the Department of State is the 18th day of December,
1984 under the name American Cellulose Mill Corp.
3. The Certificate of Incorporation is hereby changed, pursuant to Section
801 (b) (1) of the Business Corporation Law, to effect a change in the name of
the Corporation.
4. Paragraph First of the Certificate of Incorporation of American
Cellulose Products Corp. is hereby changed to read as follows:
First: The name of the corporation is
AMERICAN CELLULOSE MILL CORP.
5. This change to the Certificate of Incorporation of American Cellulose
Products Corp. was authorized by the resolution of the Board of Directors of the
Corporation, dated October 16, 1993 and the unanimous written consent of the
shareholders of the Corporation, dated October 14, 1993.
<PAGE>
In witness whereof, the undersigned, who affirm that the statements made
herein are true under the penalties of perjury, have executed this certificate
this 14th day of October, 1993.
/s/ Nourollah Elghanayan
------------------------------
Nourollah Elghanayan,
President
/s/ Mehdi Gabayzadeh
------------------------------
Mehdi Gabayzadeh,
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMERICAN CELLULOSE PRODUCTS CORP.
----------------------------
Section 805 of the Business Corporation Law
Filer: Tracey Ann Mccormick
Corporation Service Company
4 Central Avenue
Albany, NY 12210
[STAMP]
BILLED
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CELLULOSE MILL CORP.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is American Cellulose Mill Corp. The
name of the Corporation is American Cellulose Mill Corp. The original name under
which it was formed was American Cellulose Mill Corporation.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 18th day of December 1984.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article
Sixth is hereby added to the Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or
its shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) of a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CELLULOSE MILL CORP.
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
BY-LAWS
OF
AMERICAN CELLULOSE MILL CORPORATION
(Formed under the laws of the State of New York)
<PAGE>
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by a majority of the members of the Board of Directors or by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be called. Such request shall state
the purpose or purposes of the proposed meeting. At such meetings the only
business which may be transacted is that relating to the purpose or purposes set
forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing, shall be given no less than 10 days nor more than 50 days
prior to the date of such meeting, and shall state the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called. Notice
of a special meeting shall indicate that it is being issued by or at the
direction of the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a
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<PAGE>
shareholders' meeting may, and on the request of any shareholder entitled to
vote thereat shall, appoint two inspectors. In case any person appointed fails
to appear or act, the vacancy may be filled by appointment made by the Board in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may
-3-
<PAGE>
be voted by him, either in person or by proxy, without transfer of such shares
into his name. Shares held by a trustee may be voted by him, either in person or
by proxy, only after the shares have been transferred into his name as trustee
or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a majority of votes cast, adjourn the meeting despite the
absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law or by written agreement among the shareholders, be
elected by a plurality of the votes cast
-4-
<PAGE>
at a meeting of shareholders by the holders of shares entitled to vote in the
election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law or by written agreement among the shareholders, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of such
meeting, nor more than fifty (50) days prior to any other action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least eighteen (18) years of age.
Section 2. Number of Directors. Unless otherwise determined by the Board of
Directors, the number of directors constituting the entire Board of Directors
shall be one (1).
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office
-5-
<PAGE>
until the next annual meeting and until their successors have been elected and
qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws or by written
agreement among the shareholders, the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or a majority of the directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one (1) or more members of
the Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, facsimile, or written message to the
director not later than noon, New York time, on the day prior to the meeting.
Notices are deemed to have been given: by mail, when deposited in the United
States mail; by telegram at the time of filing; by facsimile at the time of
transmission with a confirmation copy delivered on the second business day by
recognized overnight courier service; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that purpose, or, if none has been so designated,
at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without
-6-
<PAGE>
protesting, prior thereto or at its commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
agreed upon by the Corporation or its shareholders. Vacancies occurring as a
result of the removal of directors by shareholders shall be filled by the
shareholders, unless otherwise agreed upon by the Corporation or its
shareholders. A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three (3) or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
-7-
<PAGE>
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one (1) or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one (1) or more of the directors are directors or officers, or are
financially interested shall be either void or voidable, irrespective of whether
such interested director or directors are present at a meeting of the Board of
Directors, or of a committee thereof, which authorizes such contract or
transaction and irrespective of whether his or their votes are counted for such
purpose. In the absence of fraud, any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known to the Board or
committee (as the case may be); or
-8-
<PAGE>
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one (1) or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, a Treasurer and such other
officers as it may determine. Any two (2) or more offices may be held by the
same person, except that the same person may not hold the offices of President
and Secretary unless there be only (1) shareholder. The Board of Directors may
also elect one (1) or more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him or her, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer of the Corporation to the full
extent of such disallowance. It shall be the duty of the directors, as a Board,
to enforce payment of each such amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors, proportionate amounts
may be withheld from future compensation payments until the amount owed to the
Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his or her term of
office shall extend to and expire at the meeting of the Board following the next
annual meeting of shareholders. Any officer may be removed by the Board, with or
without cause, at any time.
-9-
<PAGE>
Removal of an officer without cause shall be without prejudice to his or her
contract rights, if any, and the election or appointment of an officer shall not
of itself create contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
The President shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board of Directors shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation
and he or she, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
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<PAGE>
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one (1), the
Assistant Treasurers in the order designated by the Board of Directors (or in
the absence of any designation, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors and officers and their residence addresses. The
Corporation shall also keep at its office in the State of New York or at the
office of its transfer agent or registrar in the State of New York, if any, a
record containing the names and addresses of all shareholders, the number and
class of shares held by each and the dates when they respectively became the
owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security
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<PAGE>
holder or other person shall have any right to inspect any accounts, books,
records or other documents of the Corporation except as conferred by statute or
as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer at the date
of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one (1), authorized to be
issued and the designation, relative rights, preferences and limitations of each
series of any class of preferred shares authorized to be issued so far as the
same have been fixed, and the authority of the Board of Directors to designate
and fix the relative rights, preferences and limitations of other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
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<PAGE>
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper indorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation or
its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the
year ending September 30.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
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<PAGE>
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of the
changes made.
Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while serving, or thereafter, by reason of his or her being
or having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors, then in office;
or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested director
or officer; or
(b) in the absence of action by disinterested directors or
shareholders, there has been obtained at the request of a majority of the
directors then in office an opinion in writing of independent legal counsel
to the effect that such director, officer, trustee, employee or agent
appears to have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an
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<PAGE>
undertaking by such individual to repay the amounts so paid by the Corporation
if it is ultimately determined that indemnification for such expenses is not
authorized under this section. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which any such director,
officer, trustee, employee or agent may be entitled. Nothing contained in this
Article shall affect any rights to indemnification to which corporate personnel
other than directors, officers, trustees, employees or agents may be entitled by
contract or otherwise under law. As used in this section, the terms "director",
"officer", "trustees", "employee" and "agent" include their respective heirs,
executors and administrators, and an "interested" director, officer, trustee,
employee or agent is one against whom in such capacity the proceedings in
question, or other proceedings on the same or similar grounds, are then pending.
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ARTICLES OF ORGANIZATION
OF
AMERICAN TISSUE MILLS OF GREENWICH LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is American Tissue Mills of
Greenwich LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December
31, 2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The limited liability company is to be managed by one or more
managers.
IN WITNESS WHEREOF, this certificate has been subscribed this 28th day of May,
1996, by the undersigned who affirms that the statements made herein are true
under the penalties of perjury.
/s/ Mehdi Gabayzadeh
-----------------------------
Mehdi Gabayzadeh, Member
and Sole Organizer
1
<PAGE>
ARTICLES OF ORGANIZATION
OF
AMERICAN TISSUE MILLS OF GREENWICH LLC
---------------------------------------------------
Section 203 of the Limited Liability Company Law
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED MAY 28 1996
TAX$___________
BY: TLG
Filer: Scott A. Mautner, Esq
Mandel And Resnik, P.C.
220 East 42nd Street
New York, NY 10017
CMS
2
EXHIBIT 3.8
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
AMERICAN TISSUE MILLS OF GREENWICH LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 28th day of May 1996, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788, Jeffrey Elghanayan, having
an address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh,
having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh
and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph
Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at 135
Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany, as
trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing, holding, managing, operating and
improving a certain paper mill ("Mill"), together with all real and personal
property, situated in Greenwich, New York; and
Whereas, the limited liability company will own the Mill and will manage and
operate the Mill as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the
<PAGE>
"Act") and upon the terms and conditions set forth in this Agreement. The name
of the Company shall be American Tissue Mills of Greenwich LLC and all business
of the Company shall be conducted in that name. Mehdi Gabayzadeh has acted as an
organizer to form the Company and has caused the Articles of Organization
("Articles") to be filed or recorded in the appropriate public office(s) as may
be required by the Act and shall thereafter do and continue to do all other
things as may be required to perfect and maintain the Company as a limited
liability company under the State of New York. "Person" shall mean any person,
corporation, governmental authority, limited liability company, partnership,
trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Mill, together with all personal and real property,
(ii) engage in any and all business activities and transactions reasonably
necessary and incidental to the purposes of the Company, including obtaining
financing and refinancing, leasing, selling, exchanging and transferring all or
any part of the Mill; and (iii) engage in any other lawful act or activity for
which a limited liability company may be formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Mill and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service Company or any successor appointed by the Managers, in
accordance with the Act. The registered office of the Company in the State of
New York is located at Corporation Service Company, 500 Central Avenue, Albany,
New York 12206.
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<PAGE>
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified;
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<PAGE>
provided, however, that any change in the manner of maintaining capital accounts
shall not materially alter the economic agreement between or among the Members.
Except as otherwise required in the Act or this Agreement, no Member shall have
any liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate per annum equal to 1%
over the rate of interest announced presently by Citibank, N.A., in New York,
from time to time, as Citibank's "base rate". No Member shall be obligated to
lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
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<PAGE>
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and (iv) notwithstanding any other
provision of this Article 3, any items which are specially allocated pursuant to
Article 3 hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
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<PAGE>
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-1(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment
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decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event
Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the Members to whom
such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of
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the Company, within the meaning of Regulations Section 1.752-3(a)(3), the
Members' interests in Company profits are in proportion to their Membership
Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
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4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Mill. All references herein to "fiscal year" or "taxable year" shall be
considered references to the annual accounting period ending each September
30th, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income
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and (solely from such income and the proceeds of any financing thereof) pay the
expenses thereof, and make distributions to the Members as provided herein. The
Members and their respective duly authorized representatives shall have the
right to examine such books, records, accounts and documents at any and all
reasonable times and to make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30th as the Fiscal Year;
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(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. Nourollah Elghanayan is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power
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and authority in the management of the Company business to do any and all things
necessary to effectuate the purposes of the Company including, without
limitation, the right, power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Mill;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Mill;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
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Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful
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misconduct, gross negligence, breach of the Managers' fiduciary duties and/or
breach of this Agreement. The Managers do not in any way guaranty the return of
any Capital Contribution to a Member or a profit for the Members from the
operations of the Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be
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filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Mehdizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
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indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
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7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose of any other action, the
Managers may fix, in advance, a date as the record date for any such
determination of Members. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of such meeting, nor more then fifty (50)
days prior to any other action. When a determination of Members of record
entitled to notice of or to vote at any meeting of Members has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general
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assignment by the Company for the benefit of creditors; the filing of any
petition or answer by the Company seeking to adjudicate it a bankrupt or
insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of the Company or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting
to, or acquiescing in the entry of an order for relief or the appointment
of a receiver, trustee, custodian, or other similar official for the
Company or for any substantial part of its property; or action taken by the
Company to authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber
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or dispose of all or any portion of his, her or its Membership Interest or any
rights therein without the unanimous written consent of the Members, other than
the transferring Member, and any attempted disposition shall be ineffective to
transfer such interest. Each Member hereby acknowledges the reasonableness of
the restrictions on transfer imposed by this Agreement in view of the Company
purposes and the relationship of the Members. Accordingly, the restrictions on
transfer contained herein shall be specifically enforceable. If a Membership
Interest of a Member shall, with the consent of the Members, be transferred
pursuant to this Section, the transferee shall become the assignee of the
Member's Membership Interest in the Company, provided such assignment shall be
by instrument in form and substance reasonably satisfactory to the Members
(which instrument shall contain a statement by the assignee of his, her or its
adoption and assumption of all of the applicable terms of this Agreement, as
same may be amended); provided, however, nothing contained in this Article 9
shall prevent any Member from transferring all or part of his, her or its
Membership Interest in the Company (x) by way of will or intestacy, or inter
vivos gift or trust, to or for the benefit of members of the Member's immediate
family, or (y) to a partnership, corporation or other entity, all of the
outstanding interests of which entity are owned (of record and beneficially) by
such Member and/or a permitted transferee, (each of (x) and (y) being referred
to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
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Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power
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<PAGE>
under the Act to dissolve the Company, (d) transfer all or any portion of his,
her or its Membership Interest in the Company, (e) petition for judicial
dissolution of the Company, (g) demand a return of such Member's contributions
or profits (or a bond or other security for the return of such contributions or
profits) or (h) take any action to file a certificate of dissolution or its
equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the
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<PAGE>
appraisers shall determine the fair market value of the defaulting Member's
Membership Interest as of the date of the Exercise Notice. Such determination of
fair market value shall be final and binding on all parties. Each Member shall
pay the fees and expenses of its own appraiser, except that in the event an
Appointee is required, the fees and expenses of the Appointee shall be paid
jointly by the participating Members. The purchase price for the defaulting
Member's Membership Interest shall be paid, and the closing of such purchase
shall take place, in accordance with this section. If more than one Member
exercises such buy-out rights, each such Member shall be entitled to acquire the
portion of the defaulting Member's Membership Interest which bears the same
proportion as the purchasing Members' Membership Interest bears to the aggregate
Membership Interests of the Members participating in the transaction. The
payment of the purchase price, and the closing of the purchase, shall be in
accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
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<PAGE>
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve
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<PAGE>
shall, after the passage of a reasonable period of time, be distributed in
accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with,
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<PAGE>
violate or result in the breach of any law, regulation, order or rule of any
governmental department, agency or instrumentality applicable to it, him or
them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel and Resnik, P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Barry H. Mandel, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the
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<PAGE>
parties hereto, their heirs, legal representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
28th day of May, 1996.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
----------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
----------------------------------
Jeffrey Elghanayan
-26-
<PAGE>
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
Nourollah Elghanayan 5/28/96 16.67%
Victoria
Elghanayan 5/28/96 16.67%
Jeffrey Elghanayan 5/28/96 16.66%
Mehdi Gabayzadeh 5/28/96 26%
Mehdi Gabayzadeh 5/28/96 8%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 5/28/96 8%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 5/28/96 8%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO
LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF
AMERICAN TISSUE MILLS OF GREENWICH LLC
Amendment made as of the 19th day of August 1997, by and among Nourollah
Elghanayan, having an address at 135 Engineers Road, fla1uppauge, New Y9rk
11788, Victoria Elghanayan, having an address ati 135 Engineers Road, Hauppauge,
New York 11788, Jeffrey Elghanayan, having an address at 2481 Monaco Drive,
Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh, having an address at 135
Engineers R&ad, Hauppauge, New York 11788, Mehdi Gabayzadeh, as trustee of the
John Gabayzadeh Trust, having an address at 135 Engineers Road, Hauppauge, New
York 11788, Mehdi Gabayzadeh, as trustee of the Diane Gabayzadeh Trust, having
an address at 135 Engineers Road, Hauppauge, New York 11788 and Mehdi
Gabayzadeh, as truste~ of the Deborah Gabayzadeh Trust, having an address at 135
Engineers Road, Haiuppauge, New York 11788.
WITNESSETH:
Whereas, Nourollah Elghanayan, Victoria Elghanayan, Jeffrey Elghanayan, Mehdi:
Gabayzadeh, Mehdi Gabayzadeh, as trustee of the John Gabayzadeb Trust, Mehdi
Gabayzadeh, as trustee of the Diane Gabayzadeh Trust and Mehdi Gabayzadeh, as
trustee of the Deborah Gabayzadeh Trust are members (the "Members") of a limited
liability company organized under the laws of the State of New York 4ith the
name of "American Tissue Mills of Greenwich LLC" ("Greenwich"), hating an
address at 135 Engineers Road, Hauppauge, New York 11788; and
Whereas, the Members desire to amend that certain Limited Liability Company
Operating Agreement of Greenwich dated as of May 28, 1996 (the "Operating
Agreement"), which relates to the busihess of Greenwich and the rights and
responsibilities of the Members.
Now, therefore, in consideration of the premises and for otiher good 7; arid
valuable consideration, the receipt and sufficiency df which are hereby
acknowledged, the Members agree as follows:
1. The last sentencq of Article 6, Section 6.9 of the Operating Agreement is
deleted and replaced with the following:
The Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commericial paper of the Company, and the
transaction of all business of the Company with its banks, shall be by
Nourollah Elghanayan, Mehdi Gabayzadeh, James Mehdizadeh or Robert
Mehdizadeh, any two signing jointly; provided, however, that in connection
with the Company executing and delivering a certain Loan and Security
Agreement, dated as of August 20, 1997, between the
<PAGE>
Company, as borrower, and Lasalle National Bank ("LaSalle"), as lender, in
respect of the loan by LaSalle to the Corfipany in the amount of
$1,500,000.00, Frank DiMajo shall be authorized, empowered and directed to
execute and deliver such agreement and. any other instruments in connection
therewith as he deems necessary and proper.
In witness whereof, the parties hereto have executed this Amendment of the date
first above written.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
----------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
----------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
-2-
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
AMERICAN TISSUE MILLS OF GREENWICH LLC
The Limited Liability Company Operating Agreement of AMERICAN TISSUE MILLS OF
GREENWICH LLC (the "Company") is hereby amended to provide that the membership
interests of the Company may be certificated and that each of such certificates
is a "Security" governed by Article 8 of the Uniform Commercial Code of the
State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
AMERICAN TISSUE MILLS OF GREENWICH LLC
The Limited Liability Company Operating Agreement of American Tissue Mills of
Greenwich LLC is hereby amended as follows (all capitalized terms not defined
herein shall have the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"6.9 Officers. The Managers may designate one or more individuals as
officers of the Company, who shall have such titles and exercise and
perform such powers and duties as shall be assigned to them from time
to time by the Managers. Any officer may be removed by the Managers at
any time, with or without cause. Each officer shall hold office until
his or her successor is elected and qualified. Any number of offices
may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
------------------------------
Mehdi Gabayzadeh, President
ARTICLES OF ORGANIZATION
OF
AMERICAN TISSUE MILLS OF NEENAH LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is American Tissue Mills of
Neenah LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve December 31,
2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The limited liability company is to be managed by one or more
managers.
IN WITNESS WHEREOF, this certificate has been subscribed this 5th day of August,
1996, by the undersigned who affirms that the statements made herein are true
under the penalties of perjury.
/s/ Nourollah Elghahayan
-----------------------------
Nourollah Elghahayan,
and Sole Organizer
1
<PAGE>
ARTICLES OF ORGANIZATION
OF
AMERICAN TISSUE MILLS OF NEENAH LLC
--------------------------------
Section 203 of the Limited Liability Company Law
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED AUG 6 1996
Filer: Scott A. Mautner, Esq
Mandel And Resnik, P.c.
220 East 42nd Street
New York, NY 10017
2
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
AMERICAN TISSUE MILLS OF NEENAH LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 6th day of August 1996, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788 and Jeffrey Elghanayan,
having an address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi
Gabayzadeh, having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi
Gabayzadeh and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having
an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and
Joseph Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at
135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany,
as trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing, holding, managing, operating and
improving a certain paper mill ("Mill"), together with all real and personal
property, situated in Neenah, Wisconsin; and
Whereas, the limited liability company will own the Mill and will manage and
operate the Mill as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the
<PAGE>
"Act") and upon the terms and conditions set forth in this Agreement. The name
of the Company shall be American Tissue Mills of Neenah LLC and all business of
the Company shall be conducted in that name. Nourollah Elghanayan has acted as
an organizer to form the Company and has caused the Articles of Organization
("Articles") to be filed or recorded in the appropriate public office(s) as may
be required by the Act and shall thereafter do and continue to do all other
things as may be required to perfect and maintain the Company as a limited
liability company under the State of New York. "Person" shall mean any person,
corporation, governmental authority, limited liability company, partnership,
trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Mill, together with all personal and real property,
(ii) engage in any and all business activities and transactions reasonably
necessary and incidental to the purposes of the Company, including obtaining
financing and refinancing, leasing, selling, exchanging and transferring all or
any part of the Mill; and (iii) engage in any other lawful act or activity for
which a limited liability company may be formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Mill and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company.
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<PAGE>
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified;
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provided, however, that any change in the manner of maintaining capital accounts
shall not materially alter the economic agreement between or among the Members.
Except as otherwise required in the Act or this Agreement, no Member shall have
any liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. No Member shall be obligated to lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for
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this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments: (i) any income of the
Company that is exempt from federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this Article 3 shall be added
to such taxable income or loss; (ii) any expenditures of the Company described
in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses pursuant to this
Article 3 shall be subtracted from such taxable income or loss; (iii) to the
extent an adjustment to the adjusted tax basis of any Company asset pursuant to
Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining capital
accounts as a result of a distribution other than in liquidation of a Member's
interest in the Company, the amount of such adjustment shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Profits or
Losses; and (iv) notwithstanding any other provision of this Article 3, any
items which are specially allocated pursuant to Article 3 hereof shall not be
taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-1(f) of the
Regulations and shall be interpreted consistently therewith.
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(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the
Members to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction
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realized as a direct or indirect result of the issuance of an interest in the
Company to a Member (the "Issuance Items") shall be allocated among the Members
so that, to the extent possible, the net amount of such Issuance Items, together
with all other allocations under this Agreement to each Member, shall be equal
to the net amount that would have been allocated to each such Member if the
Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined
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in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
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4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Members and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Mill. All references herein to "fiscal year" or "taxable year" shall be
considered references to the annual accounting period ending each September
30th, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing thereof) pay the expenses thereof, and make
distributions to the Members as provided herein. The Members and their
respective duly authorized representatives shall have the right to examine such
books, records, accounts and documents at any and all reasonable times and to
make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers,
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which accounts shall be used for the payment of the disbursements properly
chargeable to the Company and in which shall be deposited all cash receipts of
the Company. All amounts required by this Article 5 to be deposited in those
accounts shall be and remain the property of the Company and shall be received,
held and disbursed by the Managers only for the purposes herein specified. There
shall not be deposited into those accounts any funds other than Company funds.
Withdrawals shall be made from those accounts only for the purpose of making
payment of Company expenditures and distributions herein authorized, and only by
the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30th as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
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(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. Nourollan Elghanayan is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power and authority
in the management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Mill;
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(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Mill;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the
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Company in the best interests of the Company and the Members, and shall have a
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Company. All decisions made for and on behalf of the Company by the Managers
shall be binding upon the Company. The Managers shall devote such time, effort
and personnel to the Company affairs as is necessary for the conduct thereof;
provided, however, it is understood and agreed that the Managers and/or their
affiliates may be interested, directly or indirectly, in various other
businesses and undertakings and, subject to the fulfillment of their obligations
under this Agreement, the Managers shall not be required to devote their entire
time to the business of the Company and shall not be restricted in any manner
from participating in other businesses or activities. In carrying out their
obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a Member or a profit for the Members from the operations of the
Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting,
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brokerage and other fees, insurance costs and the costs of preparation and
dissemination of reports required to be furnished to the Members for investor
tax reporting or other purposes, or which reports the Managers deem the
furnishing thereof to be in the best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
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6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Mehdizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every
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meeting of Members to vote the Membership Interest standing in his name on the
record of Members. Membership Interests held by an administrator, executor,
guardian, conservator, committee, or other fiduciary, except a trustee, may be
voted by him, either in person or by proxy, without transfer of such interests
into his name. Membership Interests held by a trustee may be voted by him,
either in person or by proxy, only after the Membership Interests have been
transferred into his name as trustee or into the name of his nominee. Membership
Interests standing in the name of a domestic or foreign corporation of any type
or kind may be voted by such officer, agent or proxy as the by-laws of such
corporation may provide, or, in the absence of such provision, as the board of
directors of such corporation may determine. A Member shall not sell his vote or
issue a proxy to vote to any person for any sum of money or anything of value
except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose
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of determining Members entitled to receive payment of any distribution or the
allotment of any rights, or for the purpose of any other action, the Managers
may fix, in advance, a date as the record date for any such determination of
Members. Such date shall not be more than fifty (50) nor less than ten (10) days
before the date of such meeting, nor more then fifty (50) days prior to any
other action. When a determination of Members of record entitled to notice of or
to vote at any meeting of Members has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Managers
fix a new record date for the adjourned meeting. A list of Members as of the
record date shall be produced at any meeting of Members upon the request thereat
or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general assignment by the Company for the
benefit of creditors; the filing of any petition or answer by the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of the Company or its debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors,
or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian, or other
similar official for the Company or for any substantial part of its
property; or action taken
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by the Company to authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber or dispose of all or any
portion of his, her or its Membership Interest or any rights therein without the
unanimous written consent of the Members, other than the transferring Member,
and any attempted disposition shall be ineffective to transfer such interest.
Each Member hereby acknowledges the reasonableness of the restrictions on
transfer imposed by this Agreement in view of the Company purposes and the
relationship of the Members. Accordingly, the restrictions on transfer contained
herein shall be specifically enforceable. If a Membership Interest of a Member
shall, with the consent of the Members, be transferred pursuant to this Section,
the transferee shall become the assignee of the Member's Membership Interest in
the Company,
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provided such assignment shall be by instrument in form and substance reasonably
satisfactory to the Members (which instrument shall contain a statement by the
assignee of his, her or its adoption and assumption of all of the applicable
terms of this Agreement, as same may be amended); provided, however, nothing
contained in this Article 9 shall prevent any Member from transferring all or
part of his, her or its Membership Interest in the Company (x) by way of will or
intestacy, or inter vivos gift or trust, to or for the benefit of members of the
Member's immediate family, or (y) to a partnership, corporation or other entity,
all of the outstanding interests of which entity are owned (of record and
beneficially) by such Member and/or a permitted transferee, (each of (x) and (y)
being referred to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the
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Managers. All distributions on or before the date of a transfer shall be made to
the transferor, and all distributions thereafter shall be made to the
transferee. Solely for purposes of making such allocations and distributions,
the Company shall recognize a transfer not later than the end of the calendar
month during which it is given notice stating the date such Membership Interest
was transferred and such other information as the Managers may reasonably
require. Without waiving the Company's or nontransferring Members' remedies
hereunder, if a transfer is not a transfer permitted pursuant to this Agreement,
then all of such items shall be allocated, and all distributions shall be made,
to the Person who, according to the books and records of the Company, on the
last day of the Fiscal Year during which the transfer occurs, was the owner of
the Membership Interest. The Company shall incur no liability for making
allocations and distributions in accordance with the provisions of this Article,
whether or not the Company has knowledge of any transfer of ownership of any
Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power under the Act to dissolve the Company, (d)
transfer all or any portion of his, her or its Membership Interest in the
Company, (e) petition for judicial dissolution of the Company, (g) demand a
return of such Member's contributions or profits (or a bond or other security
for the return of such contributions or profits) or (h) take any action to file
a certificate of dissolution or its equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
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(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the appraisers shall
determine the fair market value of the defaulting Member's Membership Interest
as of the date of the Exercise Notice. Such determination of fair market value
shall be final and binding on all parties. Each Member shall pay the fees and
expenses of its own appraiser, except that in the event an Appointee is
required, the fees and expenses of the Appointee shall be paid jointly by the
participating Members. The purchase price for the defaulting Member's Membership
Interest shall be paid, and the closing of such purchase shall take place, in
accordance with this section. If more than one Member exercises such buy-out
rights, each such Member shall be entitled to acquire the portion of the
defaulting Member's Membership Interest which bears the same proportion as the
purchasing
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Members' Membership Interest bears to the aggregate Membership Interests of the
Members participating in the transaction. The payment of the purchase price, and
the closing of the purchase, shall be in accordance with the following
provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
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(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve shall, after the passage of a reasonable period of time,
be distributed in accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
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(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with, violate or result in the breach of
any law, regulation, order or rule of any governmental department, agency or
instrumentality applicable to it, him or them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt
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requested, postage prepaid, or (iii) upon transmission if by facsimile with a
confirmation copy delivered on the second business day by recognized overnight
courier, to each party's respective address set forth on the first page of this
Agreement, with a copy given in like manner to Mandel and Resnik, P.C., 220 East
42nd Street, New York, New York 10017, Attention: Barry H. Mandel, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added,
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this Agreement shall be construed as if the words or phrases so stricken out or
otherwise eliminated had never appeared in this Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
6th day of August, 1996.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
----------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
----------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
Nourollah Elghanayan 8/6/96 16.67%
Victoria
Elghanayan 8/6/96 16.67%
Jeffrey Elghanayan 8/6/96 16.66%
Mehdi Gabayzadeh 8/6/96 26%
Mehdi Gabayzadeh 8/6/96 8%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 8/6/96 8%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 8/6/96 8%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
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AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
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AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
AMERICAN TISSUE MILLS OF NEENAH LLC
----------
The Limited Liability Company Operating Agreement of AMERICAN TISSUE MILLS OF
NEENAH LLC (the "Company") is hereby amended to provide that the membership
interests of the Company may be certificated and that each of such certificates
is a "Security" governed by Article 8 of the Uniform Commercial Code of the
State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: Mehdi Gabayzadeh
-----------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
AMERICAN TISSUE MILLS OF NEENAH COMPANY LLC
The Limited Liability Company Operating Agreement of American Tissue Mills of
Neenah LLC Company LLC is hereby amended as follows (all capitalized terms not
defined herein shall have the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"6.9 Officers. The Managers may designate one or more individuals as
officers of the Company, who shall have such titles and exercise and
perform such powers and duties as shall be assigned to them from time
to time by the Managers. Any officer may be removed by the Managers at
any time, with or without cause. Each officer shall hold office until
his or her successor is elected and qualified. Any number of offices
may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
CERTIFICATE OF AMENDMENT
OF
AMERICAN TISSUE MILLS OF NEW ENGLAND, INC.
(Under Section 805 of the Business Corporation Law)
The undersigned, Nourollah Elghanayan (President) and Mehdi Gabayzadeh
(Secretary) of American Tissue Mills of New England, Inc., certify and set
forth:
1. The name of the Corporation is American Tissue Mills of New England,
Inc.
2. The date that the Certificate of Incorporation of American Tissue Mills
of New England, Inc. was filed by the Department of State is the 29th day of
April, 1994.
3. The Certificate of Incorporation is hereby changed, pursuant to Section
801 (b) (1) of the Business Corporation Law, to affect a change in the name of
the Corporation.
4. Paragraph Fist of the Certificate of Incorporation of American Tissue
Mills of New Hampshire, Inc. is hereby changed to read as follows:
"The name of the corporation is American Tissue Mills of New
Hampshire, Inc."
5. This change to the Certificate of Incorporation of
<PAGE>
American Tissue Mills of New England, Inc. was authorized by the resolution of
the Board of Directors of the Corporation, dated June 15, 1994 and the written
consent of all of the shareholders of the Corporation, dated June 15, 1994.
In witness whereof, the undersigned, who affirm that the statements made
herein are true under the penalties of perjury, have executed this certificate
this 15th day of June, 1994.
s/s Nourollah Elghanayan
-----------------------------
Nourollah Elghanayan,
President
s/s Mehdi Gabayzadeh
-----------------------------
Mehdi Gabayzadeh,
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMERICAN TISSUE MILLS OF NEW ENGLAND, INC.
-----------------------
Section 805 of the Business Corporation Law
Filer: Tracey Ann Carter
Corporation Service Company
4 Central Avenue
Albany, NY 12210
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED JUN 29 1994
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW ENGLAND, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
-----------------------------------------
The undersigned, a natural person of the age of eighteen years or over,
desiring to form a corporation pursuant to the provisions of Section 402 of the
Business Corporation Law of the State of New York, hereby certifies as follows:
FIRST: The name of the corporation is:
AMERICAN TISSUE MILLS OF NEW ENGLAND, INC.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law of the State of New York, exclusive of any act or activity requiring the
consent or approval of any state official, department, board, agency or other
body without such consent or approval first being obtained.
THIRD: The office of the corporation in the State of New York is to be
located in the County of Suffolk.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is:
Two Hundred (200) Shares Without Par Value
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against the corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
corporation served upon him is:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
IN WITNESS WHEREOF, I have duly executed and subscribed this certificate
and do affirm the foregoing as true under the penalties of perjury this twenty
ninth of April, 1994.
s/s Charles G. Tucker
-----------------------------
Charles G. Tucker
Incorporator
Corporation Service Company
4 Central Avenue
Albany, NY 12210
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW ENGLAND, INC.
-----------------------
Section 402 of the Business Corporation Law
Filer: Charles G. Tucker
Corporation Service Company
4 Central Avenue
Albany, NY 12210
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED APR 29 1994
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is American Tissue Mills of New
Hampshire, Inc. The original name under which it was formed was American Tissue
Mills of New England, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 29th day of April 1994.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article
Sixth is hereby added to the Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or
its shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
<PAGE>
State of New York }
Department of State}
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on Sep 13 1999
[SEAL] /s/ [ILLEGIBLE]
Special Deputy Secretary of State
BY-LAWS
OF
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.
(Formed under the laws of the State of New York)
<PAGE>
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or, subject to the control of the Board, by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be called. Such request shall state
the purpose or purposes of the proposed meeting. At such meetings the only
business which may be transacted is that relating to the purpose or purposes set
forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
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<PAGE>
shareholder entitled to vote thereat shall, appoint two inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum,and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of
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<PAGE>
such shares into his name. Shares held by a trustee may be voted by him, either
in person or by proxy, only after the shares have been transferred into his name
as trustee or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a majority of votes cast, adjourn the meeting despite the
absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law or by written agreement among the shareholders, be
elected by a plurality of the votes cast at a meeting of shareholders by the
holders of shares
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<PAGE>
entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law or by written agreement among the shareholders, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of such
meeting, nor more then fifty (50) days prior to any other action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least eighteen (18) years of age.
Section 2. Number of Directors. The number of directors constituting the
entire Board of Directors shall be the number, not less than one (1) nor more
than five (5), fixed from time to time by a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies, provided, however, that no decrease shall shorten
the term of an incumbent director, and provided further, however, that if all of
the shares of the Corporation are owned
-5-
<PAGE>
beneficially and of record by less than three (3) shareholders, the number of
directors may be less than three (3) but not less than the number of
shareholders. Until otherwise fixed by the directors, the number of directors
constituting the entire Board shall be two (2).
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws or by written
agreement among the shareholders, the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or any two (2) directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one (1) or more members of
the Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, New York time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that
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<PAGE>
purpose, or, if none has been so designated, at his last known residence or
business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
agreed upon by the Corporation or its shareholders. Vacancies occurring as a
result of the removal of directors by shareholders shall be filled by the
shareholders, unless otherwise agreed upon by the Corporation or its
shareholders. A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three (3) or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that
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<PAGE>
no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one (1) or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one (1) or more of the directors are directors or officers, or are
financially interested shall be either void or voidable, irrespective of whether
such interested director or directors are present at a meeting of the Board of
Directors, or of a committee thereof, which authorizes such contract or
transaction and irrespective of whether his or their votes are counted for such
purpose. In the absence of fraud, any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
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<PAGE>
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known to the Board or
committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one (1) or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, a Treasurer and such other
officers as it may determine. Any two (2) or more offices may be held by the
same person, except that the same person may not hold the offices of President
and Secretary unless there be only (1) shareholder. The Board of Directors may
also elect one (1) or more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him or her, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer of the Corporation to the full
extent of such disallowance. It shall be the duty of the directors, as a Board,
to enforce payment of each such amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors, proportionate amounts
may be withheld from future compensation payments until the amount owed to
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<PAGE>
the Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his or her term of
office shall extend to and expire at the meeting of the Board following the next
annual meeting of shareholders. Any officer may be removed by the Board, with or
without cause, at any time. Removal of an officer without cause shall be without
prejudice to his or her contract rights, if any, and the election or appointment
of an officer shall not of itself create contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board of Directors shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation
and he or she, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the
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<PAGE>
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his or her signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one (1), the
Assistant Treasurers in the order designated by the Board of Directors (or in
the absence of any designation, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors
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<PAGE>
and officers and their residence addresses. The Corporation shall also keep at
its office in the State of New York or at the office of its transfer agent or
registrar in the State of New York, if any, a record containing the names and
addresses of all shareholders, the number and class of shares held by each and
the dates when they respectively became the owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security holder or other person shall have any right to inspect any
accounts, books, records or other documents of the Corporation except as
conferred by statute or as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer at the date
of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one (1), authorized to be
issued and the designation, relative rights, preferences and limitations of
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<PAGE>
each series of any class of preferred shares authorized to be issued so far as
the same have been fixed, and the authority of the Board of Directors to
designate and fix the relative rights, preferences and limitations of other
series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper indorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation or
its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
OTHER MATTERS
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<PAGE>
Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the
year ending September 30.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of the
changes made.
Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while serving, or thereafter, by reason of his or her being
or having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors, then in office;
or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to
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<PAGE>
vote for directors, voting as a single class, exclusive of any stock
owned by any interested director or officer; or
(b) in the absence of action by disinterested directors or
shareholders, there has been obtained at the request of a majority of the
directors then in office an opinion in writing of independent legal counsel
to the effect that such director, officer, trustee, employee or agent
appears to have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an undertaking by such individual to repay the amounts so paid by the
Corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any such director, officer, trustee, employee or agent may be entitled. Nothing
contained in this Article shall affect any rights to indemnification to which
corporate personnel other than directors, officers, trustees, employees or
agents may be entitled by contract or otherwise under law. As used in this
section, the terms "director", "officer", "trustees", "employee" and "agent"
include their respective heirs, executors and administrators, and an
"interested" director, officer, trustee, employee or agent is one against whom
in such capacity the proceedings in question, or other proceedings on the same
or similar grounds, are then pending.
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CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW YORK, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
------------------------------------------
The undersigned, a natural person of the age of eighteen years or over,
desiring to form a corporation pursuant to the provisions of Section 402 of the
Business Corporation Law of the State of New York, hereby certifies as follows:
FIRST: The name of the corporation is:
AMERICAN TISSUE MILLS OF NEW YORK, INC.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law of the State of New York, exclusive of any act or activity requiring the
consent or approval of any state official, department, board, agency or other
body without such consent or approval first being obtained.
THIRD: The office of the corporation in the State of New York is to be
located in the County of Suffolk.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is:
Two Hundred (200) Shares Without Par Value
1
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against the corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
corporation served upon him is:
Mandel and Resnick, P.C.
220 East 42nd Street
New York, NY 10017
IN WITNESS WHEREOF, I have duly executed and subscribed this certificate
and do affirm the foregoing as true under the penalties of perjury this seventh
of April, 1994.
/s/ Tracy Ann Mccormick
-----------------------------
Tracy Ann Mccormick
Incorporator
Corporation Service Company
4 Central Avenue
Albany, NY
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW YORK, INC.
------------------------------
Section 402 of the Business Corporation Law
FILED
Apr 7 2:35 PM '94
[STAMP]
[ILLEGIBLE]
Filer: Tracy Ann Mccormick
Corporation Service Company
4 Central Avenue
Albany, NY 12210
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW YORK, INC.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is American Tissue Mills of New York,
Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 7th day of April 1994.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article
Sixth is hereby added to the Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or
its shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
State of New York }
Department of State}
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on Sep 10 1999
[SEAL] /s/ [ILLEGIBLE]
Special Deputy Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF NEW YORK, INC.
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
BY-LAWS
OF
AMERICAN TISSUE MILLS OF NEW YORK, INC.
(Formed under the laws of the State of New York)
<PAGE>
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or, subject to the control of the Board, by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be called. Such request shall state
the purpose or purposes of the proposed meeting. At such meetings the only
business which may be transacted is that relating to the purpose or purposes set
forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 5. Waiver of Notice. Notice of meeting
need not be given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The attendance of any
shareholder at a meeting, in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting, shall constitute a
waiver of notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
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<PAGE>
shareholder entitled to vote thereat shall, appoint two inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum,and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of
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<PAGE>
such shares into his name. Shares held by a trustee may be voted by him, either
in person or by proxy, only after the shares have been transferred into his name
as trustee or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a majority of votes cast, adjourn the meeting despite the
absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law or by written agreement among the shareholders, be
elected by a plurality of the
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<PAGE>
votes cast at a meeting of shareholders by the holders of shares entitled to
vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law or by written agreement among the shareholders, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of such
meeting, nor more then fifty (50) days prior to any other action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least eighteen (18) years of age.
Section 2. Number of Directors. The number of directors constituting the
entire Board of Directors shall be the number, not less than one (1) nor more
than five (5), fixed from time to time by a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies, provided, however, that no decrease shall shorten
the term of an incumbent director, and provided further,
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<PAGE>
however, that if all of the shares of the Corporation are owned beneficially and
of record by less than three (3) shareholders, the number of directors may be
less than three (3) but not less than the number of shareholders. Until
otherwise fixed by the directors, the number of directors constituting the
entire Board shall be two (2).
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws or by written
agreement among the shareholders, the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or any two (2) directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one (1) or more members of
the Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, New York time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall
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<PAGE>
be sent to each director at the address designated by him for that purpose, or,
if none has been so designated, at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
agreed upon by the Corporation or its shareholders. Vacancies occurring as a
result of the removal of directors by shareholders shall be filled by the
shareholders, unless otherwise agreed upon by the Corporation or its
shareholders. A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three (3) or more directors and each of which, to the extent
provided in the
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<PAGE>
resolution, shall have all the authority of the Board, except that no such
committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one (1) or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one (1) or more of the directors are directors or officers, or are
financially interested shall be either void or voidable, irrespective of whether
such interested director or directors are present at a meeting of the Board of
Directors, or of a committee thereof, which authorizes such contract or
transaction and irrespective of whether his or their votes are counted for such
purpose. In the absence of fraud, any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
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<PAGE>
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known to the Board or
committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one (1) or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, a Treasurer and such other
officers as it may determine. Any two (2) or more offices may be held by the
same person, except that the same person may not hold the offices of President
and Secretary unless there be only (1) shareholder. The Board of Directors may
also elect one (1) or more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him or her, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer of the Corporation to the full
extent of such disallowance. It shall be the duty of the directors, as a Board,
to enforce payment of each such amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors, proportionate amounts
may be withheld from future compensation payments until the amount owed to
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<PAGE>
the Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his or her term of
office shall extend to and expire at the meeting of the Board following the next
annual meeting of shareholders. Any officer may be removed by the Board, with or
without cause, at any time. Removal of an officer without cause shall be without
prejudice to his or her contract rights, if any, and the election or appointment
of an officer shall not of itself create contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board of Directors shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation
and he or she, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the
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<PAGE>
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his or her signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one (1), the
Assistant Treasurers in the order designated by the Board of Directors (or in
the absence of any designation, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors
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<PAGE>
and officers and their residence addresses. The Corporation shall also keep at
its office in the State of New York or at the office of its transfer agent or
registrar in the State of New York, if any, a record containing the names and
addresses of all shareholders, the number and class of shares held by each and
the dates when they respectively became the owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security holder or other person shall have any right to inspect any
accounts, books, records or other documents of the Corporation except as
conferred by statute or as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer at the date
of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one (1), authorized to be
issued and the designation, relative rights, preferences and limitations of
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<PAGE>
each series of any class of preferred shares authorized to be issued so far as
the same have been fixed, and the authority of the Board of Directors to
designate and fix the relative rights, preferences and limitations of other
series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper indorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation or
its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
OTHER MATTERS
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<PAGE>
Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the
year ending September 30.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of the
changes made.
Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while serving, or thereafter, by reason of his or her being
or having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors, then in office;
or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to
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<PAGE>
vote for directors, voting as a single class, exclusive of any stock
owned by any interested director or officer; or
(b) in the absence of action by disinterested directors or
shareholders, there has been obtained at the request of a majority of the
directors then in office an opinion in writing of independent legal counsel
to the effect that such director, officer, trustee, employee or agent
appears to have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an undertaking by such individual to repay the amounts so paid by the
Corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any such director, officer, trustee, employee or agent may be entitled. Nothing
contained in this Article shall affect any rights to indemnification to which
corporate personnel other than directors, officers, trustees, employees or
agents may be entitled by contract or otherwise under law. As used in this
section, the terms "director", "officer", "trustees", "employee" and "agent"
include their respective heirs, executors and administrators, and an
"interested" director, officer, trustee, employee or agent is one against whom
in such capacity the proceedings in question, or other proceedings on the same
or similar grounds, are then pending.
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF CANADA, INC.
Under Section 805 of the Business Corporation Law
The undersigned hereby set forth and certify as follows:
1. The name of the Corporation is:
AMERICAN TISSUE MILLS OF CANADA, INC.
2. The Certificate of Incorporation was filed by the Department of State on
the 12th day of August, 1992.
3. The Certificate of Incorporation is hereby amended to change the
corporations name.
Paragraph One of the Certificate of Incorporation is amended to read as
follows:
The name of the corporation is:
AMERICAN TISSUE MILLS OF OREGON, INC.
<PAGE>
4. This amendment to the Certificate of Incorporation was authorized by the
agent for the Sole Incorporator; as the Sole Incorporator is unable to act, and
there are no directors, officers or holders of shares whose subscriptions for
shares have been accepted.
IN WITNESS WHEREOF, we have signed this Certificate of Amendment this 26th
day of October 1992, and hereby affirm the truth of the statements contained
herein under the penalties of perjury.
/s/ Linda Pellitier
-----------------------------
Linda Pellitier
Agent for Sole Incorporator
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF CANADA, INC.
Under Section 805 of the Business Corporation Law
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED OCT 30 1992
Filer: Linda Pellitier
Corporation Service Company
4 Central Avenue
Albany, NY 12210
3
<PAGE>
CERTIFICATE OF INCORPORATION
OF
American Tissue Mills of Canada, Inc.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
- --------------------------------------------------------------------------------
The undersigned, a natural person of the age of eighteen years or over,
desiring to form a corporation pursuant to the provisions of Section 402 of the
Business Corporation Law of the State of New York, hereby certifies as follows:
FIRST: The name of the corporation is:
American Tissue Mills of Canada, Inc.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law of the State of New York, exclusive of any act or activity requiring the
consent or approval of any state official, department, board, agency or other
body without such consent or approval first being obtained.
THIRD: The office of the corporation in the State of New York is to be
located in the County of New York.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is:
Two Hundred (200) Shares At No Par Value
1
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against the corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
corporation served upon him is:
Barry H. Mandel
c/o Mandel And Resnik, P.C.
220 East 42nd Street
New York, NY 10017
IN WITNESS WHEREOF, I have executed and subscribed this certificate and do
affirm the foregoing as true under the penalties of perjury this Twelfth day of
August, A.D. 1992.
/s/ Alexa M. Rockwell
------------------------------
Alexa M. Rockwell
Incorporator
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
American Tissue Mills of Canada Inc.
-----------------------------
Section 402 of the Business Corporation Law
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED AUG 12 1992
TAX$ 10
BY: PEM
NY. Co.
Filer: Alexa M. Rockwell
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF OREGON, INC.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is American Tissue Mills of Oregon, Inc.
SECOND: The Certificated of Incorporation of the Corporation was filed by
the Department of State on the 12th day of August 1992.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article
Sixth is hereby added to the Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or
its shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF OREGON, INC.
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
<PAGE>
State of New York }
Department of State}
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on Sep 10 1999
[SEAL] /s/ [ILLEGIBLE]
Special Deputy Secretary of State
MINUTES
and
BY-LAWS
of
AMERICAN TISSUE MILLS OF OREGON, INC.
----------
From
August 12, 1992
To
----------
<PAGE>
BY-LAWS
OF
AMERICAN TISSUE MILLS OF OREGON, INC.
(Formed under the laws of the State of New York)
----------
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or, subject to the control of the Board, by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be called. Such request shall state
the purpose or purposes of the proposed
<PAGE>
meeting. At such meetings the only business which may be transacted is that
relating to the purpose or purposes set forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in
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<PAGE>
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint two inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding
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<PAGE>
at the meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. Any report or certificate
made by them shall be prima facie evidence of the facts stated and of the vote
as certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the
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<PAGE>
shares entitled to vote in the election of directors of such other corporation
is held as of the record date by the Corporation, shall not be shares entitled
to vote or to be counted in determining the total number of outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as trustee or into the name of his
nominee.
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series
-5-
<PAGE>
shall constitute a quorum for the transaction of such specified item of
business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a majority of votes cast, adjourn the meeting despite the
absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
-6-
<PAGE>
Section 11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law or by written agreement among the shareholders, be
elected by a plurality of the votes cast at a meeting of shareholders by the
holders of shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law or by written agreement among the shareholders, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in
-7-
<PAGE>
advance, a date as the record date for any such determination of shareholders.
Such date shall not be more than fifty (50) nor less than ten (10) days before
the date of such meeting, nor more then fifty (50) days prior to any other
action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least eighteen (18) years of age.
Section 2. Number of Directors. The number of directors constituting the
entire Board of Directors shall be the number, not less than one (1) nor more
than five (5), fixed from time to time by a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies, provided, however, that no decrease shall shorten
the term of an incumbent director, and provided further,
-8-
<PAGE>
however, that if all of the shares of the Corporation are owned beneficially and
of record by less than three (3) shareholders, the number of directors may be
less than three (3) but not less than the number of shareholders. Until
otherwise fixed by the directors, the number of directors constituting the
entire Board shall be two (2).
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws or by written
agreement among the shareholders, the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
-9-
<PAGE>
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or any two (2) directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one (1) or more members of
the Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, New York time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that purpose, or, if none has
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been so designated, at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
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Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
agreed upon by the Corporation or its shareholders. Vacancies occurring as a
result of the removal of directors by shareholders shall be filled by the
shareholders, unless otherwise agreed upon by the Corporation or its
shareholders. A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three (3) or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
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(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
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<PAGE>
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one (1) or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one (1) or more of the directors are directors or officers, or are
financially interested shall be either void or voidable, irrespective of whether
such interested director or directors are present at a meeting of the Board of
Directors, or of a committee thereof, which authorizes such contract or
transaction and irrespective of whether his or their votes are counted for such
purpose. In the absence of fraud, any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known
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<PAGE>
to the Board or committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one (1) or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, a Treasurer and such other
officers as it may determine. Any two (2) or more offices may be held by the
same person, except that the same person may not hold the offices of President
and Secretary unless there be only (1) shareholder. The Board of Directors may
also elect one (1) or more Assistant Secretaries and Assistant Treasurers.
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<PAGE>
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him or her, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer of the Corporation to the full
extent of such disallowance. It shall be the duty of the directors, as a Board,
to enforce payment of each such amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors, proportionate amounts
may be withheld from future compensation payments until the amount owed to the
Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his or her term of
office shall extend to and expire at the meeting of the
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<PAGE>
Board following the next annual meeting of shareholders. Any officer may be
removed by the Board, with or without cause, at any time. Removal of an officer
without cause shall be without prejudice to his or her contract rights, if any,
and the election or appointment of an officer shall not of itself create
contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board of
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<PAGE>
Directors shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation
and he or she, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such
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other powers as the Board of Directors may from time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
The Treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his or
her transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
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The Assistant Treasurer or, if there shall be more than one (1), the
Assistant Treasurers in the order designated by the Board of Directors (or in
the absence of any designation, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors and officers and their residence addresses. The
Corporation shall also keep at its office in the State of New York or at the
office of its transfer agent or registrar in the State of New York, if any, a
record containing the names and addresses of all shareholders, the number and
class of shares held by each and the dates when they respectively became the
owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security holder or other person shall have any
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<PAGE>
right to inspect any accounts, books, records or other documents of the
Corporation except as conferred by statute or as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile
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signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer at the date of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one (1), authorized to be
issued and the designation, relative rights, preferences and limitations of each
series of any class of preferred shares authorized to be issued so far as the
same have been fixed, and the authority of the Board of Directors to designate
and fix the relative rights, preferences and limitations of other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
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<PAGE>
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper indorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation or
its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
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ARTICLE V
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the
year ending September 30.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
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Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while serving, or thereafter, by reason of his or her being
or having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors,
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then in office; or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested director
or officer; or
(b) in the absence of action by disinterested directors or shareholders,
there has been obtained at the request of a majority of the directors then
in office an opinion in writing of independent legal counsel to the effect
that such director, officer, trustee, employee or agent appears to have
acted in good faith in the reasonable belief that his or her action was in
the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an undertaking by such individual to repay the amounts so paid by the
Corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any such director, officer, trustee, employee or agent may be entitled. Nothing
contained in this Article shall affect any rights to indemnification to which
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corporate personnel other than directors, officers, trustees, employees or
agents may be entitled by contract or otherwise under law. As used in this
section, the terms "director", "officer", "trustees", "employee" and "agent"
include their respective heirs, executors and administrators, and an
"interested" director, officer, trustee, employee or agent is one against whom
in such capacity the proceedings in question, or other proceedings on the same
or similar grounds, are then pending.
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CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
----------
The undersigned, a natural person of the age of eighteen years or over,
desiring to form a corporation pursuant to the provisions of Section 402 of the
Business Corporation Law of the State of New York, hereby certifies as follows:
FIRST: The name of the corporation is:
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law of the State of New York, exclusive of any act or activity requiring the
consent or approval of any state official, department, board, agency or other
body without such consent or approval first being obtained.
THIRD: The office of the corporation in the State of New York is to be
located in the County of Suffolk.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is:
Two Hundred (200) Shares Without Par Value
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against the corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
corporation served upon him is:
c/o Mandel And Resnick, p.c.
220 East 42nd Street
New York, NY 10017
IN WITNESS WHEREOF, I have duly executed and subscribed this certificate
and do affirm the foregoing as true under the penalties of perjury this
fifteenth of March, 1994.
/s/ Tracey Ann Mccormick
---------------------------------------
Tracey Ann Mccormick
Incorporator
Corporation Service Company
4 Central Avenue
Albany, NY 12210
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
----------
Section 402 of the Business Corporation Law
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED MAR 15 1994
TAX $10
BY: [ILLEGIBLE]
Filer: Tracey Ann Mccormick
Corporation Service Company
4 Central Avenue
Albany, NY 12210
FILED
MAR 15 4:54 PM '94
RECEIVED
MAR 15 12:19 PM '94
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is American Tissue Mills of Wisconsin,
Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 15th day of March 1994.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article
Sixth is hereby added to the Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or
its shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
<PAGE>
State of New York }
Department of State}
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on Sep 10 1999
[SEAL] /s/ [ILLEGIBLE]
Special Deputy Secretary of State
BY-LAWS
OF
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
(Formed under the laws of the State of New York)
<PAGE>
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or, subject to the control of the Board, by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be called. Such request shall state
the purpose or purposes of the proposed meeting. At such meetings the only
business which may be transacted is that relating to the purpose or purposes set
forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint two inspectors.
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In case any person appointed fails to appear or act, the vacancy may be filled
by appointment made by the Board in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum,and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted
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<PAGE>
by him, either in person or by proxy, only after the shares have been
transferred into his name as trustee or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a majority of votes cast, adjourn the meeting despite the
absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote or Consent of Shareholders.
Directors shall, except as otherwise required by law or by written agreement
among the shareholders, be elected by a plurality of the votes cast at a meeting
of shareholders by the holders of shares
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entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law or by written agreement among the shareholders, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of such
meeting, nor more then fifty (50) days prior to any other action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least eighteen (18) years of age.
Section 2. Number of Directors. The number of directors constituting the
entire Board of Directors shall be the number, not less than one (1) nor more
than five (5), fixed from time to time by a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies, provided, however, that no decrease shall shorten
the term of an incumbent director, and provided further, however, that if all of
the shares of the Corporation are owned
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beneficially and of record by less than three (3) shareholders, the number of
directors may be less than three (3) but not less than the number of
shareholders. Until otherwise fixed by the directors, the number of directors
constituting the entire Board shall be two (2).
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws or by written
agreement among the shareholders, the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or any two (2) directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one (1) or more members of
the Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, New York time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that
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purpose, or, if none has been so designated, at his last known residence or
business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
agreed upon by the Corporation or its shareholders. Vacancies occurring as a
result of the removal of directors by shareholders shall be filled by the
shareholders, unless otherwise agreed upon by the Corporation or its
shareholders. A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three (3) or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that
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no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one (1) or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one (1) or more of the directors are directors or officers, or are
financially interested shall be either void or voidable, irrespective of whether
such interested director or directors are present at a meeting of the Board of
Directors, or of a committee thereof, which authorizes such contract or
transaction and irrespective of whether his or their votes are counted for such
purpose. In the absence of fraud, any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
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<PAGE>
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known to the Board or
committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one (1) or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, a Treasurer and such other
officers as it may determine. Any two (2) or more offices may be held by the
same person, except that the same person may not hold the offices of President
and Secretary unless there be only (1) shareholder. The Board of Directors may
also elect one (1) or more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him or her, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer of the Corporation to the full
extent of such disallowance. It shall be the duty of the directors, as a Board,
to enforce payment of each such amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors, proportionate amounts
may be withheld from future compensation payments until the amount owed to
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the Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his or her term of
office shall extend to and expire at the meeting of the Board following the next
annual meeting of shareholders. Any officer may be removed by the Board, with or
without cause, at any time. Removal of an officer without cause shall be without
prejudice to his or her contract rights, if any, and the election or appointment
of an officer shall not of itself create contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board of Directors shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation
and he or she, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the
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<PAGE>
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his or her signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one (1), the
Assistant Treasurers in the order designated by the Board of Directors (or in
the absence of any designation, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and any committees of directors, and (c) a
current list of the directors
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and officers and their residence addresses. The Corporation shall also keep at
its office in the State of New York or at the office of its transfer agent or
registrar in the State of New York, if any, a record containing the names and
addresses of all shareholders, the number and class of shares held by each and
the dates when they respectively became the owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security holder or other person shall have any right to inspect any
accounts, books, records or other documents of the Corporation except as
conferred by statute or as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer at the date
of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class of shares, if more than one (1), authorized to be
issued and the designation, relative rights, preferences and limitations of
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each series of any class of preferred shares authorized to be issued so far as
the same have been fixed, and the authority of the Board of Directors to
designate and fix the relative rights, preferences and limitations of other
series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders upon presentment to the Corporation
or a transfer agent of a certificate or certificates representing the shares
requested to be transferred, with proper indorsement on the certificate or on a
separate accompanying document, together with such evidence of the payment of
transfer taxes and compliance with other provisions of law as the Corporation or
its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
OTHER MATTERS
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Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the
year ending September 30.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of the
changes made.
Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while serving, or thereafter, by reason of his or her being
or having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors, then in office;
or
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to
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vote for directors, voting as a single class, exclusive of any stock
owned by any interested director or officer; or
(b) in the absence of action by disinterested directors or
shareholders, there has been obtained at the request of a majority of the
directors then in office an opinion in writing of independent legal counsel
to the effect that such director, officer, trustee, employee or agent
appears to have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an undertaking by such individual to repay the amounts so paid by the
Corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any such director, officer, trustee, employee or agent may be entitled. Nothing
contained in this Article shall affect any rights to indemnification to which
corporate personnel other than directors, officers, trustees, employees or
agents may be entitled by contract or otherwise under law. As used in this
section, the terms "director", "officer", "trustees", "employee" and "agent"
include their respective heirs, executors and administrators, and an
"interested" director, officer, trustee, employee or agent is one against whom
in such capacity the proceedings in question, or other proceedings on the same
or similar grounds, are then pending.
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The Record of Organization of Berlin Mills Railway, Inc. having been submitted
to me, I have examined the same and find that it conforms to the provisions of
the Business Corporation Law, and it is hereby approved.
Dated January 30, 1970
/s/ Irma A. Matthews
--------------------------
Assistant Attorney General
STATE OF NEW HAMPSHIRE
-------------
Office of the Secretary of State
Filed for record this 30th
day of January, 1970
at 4:25 p.m. o'clock
/s/ Edward C. Kelley
--------------------
DEPUTY
SECRETARY OF STATE
<PAGE>
D-T5771
BERLIN MILLS RAILWAY, INC.
Petition for authority to acquire the railroad of the Brown Company in the
City of Berlin and the Town of Gorham, and to operate as a railroad corporation
therein.
..00..
Appearances: For the petitioners, Guy A. Swenson, Jr.
..00..
REPORT
By petition filed November 26, 1969, the Berlin Mills Railway, Inc. seeks
authority to acquire the Berlin Mills Railway, a division of the Brown Company
in Berlin, approximately 68% of which is owned by Gulf and Western Industries,
Inc. Hearing thereon was held at Concord on December 30 at which no one appeared
in opposition to the petition.
Three individuals, Leo E. Patry, Franklin Hollis, and Guy A. Swenson, Jr.,
have associated themselves as incorporators and seek authority, pursuant to RSA
294:2, as amended, to organize a corporation for the purpose of acquiring and
operating the railroad facilities, which have been in operation since 1852 in
the City of Berlin and the Town of Gorham. The corporation will issue 150 shares
of its Common Stock to the Brown Company at par value of $100.00 per share. In
return for this, the Brown Company will convey to the Berlin Mills Railway,
Inc., all land, buildings, structures and trackage in the City of Berlin and the
Town of Gorham, which is now owned by the Brown Company, which is used, or held
for use in connection with the operation of the railway. The Brown Company will
also convey railway operating equipment consisting of two 70-ton diesel
locomotives, 12 box cars 50-feet in length, 36 box cars 40-feet in length, 13
flat cars, 10 gondola cars, three hopper cars, a snow plow, wrecking car, two
section motor cars, one tie tamper, two lorry cars, and other maintenance
equipment in accordance with an Agreement filed in this proceeding, and executed
by the Brown Company and
<PAGE>
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the incorporators of the Berlin Mills Railway, Inc.
The railroad involved consists of approximately 12.7 miles of track. It
interchanges cars with the Boston & Maine Corporation on the east side of the
Androscoggin River, and with the Canadian National Railways on the west side of
the river. In addition to this, it at times transfers cars from the Boston &
Maine to the Canadian National as a bridge service, but it is essentially a
switching railroad and performs a transfer service between the various mills of
the Brown Company located in Berlin and in Gorham. Freight traffic handled by
this railroad is estimated to be 60% inbound and 40% outbound.
Its switching tariffs and services are used in both interstate and
intrastate commerce and it is, accordingly, subject to the jurisdiction of both
the Interstate Commerce Commission (hereinafter sometimes referred to as "ICC")
and the Public Utilities Commission.
The corporation has been created to operate the railroad service as a
separate entity rather than to continue as a division of the Brown Company. It
is alleged that certain accounting and other advantages will accrue, and that
the ICC regulations can be more readily met through a separate corporation, even
though its stock is owned by the Brown Company.
There are approximately 30 men employed by the railroad which include
locomotive engineers, firemen, and brakemen who are members of the National
Railroad Unions, while the section and maintenance men are members of the United
Brotherhood Local No. 75 of Berlin. The incorporators have assured the members
of the unions that there will be no change in labor contracts. There has been no
opposition expressed to the proposal by members or representatives of the union.
Effective December 31, 1969, the Interstate Commerce Commission, in Finance
Docket No. 25945 entitled "Berlin Mills Railway, Inc. - Stock",
<PAGE>
- 3 -
certified that the present and future public convenience and necessity require
the acquisition and operation of the Berlin Mills Railway by the Berlin Mills
Railway, Inc. In these proceedings, the ICC authorized the issuance of 150
shares of Berlin Mills Railway, Inc. Common Stock, par value $100. per share, in
exchange for the Brown Company's interests in the Railroad assets and properties
now operated as a division of the Brown Company.
Upon consideration of all the facts, the Commission is of the opinion that
the formation of the Berlin Mills Railway, Inc., as herein proposed will be for
the public good, and that, upon said formation, the Berlin Mills Railway, Inc.
be authorized to acquire, maintain, and operate the line of railroad within this
state as requested. Our order will issue accordingly.
GERARD O. BERGEVIN
------------------------
Commissioner
Francis J. Riordan, Chairman, did not sit.
Thomas A. Power, Commissioner
Concurring
January 15, 1970
<PAGE>
================================================================================
State of New Hampshire
---------
Be it known that whereas
FRANKLIN HOLLIS AND GUY A. SWENSON, JR. BOTH OF CONCORD, NEW HAMPSHIRE
AND
LEO E. PATRY OF BERLIN, NEW HAMPSHIRE
have associated themselves with the intention of forming a corporation under the
name of
BERLIN MILLS RAILWAY, INC.
for the purpose
To acquire, maintain and operate the lines of railroad existing within this
State heretofore operated by Berlin Mills Railway, an unincorporated common
carrier by rail owned by and operated as a separate and distinct department of
Brown Company, a Delaware corporation; and for other purposes as set forth in
the Articles of Agreement.
with a capital stock consisting of
150 shares with par value at $100; 150 shares with par value at $100 authorized
to be issued at the present time.
and have complied with the provisions of the statutes of this State in such case
made and provided as appears from the record of organization of said corporation
duly approved by the assistant attorney-general and recorded in this office; now
therefore
I, EDWARD C. KELLEY, Deputy Secretary of State of New Hampshire, do hereby
certify
<PAGE>
A TRUE COPY
ATTEST
/s/ Charles P. Amyot
-------------------------
SECRETARY
N.H. PUBLIC UTILITIES COMMISSION
THE STATE OF NEW HAMPSHIRE
RECORD OF ORGANIZATION
OF
BERLIN MILLS RAILWAY, INC.
ARTICLES OF AGREEMENT
We, the undersigned, being all of lawful age, do hereby associate ourselves
together for the purpose of founding a corporation under the provisions of
Chapter 294 of the New Hampshire Revised Statutes Annotated.
ARTICLE I
The name of this corporation shall be Berlin Mills Railway, Inc.
ARTICLE II
The objects and purposes for which this corporation is organized are as
follows:
To acquire, maintain and operate the lines of railroad existing within this
State heretofore operated by Berlin Mills Railway, an unincorporated common
carrier by rail owned by and operated as a separate and distinct department of
Brown Company, a Delaware corporation, in the City of Berlin and Town of Gorham,
in the State of New Hampshire, and in connection therewith:
(1) To do a general transportation business; to transport, carry, haul,
distribute, deliver and handle passengers, freight, baggage, mail, express,
goods, wares, merchandise and other property of every kind and nature, by
railroad, truck, bus and other means of transportation or by any thereof;
(2) To purchase, construct, establish, lease or otherwise acquire, own,
operate, maintain, hold and use, mortgage, sell or otherwise dispose
<PAGE>
of or deal with:
(a) Railroads, railways, railroad and railway lines and systems, and
transportation facilities, lines and systems of all kinds, operated by steam,
electricity, gasoline, motor or any other motive powers whatsoever, and bus,
automobile, motor coach and truck lines;
(b) Terminal properties and depots, freight and passenger station houses,
rights of way, tramways and tracks, bridges, trestles, tunnels, signals and
signal systems, car houses, engine houses, roundhouses, turntables, transfer
tables, freight coal and wood houses and sheds, snowsheds, warehouses, storage
and coal storage facilities, machine and repair shops, freight, stock and repair
yards, power plants and power houses for the development, generation,
transmission or utilization of water, steam, electric or other power, plants for
any form of lighting or heating, pipe lines, ice and refrigerating plants, oil,
water or gas tanks and wells, grain or other elevators, wharves, docks, piers,
slips, landings, drydocks, derricks, airports, landing areas, hangars, hotels,
boarding houses, eating houses, hospital and all other buildings, structures,
superstructures, property fixtures, appliances and appurtenances necessary or
useful in connection therewith;
(c) Cars, locomotives, engines, rolling stock and railway equipment of all
kinds; motors, buses, trucks, automobiles, ferries, barges, tugs and other
craft, towing, salvage and wrecking outfits, and all tools, machinery,
appliances, equipment, mechanical and electrical devices and property of every
kind and nature necessary or useful in connection therewith; and
(d) Any and all other property, real, personal or mixed, and wheresoever
situated, whether or not similar to any property above described, which may be
necessary or useful in connection with the business referred to in this Article
II.
<PAGE>
(3) To purchase or otherwise acquire, own, hold, develop, operate,
mortgage, sell and convey, or demise, lease, let and hire business and
residential properties, agricultural, timber, mineral and other lands, mines,
deposits, quarries, ditches, water and water rights, and other real property of
every kind and description or estates or interests therein;
(4) To purchase, manufacture, or otherwise acquire, invest in, own,
mortgage, pledge, sell, assign and transfer, or otherwise dispose of, lease,
let, hire, trade, deal in and deal with, goods, wares and merchandise and
personal property of every kind and description;
(5) To purchase, lease, or otherwise acquire, own, hold, control, operate
and use franchises, easements, grants, powers, permits, rights, licenses,
privileges, and immunities, and other property of every kind and description;
(6) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether secured by
mortgage, deed of trust, pledge or otherwise of its property and franchises
presently owned or thereafter acquired, without limit as to amount, and to
secure the same by mortgage, pledge or otherwise; and generally to make and
perform agreements and contracts of every kind and description;
(7) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the objects or
the furtherance of any of the powers hereinbefore set forth, either alone or in
association with other corporations, firms or individuals, and to do every other
act or acts, thing or things incidental or appurtenant to or growing out of or
connected with the aforesaid business or powers or any part or parts thereof
provided the same be not inconsistent with the laws under which this corporation
is organized;
<PAGE>
(8) To acquire by purchase, subscription or otherwise, and to hold for
investment or otherwise and to use, sell, assign, transfer, mortgage, pledge or
otherwise deal with or dispose of stocks, bonds or any other obligations or
securities of any corporation or corporations; to merge or consolidate with any
corporation in such manner as may be permitted by law; to aid in any manner any
corporation whose stock, bonds or other obligations are held or in any manner
guaranteed by this corporation, or in which this corporation is in any way
interested; and to do any other acts or things for the preservation, protection,
improvement or enhancement of the value of any such stock, bonds or other
obligations; and while owner of any such stock, bonds or other obligations to
exercise all the rights, powers and privileges of ownership thereof, and to
exercise any and all voting powers therein; to guarantee the payment of
dividends upon any stock, or the principal or interest or both, of any bonds or
other obligations, and the performance of any contracts;
(9) To purchase, hold, sell and transfer the shares of its own capital
stock so far as may be permitted by the laws of the State of New Hampshire;
(10) To have one or more offices and to carry on any or all of its
operations and business in any of the states, districts, territories or colonies
of the United States, in the Provinces of Canada, and in any and all foreign
countries, subject to the laws of such state, district, territory, colony,
province or country;
(11) In general, to carry on any or all of the business of the corporation
as principal, agent or contractor, and to carry on any other business incidental
to and in connection with the foregoing and to have and exercise all the powers
conferred by the laws of New Hampshire upon
<PAGE>
corporations formed under the business corporation law, and to do any or all of
the things hereinbefore set forth to the same extent as natural persons might or
could do.
ARTICLE III
The principal place of business of this corporation shall be located in
Berlin, County of Coos, and State of New Hampshire, but the corporation may
carry on any portion of its business within or without said State. Meetings of
stockholders may be held within or without the State of New Hampshire as may be
provided by the bylaws.
ARTICLE IV
The capital stock of this corporation shall consist of one hundred fifty
(150) shares of common stock having a par value of one hundred dollars ($100)
per share, and each share thereof shall be entitled to one vote and shall be on
a par in all other respects with all other shares of common stock.
ARTICLE V
The first meeting of incorporators shall be held at the offices of Sulloway
Hollis Godfrey & Soden, 9 Capitol Street, Concord, New Hampshire, on the 19th
day of November, 1969, at 9:30 o'clock in the forenoon.
/s/ Leo E. Patry Brown Company, Berlin, N.H.
- ----------------------------------
/s/ Franklin Hollis 9 Capitol St., Concord, N.H.
- ----------------------------------
/s/ Guy A. Swenson, Jr. 9 Capitol St., Concord, N.H.
- ----------------------------------
<PAGE>
AFFIDAVIT OF AUTHENTICITY
This is to certify that the appended copy of "Record of Organization of
Berlin Mills Railway, Inc., Articles of Agreement" is an identical copy of the
same document filed with the New Hampshire Public Utilities Commission on
November 26, 1969, at 9:30 a.m.
The New Hampshire Public Utilities Commission has scheduled a hearing in
Docket D-T5771, a Petition of Leo E. Patry, Franklin Hollis and Guy A. Swenson,
Jr., to form a corporation to be known as Berlin Mills Railway, Inc., and for
related authorities for which the hearing shall take place on December 30, 1969,
at 11:00 a.m. at the offices of the Commission in Concord, New Hampshire.
NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION
/s/ Charles P. Amyot
---------------------------
Charles P. Amyot
Secretary
CPA/cp
December 5, 1969
<PAGE>
THE STATE OF NEW HAMPSHIRE
RECORD OF ORGANIZATION
OF
BERLIN MILLS RAILWAY, INC.
ARTICLES OF AGREEMENT
We, the undersigned, being all of lawful age, do hereby associate ourselves
together for the purpose of founding a corporation under the provisions of
Chapter 294 of the New Hampshire Revised Statutes Annotated.
ARTICLE I
The name of this corporation shall be Berlin Mills Railway, Inc.
ARTICLE II
The objects and purposes for which this corporation is organized are as
follows:
To acquire, maintain and operate the lines of railroad existing within this
State heretofore operated by Berlin Mills Railway, an unincorporated common
carrier by rail owned by and operated as a separate and distinct department of
Brown Company, a Delaware corporation, in the City of Berlin and Town of Gorham,
in the State of New Hampshire, and in connection therewith:
(1) To do a general transportation business; to transport, carry, haul,
distribute, deliver and handle passengers, freight, baggage, mail, express,
goods, wares, merchandise and other property of every kind and nature, by
railroad, truck, bus and other means of transportation or by any thereof;
(2) To purchase, construct, establish, lease or otherwise acquire, own,
operate, maintain, hold and use, mortgage, sell or otherwise dispose
<PAGE>
of or deal with:
(a) Railroads, railways, railroad and railway lines and systems, and
transportation facilities, lines and systems of all kinds, operated by steam,
electricity, gasoline, motor or any other motive powers whatsoever, and bus,
automobile, motor coach and truck lines;
(b) Terminal properties and depots, freight and passenger station houses,
rights of way, tramways and tracks, bridges, trestles, tunnels, signals and
signal systems, car houses, engine houses, roundhouses, turntables, transfer
tables, freight coal and wood houses and sheds, snowsheds, warehouses, storage
and coal storage facilities, machine and repair shops, freight, stock and repair
yards, power plants and power houses for the development, generation,
transmission or utilization of water, steam, electric or other power, plants for
any form of lighting or heating, pipe lines, ice and refrigerating plants, oil,
water or gas tanks and wells, grain or other elevators, wharves, docks, piers,
slips, landings, drydocks, derricks, airports, landing areas, hangars, hotels,
boarding houses, eating houses, hospital and all other buildings, structures,
superstructures, property fixtures, appliances and appurtenances necessary or
useful in connection therewith;
(c) Cars, locomotives, engines, rolling stock and railway equipment of all
kinds; motors, buses, trucks, automobiles, ferries, barges, tugs and other
craft, towing, salvage and wrecking outfits, and all tools, machinery,
appliances, equipment, mechanical and electrical devices and property of every
kind and nature necessary or useful in connection therewith; and
(d) Any and all other property, real, personal or mixed, and wheresoever
situated, whether or not similar to any property above described, which may be
necessary or useful in connection with the business referred to in this Article
II.
<PAGE>
(3) To purchase or otherwise acquire, own, hold, develop, operate,
mortgage, sell and convey, or demise, lease, let and hire business and
residential properties, agricultural, timber, mineral and other lands, mines,
deposits, quarries, ditches, water and water rights, and other real property of
every kind and description or estates or interests therein;
(4) To purchase, manufacture, or otherwise acquire, invest in, own,
mortgage, pledge, sell, assign and transfer, or otherwise dispose of, lease,
let, hire, trade, deal in and deal with, goods, wares and merchandise and
personal property of every kind and description;
(5) To purchase, lease, or otherwise acquire, own, hold, control, operate
and use franchises, easements, grants, powers, permits, rights, licenses,
privileges, and immunities, and other property of every kind and description;
(6) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether secured by
mortgage, deed of trust, pledge or otherwise of its property and franchises
presently owned or thereafter acquired, without limit as to amount, and to
secure the same by mortgage, pledge or otherwise; and generally to make and
perform agreements and contracts of every kind and description;
(7) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the objects or
the furtherance of any of the powers hereinbefore set forth, either alone or in
association with other corporations, firms or individuals, and to do every other
act or acts, thing or things incidental or appurtenant to or growing out of or
connected with the aforesaid business or powers or any part or parts thereof
provided the same be not inconsistent with the laws under which this corporation
is organized;
<PAGE>
(8) To acquire by purchase, subscription or otherwise, and to hold for
investment or otherwise and to use, sell, assign, transfer, mortgage, pledge or
otherwise deal with or dispose of stocks, bonds or any other obligations or
securities of any corporation or corporations; to merge or consolidate with any
corporation in such manner as may be permitted by law; to aid in any manner any
corporation whose stock, bonds or other obligations are held or in any manner
guaranteed by this corporation, or in which this corporation is in any way
interested; and to do any other acts or things for the preservation, protection,
improvement or enhancement of the value of any such stock, bonds or other
obligations; and while owner of any such stock, bonds or other obligations to
exercise all the rights, powers and privileges of ownership thereof, and to
exercise any and all voting powers therein; to guarantee the payment of
dividends upon any stock, or the principal or interest or both, of any bonds or
other obligations, and the performance of any contracts;
(9) To purchase, hold, sell and transfer the shares of its own capital
stock so far as may be permitted by the laws of the State of New Hampshire;
(10) To have one or more offices and to carry on any or all of its
operations and business in any of the states, districts, territories or colonies
of the United States, in the Provinces of Canada, and in any and all foreign
countries, subject to the laws of such state, district, territory, colony,
province or country;
(11) In general, to carry on any or all of the business of the corporation
as principal, agent or contractor, and to carry on any other business incidental
to and in connection with the foregoing and to have and exercise all the powers
conferred by the laws of New Hampshire upon
<PAGE>
corporations formed under the business corporation law, and to do any or all of
the things hereinbefore set forth to the same extent as natural persons might or
could do.
ARTICLE III
The principal place of business of this corporation shall be located in
Berlin, County of Coos, and State of New Hampshire, but the corporation may
carry on any portion of its business within or without said State. Meetings of
stockholders may be held within or without the State of New Hampshire as may be
provided by the bylaws.
ARTICLE IV
The capital stock of this corporation shall consist of one hundred fifty
(150) shares of common stock having a par value of one hundred dollars ($100)
per share, and each share thereof shall be entitled to one vote and shall be on
a par in all other respects with all other shares of common stock.
ARTICLE V
The first meeting of incorporators shall be held at the offices of
Sulloway Hollis Godfrey & Soden, 9 Capitol Street, Concord, New Hampshire, on
the 19th day of November, 1969, at 9:30 o'clock in the forenoon.
/s/ Leo E. Patry Brown Company, Berlin, N.H.
- ----------------------------------
/s/ Franklin Hollis 9 Capitol St., Concord, N.H.
- ----------------------------------
/s/ Guy A. Swenson, Jr. 9 Capitol St., Concord, N.H.
- ----------------------------------
<PAGE>
State of New Hampshire
----------
Be it know that wheras
FRANKLIN HOLLIS AND GUY A. SWNESON, JR. BOTH OF CONCORD, NEW HAMSHIRE
AND
LEO E. PATRY OF BERLIN, NEW HAMPSHIRE
have associated themselves with the intention of forming a corporation under the
name of
BERLIN MILLS RAILWAY, INC.
for the purpose
To acquire, maintain and operate the lines of railroad existing within this
State heretofore operated by Berlin Mills Railway, unincorporated common carrier
by rail owned by and operated as a separate and distinct department of Brown
Company, a Delaware corporation: and distinct department of Brown Company, a
Delaware corporation: and for other purposes as set forth in the Articles of
Agreement
with a capital stock consisting of
150 shares with par value at $100; 150 shares with par value at $100 authorized
to be issued at the present time.
and have complied with the provisions of the statutes of this State in such case
made and provided as appears from the record of organization of said corporation
duly approved by the [ILLEGIBLE] assistant attorney-general and recorded in
this office; now therefore
I, EDWARD C. KELLEY, Deputy Secretary of State of New Hampshire, do hereby
certify that said
FRANKLIN HOLLIS GUY A. SWENSON, JR.
LEO E. PATRY
their associates and successors, are legally organized and established as, and
are hereby made, an existing corporation under the name of
BERLIN MILLS RAILWAY, INC.
with the powers, rights and privileges, and subject to the limitations, duties
and restrictions, which by law appertain thereto.
Witness my official hereunto subscribed
and the seal of the State of New
Hampshire affixed, this thirtieth day of
January in the year one thousand nine
hundred and seventy
[SEAL]
Edward C. Kelly
---------------
Deputy Secretary of State.
<PAGE>
ORDER NO. 9863
Upon consideration of the foregoing report, which is made a part hereof; it
is
ORDERED, that Leo E. Patry, Franklin Hollis, and Guy A. Swenson, Jr. be,
and hereby are, authorized to form and incorporate the Berlin Mills Railway,
Inc.; and it is
FURTHER ORDERED, that the Berlin Mills Railway, Inc., be, and hereby is,
authorized to acquire, maintain, and operate the railroad facilities consisting
of the tracks and equipment now owned by the Brown Company in the City of Berlin
and the Town of Gorham, all of which is in Coos County.
By order of the Public Utilities Commission of New Hampshire this fifteenth
day of January, 1970.
/s/ Charles P [ILLEGIBLE]
Secretary
BYLAWS
OF
BERLIN MILLS RAILWAY, INC.
ARTICLE I
Name, Location and Purposes
The name, location of the principal office, and purposes of this
corporation shall be as set forth in the Articles of Agreement.
ARTICLE II
Meetings of Stockholders
The annual meeting of the stockholders shall be held at Berlin, New
Hampshire, on the first Tuesday of May each year, at 10:00 o'clock in the
forenoon (or if said first Tuesday is a legal holiday, then on the next
succeeding day which is not a legal holiday), unless the Directors shall
designate some other time and place for the holding of said meeting.
Special meetings of the stockholders shall be called by the Clerk upon
written request of the President or a majority of the Board of Directors, or
stockholders entitled to vote and who own at least one-fourth part in interest
of the capital stock, stating the time, place and purpose of such meeting.
Notice of all meetings, annual and special, of the stockholders, stating
the place, day and hour thereof, and in case of special meetings the purposes
for which the meeting is called, shall be given to each
<PAGE>
stockholder entitled to vote at said meeting by leaving such notice with him or
at his residence or usual place of business, or by mailing the same, postage
prepaid, to him at his address as it appears on the books of the corporation at
least five (5) days before such meeting. Notice of any regular or special
meeting may be dispensed with if every stockholder entitled to vote, or his
attorney thereunto authorized, by a writing filed with the records of the
meeting waive such notice. Any meeting at which all stockholders entitled to
vote are present, either in person or by proxy, or of which those who are not
present have waived notice in writing, shall be valid without prior notice.
At any meeting of stockholders, the owners of a majority of the shares of
capital stock outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum for the transaction of business.
At all meetings of the stockholders a quorum may adjourn the meeting to a
definite time and place, and any business which could have been legally
transacted at such meeting may be transacted at any adjournment thereof without
new notification.
ARTICLE III
Directors and Officers
The officers of this corporation shall consist of a Board of not less than
three (3) nor more than seven (7) Directors, a President, a Vice President, a
Treasurer, a Clerk, and such other officers as the Board of Directors may from
time to time appoint. The number of Directors until the first annual meeting
shall be fixed by the incorporators at their first meeting, and thereafter the
matter of directors for the ensuing year shall
<PAGE>
be fixed by the stockholders at their annual meeting, and the number thereof may
be changed at any special meeting of the stockholders.
ARTICLE IV
Powers of Directors
The Board of Directors shall be elected by the incorporators in the first
instance and thereafter by the stockholders at their annual meeting and shall
hold office until others are chosen in their stead. They shall have and may
exercise all the powers of the corporation, except such are conferred upon the
stockholders by law, by the Articles of Agreement, and any other provisions of
these bylaws. Vacancies in any office or in the Board of Directors may be filled
by the Board or by the remaining Directors, though less than a quorum.
ARTICLE V
President
The President shall be chosen by the incorporators in the first instance
and thereafter annually by the Board of Directors after the election of
Directors and shall hold office for one year and until his successor shall be
chosen. He shall be the chief executive officer of the corporation unless
otherwise ordered by the Board of Directors. He shall preside at all meetings of
the stockholders and Directors, with the Treasurer sign all stock certificates,
and shall perform such other duties as are imposed on him by these bylaws or as
may be assigned to him by the stockholders or Directors.
<PAGE>
ARTICLE VI
Vice President
The Vice President shall be chosen in the same manner and for the same term
as the President and shall exercise all the powers of the President during the
absence or disability of the President in addition to such other duties as the
Directors or stockholders may from time to time prescribe.
ARTICLE VII
Treasurer
The Treasurer shall be chosen in the same manner and for the same term as
the President and shall, subject to the discretion and under the supervision of
the Board of Directors, have the care and custody of the funds, books and
valuable papers of the corporation except his own bond, shall have power to
endorse for deposit or collection all notes, drafts, checks and other
obligations for the payment of money payable to the corporation or its order,
and to sign notes and drafts and checks drawn upon any bank account of the
corporation. He shall keep accurate books of account which shall be the property
of the corporation. He shall collect all moneys from time to time due and owing
to the corporation, and shall keep and disburse the same pursuant to the
contracts and obligations of the corporation, or the order of the Directors or
stockholders. He shall have power to accept for and in the name and behalf of
the corporation promissory notes, drafts and checks in the ordinary course of
business. He shall execute and deliver in behalf of the corporation all such
instruments under its common seal as may be ordered by the stockholders or
Directors, unless their execution and delivery is otherwise specifically
provided for, and shall with the President sign and affix the common seal to all
certificates of stock issued
<PAGE>
by the corporation, and perform such other duties as the Directors or
stockholders may from time to time require. He shall give bond in such sum and
with such sureties as the Directors may require. He shall have authority to open
bank accounts in the name of the corporation in such banks as he may select and
such banks shall be authorized to honor checks or drafts of the corporation
drawn upon said accounts when signed by the Treasurer or such other persons as
the Treasurer may designate in writing.
ARTICLE VIII
Clerk
The Clerk shall be chosen in the same manner and for the same term as the
President and shall be and continue to be an inhabitant of the State of New
Hampshire and keep his office therein. He shall be sworn to the faithful
discharge of his duties. He shall attend all meetings of the stockholders and
record the proceedings thereof. He shall notify the stockholders of their
meetings, in accordance with the bylaws, and shall perform such other duties as
the stockholders may from time to time determine.
In the absence of the Clerk, a Clerk Pro Tem shall be chosen by the
stockholders, who shall be sworn to the faithful discharge of his duties and who
shall, in the absence of the Clerk, perform the duties of such office.
ARTICLE IX
Meetings of Board of Directors
Regular meetings of the Board of Directors may be held at such times and
places as the Board may by vote from time to time determine, and if so
determined no notice thereof need be given. A regular meeting of the Board may
be held without notice immediately after and at the same place as the
<PAGE>
annual meeting of stockholders.
Special meetings of the Board may be held at any time and place when called
by the President or Treasurer, or two or more Directors upon written notice
given in hand or mailed to each Director, postage prepaid, at his usual place of
residence or business not less than three (3) days before the day of such
meeting, or by communication by telephone or telegraph at least twenty-four (24)
hours before the time of such meeting, or at any time without call or formal
notice, provided all the Directors are present or waive notice thereof by a
writing filed with the records of the meeting, and any meeting held without
prior notice at which two (2) or more Directors are present shall be legal if
the absent Director or Directors subsequently assent in writing to the recorded
proceedings of the meeting.
A majority of the Board of Directors shall constitute a quorum for the
transaction of business, but a less number may adjourn any meeting from time to
time, and the meeting may be held as adjourned without further notice. When a
quorum is present at any meeting a majority of the members in attendance shall
decide any question brought before such meeting. Meetings of the Board of
Directors may be held within or without the State of New Hampshire. The
Directors may appoint such committees, the number thereof and powers thereof to
be determined by said Directors.
ARTICLE X
Certificates
Stock certificates shall be in such form, not inconsistent with law, as the
Directors shall determine. All certificates shall be numbered consecutively from
the first and shall be signed by the President and Treasurer and shall bear the
seal of the corporation.
<PAGE>
ARTICLE XI
Transfer of Stock
Stock may be transferred by the owner by a writing upon the back of the
certificate by him signed, or by a separate instrument of assignment, and the
delivery of a certificate of stock to a bona fide purchaser or a pledgee for
value, together with the written transfer of the same or a written power of
attorney to sell, transfer or assign the same signed by the owner of the
certificate shall be a sufficient delivery to transfer the title as against all
parties except the corporation. No such transfer shall affect the right of the
corporation to treat the stockholder of record as the stockholder in fact until
the old certificate is surrendered and a new certificate issued to the person
entitled thereto.
ARTICLE XII
Seal
The seal of the corporation shall, subject to alteration by the Board of
Directors, consist of a flat circular die, with the words and figures
"Incorporated, New Hampshire, 1970," together with the name of the corporation
cut or engraved thereon. Pending the procurement of the permanent seal, the
Directors may authorize the use of a wafer seal. Amended May 1, 1979.
ARTICLE XIII
Execution of Papers
Except in cases where the stockholders or Board of Directors authorize the
execution thereof in some other manner, all deeds, transfers, contracts, bonds,
notes, drafts and other obligations for the payment of money made, accepted or
endorsed by the corporation, except as otherwise provided by
<PAGE>
these bylaws, shall be signed by the President or Treasurer.
ARTICLE XIV
Fiscal Year
The fiscal year of this corporation shall be a period of twelve (12)
calendar months, to be determined by vote of the Board of Directors of this
corporation.
ARTICLE XV
Amendments
These bylaws may be altered, amended or repealed at any annual meeting of
the stockholders and may be amended at any special meeting of the stockholders
called for the purpose, in the notice of which the subject matter of the
proposed alteration, amendment or repeal, or the articles to be affected
thereby, shall be specified.
<PAGE>
BYLAWS OF
BERLIN MILLS RAILWAY, INC.
(As amended and restated August 6, 1981)
ARTICLE I - CORPORATE SEAL
The corporate seal of the corporation shall be circular and shall have
inscribed thereon, within and around the circumference, "BERLIN MILLS RAILWAY,
INC." In the center shall be the word "SEAL".
ARTICLE II - FISCAL YEAR
The fiscal year of the corporation shall be determined in the discretion of
the board of directors, but in the absence of any such determination it shall
coincide with the fiscal year of James River Corporation of Virginia, a Virginia
corporation.
ARTICLE III - CLOSING OF TRANSFER
BOOKS AND FIXING RECORD DATE
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors of this
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. In lieu of closing the
stock transfer books
<PAGE>
The board of directors may fix in advance a date as the record date for any such
determination of stockholders, such date any case to be not more than fifty days
prior to the date which the particular action, requiring such determination of
stockholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of stockholders entitled to notice of
or to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this article, such
determination shall apply to any adjournment thereof.
ARTICLE IV - MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings - Meetings of stockholders may be held at such
place, either within or without the state in which this corporation was
organized, as may be provided in the notice of the meeting.
Section 2. Annual Meeting - The annual meeting of stockholders shall be
held on the first Thursday in August of each year.
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<PAGE>
Section 3. Substitute Annual Meetings - If in the judgment of the board of
directors, because of the unavailability of necessary information, or for other
sufficient reason, an annual meeting of stockholders should not be held on the
day designated in these bylaws, a substitute annual meeting may be called in
accordance with the provisions of Section 4 of this Article. Any meeting so
called shall be designated and treated for all purposes as the annual meeting.
Section 4. Special Meetings - Special meetings of the stockholders may be
called by the President, the board of directors or the holders of not less than
one-tenth of all the shares entitled to vote at the meeting.
Section 5. Notice of Meetings - Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given not less than ten nor more than
fifty days before' the date of the meeting (except as a different time is
specified in these bylaws or by the law of the state in which this corporation
was organized) either personally or by mail, by or at the direction of the
President, the Clerk, or the officer or persons calling the meeting, to each
stockholder of record entitled to vote
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<PAGE>
at such meeting. If mailed, such notice shall be deemed to be given, when
deposited in the United States mail addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid.
Notice of a stockholders' meeting to act on (i) an amendment of the
articles of incorporation; (ii) a reduction of stated capital; (iii) a plan of
merger, consolidation or exchange; or (iv) the sale, lease, exchange, mortgage,
pledge or other disposition of all or substantially all the property or assets
of the corporation if not made in the usual and regular course of its business,
shall be given, in the manner provided above, not less than twenty-five nor more
than fifty days before the date of the meeting. Any such notice shall be
accompanied by (a) a copy of the proposed amendment; (b) a copy of the proposed
plan of reduction or merger, consolidation or exchange; or (c) shall state that
a purpose or one of the purposes of the meeting is to consider a proposed sale,
lease, exchange, mortgage, pledge or other disposition of property and assets of
the corporation other than in the usual and regular course of its business.
Section 6. Quorum; Required Vote - A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of stockholders. Treasury shares shall not be counted to establish a quorum. If
a quorum is present the affirmative vote of a majority of the
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<PAGE>
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, except to the extent (i) that the vote of
a greater number or voting by classes is required by law or the articles of
incorporation; (ii) that in elections of directors the provisions of Article V,
Section 3 of these bylaws shall apply; and (iii) that a vote is required on any
of the matters set forth in the second paragraph of Section 5 of this Article IV
of these bylaws, in which event the affirmative vote of more than two-thirds of
the shares entitled to vote thereon shall be the act of the stockholders.
Less than a quorum may adjourn.
Section 7. Shares Entitled to Vote; Proxies - Each outstanding share of
common stock shall be entitled to vote on each matter submitted to a vote at a
meeting of stockholders. Treasury shares shall not be entitled to any vote.
Shares of other class of stock, if any, shall be entitled to such vote as may be
provided in the articles of incorporation.
A stockholder may vote either in person or by proxy executed by the
stockholder or by his duly authorized attorney-in-fact. No proxy shall be valid
after six months from its date, unless otherwise provided in the proxy.
Proxy not valid after six months in New Hampshire.
Section 8. Waiver of Notice - Notwithstanding any other provisions of law,
the articles of incorporation, or these bylaws, whenever notice of any meeting
for any purpose is required to be given to any stockholder, a waiver thereof in
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<PAGE>
writing signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be the equivalent to the giving of such
notice.
A stockholder who attends a meeting shall be deemed to have had timely and
proper notice of the meeting unless he attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 9. Actions by Stockholders Without a Meeting - Any action required
to be taken at a meeting of the stockholders, or any action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the actions so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same force and effect as a unanimous vote of
stockholders.
ARTICLE V - DIRECTORS
Section 1. General Powers - The business and affairs of the corporation
shall be managed by the board of directors subject to any requirement of
stockholder action contained in the law of the state in which the corporation
was organized or in the articles of incorporation.
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<PAGE>
Section 2. Number, term and qualification - The number of directors of the
corporation shall be not less than three (3) nor more than ten (10). These
numbers may be increased or decreased from time to time by amendment to these
bylaws, provided that the minimum number shall never be less than three (3). No
decrease in number shall have the effect of shortening the term of any incumbent
director. The number of directors elected by the stockholders, within the range
established by these bylaws, at their latest annual meeting shall be deemed to
be the number of directors fixed by these bylaws; provided that (i) in the event
a vacancy on the board of directors occurs which the board declines to fill, the
number of remaining incumbent directors shall be deemed to be the number of
directors fixed by these bylaws; and (ii) the board of directors shall have the
right during the period between annual meetings of the stockholders to increase
the number of directors elected by the stockholders at their latest annual
meeting by not more than two, until the maximum number set forth in these bylaws
is reached, and the number of directors as so increased shall be deemed to be
the number of directors fixed by these bylaws. Each director shall hold office
until his death, resignation, retirement, or removal or until his successor is
elected.
Section 3. Election of Directors - Except as provided in Section 5 of this
Article and in the articles of incorporation,
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<PAGE>
the directors shall be elected by the common stockholders at the annual meeting
of stockholders and those persons who receive the greatest number of votes shall
be deemed elected even though they do not receive a majority of the votes cast.
Section 4. Removal - At a meeting called expressly for that purpose any
director may be removed, with or without cause, by a vote of stockholders
holding a majority of the shares entitled to vote at an election of the
directors. If any directors are so removed, new directors may be elected at the
same meeting.
Section 5. Vacancies - Any vacancy occurring in the board of directors,
including a vacancy resulting from an increase by not more than two in the
number of directors, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the board of directors.
Section 6. Compensation - The board of directors may fix the compensation
of directors for their services as such and may provide for the payment of all
expenses incurred by directors in attending regular and special meetings of the
board of directors.
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<PAGE>
ARTICLE VI - DIRECTORS MEETINGS
Section 1. Regular Meetings - Regular meetings of the board of directors
shall be held annually, immediately following each annual meeting of
stockholders, for the purpose of electing officers and carrying on such other
business as may properly come before such meeting, and immediately following
each special meeting of stockholders to consider and act upon any matter which
may properly come before such meeting. Any such meeting shall be held at the
place where the stockholders meeting was held. The board of directors may also
adopt a schedule of additional meetings which shall be considered regular
meetings, and such meetings shall be held at the time and place, within or
without the state in which the corporation was organized, as the Chairman of the
Board of Directors (the "Chairman")/or, in his absence, the President shall
designate.
Section 2. Special Meetings - Special meetings of the board of directors
shall be held on the call of the Chairman, the President or any three members of
the board of directors at the principal office of the corporation or at such
other place as the Chairman or, in his absence, the President, shall designate.
Section 3. Telephone Meetings - The board of directors may participate in a
meeting by means of a conference telephone
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<PAGE>
or similar communications equipment whereby all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting. When such a meeting is conducted by means of
a conference telephone or similar communications equipment, a written record
shall be made of the action taken at such meeting.
Section 4. Notice of Meetings - No notice need be given of regular meetings
of the board of directors.
Notice of special meetings of the board of directors shall be mailed to
each director at least (3) days, or telegraphed at least two (2) days prior to
the date of the meeting and must set forth the purpose for which the meeting is
called.
Section 5. Quorum; Required Vote - A majority of the directors shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the board of directors unless the act of a greater number is required by law
or these bylaws.
Section 6. Waiver of Notice - Notwithstanding any other provisions of law,
the articles of incorporation or these bylaws, whenever notice of any meeting
for any purpose is required to be given to any director a waiver thereof in
writing,
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<PAGE>
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be the equivalent to the giving of such notice.
A director who attends a meeting shall be deemed to have had timely and
proper notice of the meeting unless he, attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 7. Actions by Directors Without Meeting - Any action required to be
taken at a meeting of the directors, or any action which may be taken at a
meeting of the directors, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the directors. Such consent shall have the same force and
effect as a unanimous vote.
ARTICLE VII - COMMITTEES OF DIRECTORS
Section 1. Executive Committee - The board of directors, by resolution
adopted by a majority of the number of directors fixed by these bylaws, may
designate two or more of the directors who shall constitute the executive
committee. A majority of the members of the executive committee shall constitute
a quorum. The executive committee shall meet on the call of any of its members.
Notice of any such meeting shall be given by mail, telephone, telegraph or other
means by the close of business on the day before such meeting is to be held. If
he is a member of the executive committee and present at any of its meetings the
Chairman
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shall serve as its chairman. In his absence, if he is a member of the executive
committee, the President shall serve as its chairman. Unless otherwise provided
by the law of the state in which this corporation was organized, the executive
committee shall have and may exercise all of the authority of the board of
directors except to approve (i) an amendment of the articles or incorporation;
(ii) a plan of merger or consolidation; (iii) a plan of exchange under which the
corporation would be acquired; (iv) the sale, lease or exchange, or the mortgage
or pledge for a consideration other than money, of all, or substantially all,
the property and assets of the corporation otherwise than in the usual and
regular course of its business; (v) the voluntary dissolution of the
corporation; (vi) revocation of voluntary dissolution proceedings; (vii) any
employee benefit plan involving the issuance of common stock; or (viii) the
compensation paid to the Chairman or the President.
Section 2. Audit committee - The board of directors may appoint an audit
committee consisting of not less than three directors, none of whom shall be
officers, which committee shall regularly review the adequacy of internal
financial controls, review with the corporation' s independent public
accountants the annual audit and other financial statements, and recommend the
selection of the corporation's independent public accountants.
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<PAGE>
Section 3. Other Committees - The board of directors may designate such
other committees with limited authority as it may deem advisable.
Section 4. Telephone Meetings - Committees may participate in meetings by
means of conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting. When such a
meeting is conducted by means of a conference telephone or similar
communications equipment, a written record shall be made of the action taken at
such meeting.
Section 5. Actions by Committees Without Meetings - Any action which may be
taken at a committee meeting, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the members of the committee. Such consent shall have the same
force and effect as a unanimous vote.
Section 6. Committee Rules - Unless the board of directors otherwise
provides, each committee designated by the board of directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of direction by
the board of directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of
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<PAGE>
members of such committee shall constitute a quorum for the transaction of
business, the vote or a majority of the members present at a meeting at the time
of such vote if a quorum is then present shall be the act of such committee.
Except to the extent that these bylaws contain provisions to the contrary, in
other respects each committee shall conduct its business in the same manner as
the board of directors is required to conduct its business.
ARTICLE VIII - OFFICERS
Section 1. Officers - The officers of the corporation shall be a President,
a Clerk, a Secretary, and a Treasurer, and in the discretion of the board of
directors, one or more Vice-Presidents and other officers and assistant officers
as may be deemed necessary or advisable to carry on the business of the
corporation. The Chairman and the President shall be members of the board of
directors. Any two offices may be combined in the same person except the offices
of President and Clerk or Secretary.
Section 2. Election, Term - Officers shall be elected at the annual meeting
of the board of directors immediately following the annual meeting of
stockholders, and may be elected at such other time or times as the board of
directors shall determine. They shall hold office, unless removed, until the
next annual meeting of the board of directors
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<PAGE>
or until their successors are elected. Any officer may resign at any time upon
written notice to the President, or the board of directors. Such resignation
shall take effect at the time specified therein and, unless otherwise specified
therein, no acceptance of such resignation shall be necessary to make it
effective.
Section 3. Removal of Officers - Any officer may be removed, with or
without cause, at any time by the board of directors at any duly called meeting.
Section 4. DELETED
Section 5. Duties of the President - The President shall be the chief
operating officer of the corporation and have such powers and duties as
generally pertain to that position.
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<PAGE>
In the absence of the Chairman he shall preside at all meetings of the
stockholders and the board of directors. He shall further perform such duties as
may, from time to time, be assigned or delegated to him by the board of
directors.
Section 6. Duties of Vice-Presidents - The Vice-Presidents shall perform
such duties as may, from time to time, be assigned to them by the President or
the board of directors.
Section 7.a. Duties of the Clerk./Rider
a. Duties of the Clerk - The Clerk, who shall be a resident of the State of
New Hampshire, shall record all votes and proceedings of the stockholders and
make a record of all instruments and papers required to be recorded in his
office. He shall not be required to keep any record relating to the votes and
proceedings of the directors or the Executive Committee. He may affix the
corporate seal to any document the execution of which, on behalf of the
corporation, is duly authorized, and when so affixed may attest the same. The
Clerk shall also perform such other duties as may, from time to time, be
assigned to him by the President, the board of directors, or as may be required
by law.
b. Duties of the Secretary - The Secretary shall record all votes and
proceedings of the board of directors and the Executive Committee and make a
record of all instruments and papers required to be recorded in his office. He
may affix the corporate seal to any document the execution of which, on behalf
of the corporation, is duly authorized, and when so affixed may attest the same.
The Secretary shall also perform such other duties as may, from time to time, be
assigned to him by the President, the board of directors, or as may be required
by law.
Section 8. Duties of the Treasurer - The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
corporation, and shall
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deposit or cause to be deposited, in the name of the corporation, all monies or
valuable effects in such banks, trust companies or other depositories as shall,
from time to time, be selected by or under authority of the board of directors;
if required by the board of directors, he shall give a bond for the faithful
discharge of his duties, with such surety or sureties as the board of directors
may determine; he shall be custodian of the records of the corporation; he shall
keep or cause to be kept full and accurate records of all receipts and
disbursements in books of the corporation and shall render to the President and
the board of directors, whenever requested, an account of the financial
condition of the corporation; and, in general, he shall perform all the duties
incident to the office of treasurer of a corporation, and such other duties as
may be assigned to him by the President, the board of directors or as may be
provided by law.
Section 9. Duties of Other Officers - The other officers, if any, of the
corporation shall have such powers and duties in the management of the
corporation as shall be stated in a resolution of the board of directors
creating the offices to which they have been elected and, to the extent that
such powers and duties are not so stated, they shall have such powers and duties
as generally pertain to their respective offices, subject to the
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control of the Chairman, the President and the board of directors.
Section 10. Voting Securities of Other Corporations - Any one of the
Chairman, the President or the Treasurer shall have power to act for and vote on
behalf of the corporation at all meetings of the stockholders of any corporation
in which this corporation holds stock, or in connection with any consent of
stockholders in lieu of any such meeting.
Section 11. Bonds - The board of directors may by resolution require that
any or all officers, agents and employees of the corporation give bond to the
corporation, with sufficient sureties, conditioned upon the faithful performance
of the duties of their respective offices or positions.
ARTICLE IX - CERTIFICATES OF STOCK
Section 1. Form and Issuance - Certificates of stock shall be in such form
as may be approved by the board of directors, and shall be signed by the
President or any Vice-President and the Clerk or an Assistant Clerk, or the
Treasurer or an Assistant Treasurer, and may (but need not) be sealed with the
seal of the corporation or a facsimile thereof. Any such signature may be a
facsimile, engraved or printed, if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any such officer who has signed or
whose facsimile signature has been placed upon any such certificate shall have
ceased to be such before
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such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
Section 2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates - The corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 3. Transfer - The board of directors shall have power and authority
to make all such rules and regulations as they may deem expedient concerning
the issue, registration and transfer of certificates of stock and may appoint
transfer agents or clerks and registrars thereof. Unless otherwise provided,
transfers of shares of stock by the corporation shall be made upon its books by
surrender of the certificates for the shares transferred accompanied by an
assignment in writing by the holder and may be accomplished either by the holder
in person or by a duly authorized attorney-in-fact.
ARTICLE X - AMENDMENTS
Section 1. New Bylaws and Alterations - These bylaws may be amended or
repealed and new bylaws may be made at any
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regular or special meeting of the board of directors by a majority of the board.
However, bylaws made by the board of directors may be repealed or changed and
new bylaws may be made by the stockholders and the stockholders may prescribe
that any bylaw made by them shall not be altered, amended, or repealed by the
directors.
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ARTICLES OF ORGANIZATION
OF
CALEXICO TISSUE COMPANY LLC
Under Section 203 of the Limited Liability Company Law
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED DEC 26 1996
TAX $__________
BY: [ILLEGIBLE]
Filer: Mr. Tony Villa
American Tissue Corporation
135 Engineers Road
Hauppauge, NY 11788
<PAGE>
ARTICLES OF ORGANIZATION
OF
CALEXICO TISSUE COMPANY LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Calexico Tissue Company
LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December 31,
2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the Limited Liability company served upon
him or her is c/o Mandel and Resnick, P.C. 200 East 42nd Street, New
York, New York 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The limited liability company is to be managed by one or more managers.
IN WITNESS WHEREOF, this certificate has been subscribed this 24th day of
December 1996, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
/s/ NOUROLLAH ELGHANAYAN
--------------------------------
Nourollah Elghanayan, Member
and Sole Organizer
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CALEXICO TISSUE COMPANY LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 26th day of December 1996, by and among Nourollah Elghanayan, having an
address at 135 Engineers Road, Hauppauge, New York 11788, Victoria Elghanayan,
having an address at 135 Engineers Road, Hauppauge, New York 11788, Jeffrey
Elghanayan, having an address at 2481 Monaco Drive, Laguna Beach, California
92651-1006, Mehdi Gabayzadeh, having an address at 135 Engineers Road,
Hauppauge, New York 11788, Mehdi Gabayzadeh and Joseph Neissany, as trustees of
the John Gabayzadeh Trust, having an address at 135 Engineers Road, Hauppauge,
New York 11788, Mehdi Gabayzadeh and Joseph Neissany, as trustees of the Diane
Gabayzadeh Trust, having an address at 135 Engineers Road, Hauppauge, New York
11788, Mehdi Gabayzadeh and Joseph Neissany, as trustees of the Deborah
Gabayzadeh Trust, having an address at 135 Engineers Road, Hauppauge, New York
11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, holding and developing certain real property as
a paper mill, paper converting plant and as a warehouse, said real property
being situated in Calexico, California, more particularly known as Parcel 6, of
Kloke Tract (the "Premises"); and
Whereas, the limited liability company will own the Premises and will manage,
operate and lease the Premises as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
<PAGE>
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this Agreement. The name of the Company shall be Calexico Tissue
Company LLC and all business of the Company shall be conducted in that name. One
or more Persons has acted or will act as an organizer or organizers to form the
Company and shall cause the Articles of Organization ("Articles") to be filed or
recorded in the appropriate public office(s) as may be required by the Act and
shall thereafter do and continue to do all other things as may be required to
perfect and maintain the Company as a limited liability company under the State
of New York. "Person" shall mean any person, corporation, governmental
authority, limited liability company, partnership, trust, unincorporated
association or other entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Premises, (ii) engage in any and all business
activities and transactions reasonably necessary and incidental to the purposes
of the Company, including obtaining financing and refinancing, developing,
leasing, selling, exchanging and transferring all or any part of the Premises;
and (iii) engage in any other lawful act or activity for which a limited
liability company may be formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Premises and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until January 31,
2027, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for
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<PAGE>
service of process on the Company shall be Corporation Service Company or any
successor appointed by the Managers, in accordance with the Act. The registered
office of the Company in the State of New York is located at Corporation Service
Company, 500 Central Avenue, Albany, New York 12206.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
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account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between or among the Members. Except as
otherwise required in the Act or this Agreement, no Member shall have any
liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate to be determined by
the Managers. No Member shall be obligated to lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
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ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and (iv) notwithstanding any other
provision of this Article 3, any items which are specially allocated pursuant to
Article 3 hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined
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in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2)
of the Regulations. This Section 3.3(a) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-1(f) of the Regulations and shall
be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment
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increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to the Members in
accordance with their interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv) (m)(2) applies, or to the Members to whom such distribution
was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
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(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
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4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Premises. All references herein to "fiscal year" or "taxable year" shall
be considered references to the annual accounting period ending each September
30, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all
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instruments governing any indebtedness of the Company and any amendments to any
of those documents, shall be kept at all times at the principal office of the
Managers. The Managers shall maintain such books and records and collect all
Company income and (solely from such income and the proceeds of any financing
thereof) pay the expenses thereof, and make distributions to the Members as
provided herein. The Members and their respective duly authorized
representatives shall have the right to examine such books, records, accounts
and documents at any and all reasonable times and to make copies or extracts
therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
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(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. Nourollah Elghanayan is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this
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Article or by the other provisions of this Agreement shall, in their sole
discretion, have the full and absolute right, power and authority in the
management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Premises;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Premises;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
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Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful
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misconduct, gross negligence, breach of the Managers' fiduciary duties and/or
breach of this Agreement. The Managers do not in any way guaranty the return of
any Capital Contribution to a Member or a profit for the Members from the
operations of the Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be
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filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Medizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
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indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
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<PAGE>
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose of any other action, the
Managers may fix, in advance, a date as the record date for any such
determination of Members. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of such meeting, nor more then fifty (50)
days prior to any other action. When a determination of Members of record
entitled to notice of or to vote at any meeting of Members has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general
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<PAGE>
assignment by the Company for the benefit of creditors; the filing of any
petition or answer by the Company seeking to adjudicate it a bankrupt or
insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of the Company or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting
to, or acquiescing in the entry of an order for relief or the appointment
of a receiver, trustee, custodian, or other similar official for the
Company or for any substantial part of its property; or action taken by the
Company to authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber
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<PAGE>
or dispose of all or any portion of his, her or its Membership Interest or any
rights therein without the unanimous written consent of the Members, other than
the transferring Member, and any attempted disposition shall be ineffective to
transfer such interest. Each Member hereby acknowledges the reasonableness of
the restrictions on transfer imposed by this Agreement in view of the Company
purposes and the relationship of the Members. Accordingly, the restrictions on
transfer contained herein shall be specifically enforceable. If a Membership
Interest of a Member shall, with the consent of the Members, be transferred
pursuant to this Section, the transferee shall become the assignee of the
Member's Membership Interest in the Company, provided such assignment shall be
by instrument in form and substance reasonably satisfactory to the Members
(which instrument shall contain a statement by the assignee of his, her or its
adoption and assumption of all of the applicable terms of this Agreement, as
same may be amended); provided, however, nothing contained in this Article 9
shall prevent any Member from transferring all or part of his, her or its
Membership Interest in the Company (x) by way of will or intestacy, or inter
vivos gift or trust, to or for the benefit of members of the Member's immediate
family, or (y) to a partnership, corporation or other entity, all of the
outstanding interests of which entity are owned (of record and beneficially) by
such Member and/or a permitted transferee, (each of (x) and (y) being referred
to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
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<PAGE>
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power
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<PAGE>
under the Act to dissolve the Company, (d) transfer all or any portion of his,
her or its Membership Interest in the Company, (e) petition for judicial
dissolution of the Company, (g) demand a return of such Member's contributions
or profits (or a bond or other security for the return of such contributions or
profits) or (h) take any action to file a certificate of dissolution or its
equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the
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appraisers shall determine the fair market value of the defaulting Member's
Membership Interest as of the date of the Exercise Notice. Such determination of
fair market value shall be final and binding on all parties. Each Member shall
pay the fees and expenses of its own appraiser, except that in the event an
Appointee is required, the fees and expenses of the Appointee shall be paid
jointly by the participating Members. The purchase price for the defaulting
Member's Membership Interest shall be paid, and the closing of such purchase
shall take place, in accordance with this section. If more than one Member
exercises such buy-out rights, each such Member shall be entitled to acquire the
portion of the defaulting Member's Membership Interest which bears the same
proportion as the purchasing Members' Membership Interest bears to the aggregate
Membership Interests of the Members participating in the transaction. The
payment of the purchase price, and the closing of the purchase, shall be in
accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on January 31, 2027;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
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(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve
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shall, after the passage of a reasonable period of time, be distributed in
accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with,
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violate or result in the breach of any law, regulation, order or rule of any
governmental department, agency or instrumentality applicable to it, him or
them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel and Resnik, P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the
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parties hereto, their heirs, legal representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
26th day of December, 1996.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
---------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
---------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
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/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- --------------- ----------
Nourollah Elghanayan 12/26/96 16.67%
Victoria Elghanayan 12/26/96 16.67%
Jeffrey Elghanayan 12/26/96 16.66%
Mehdi Gabayzadah 12/26/96 26.0%
Mehdi Gabayzadah 12/26/96 8.0%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadah 12/26/96 8.0%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadah 12/26/96 8.0%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
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<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/1/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CALEXICO TISSUE COMPANY LLC
----------
The Limited Liability Company Operating Agreement of CALEXICO TISSUE COMPANY LLC
(the "Company") is hereby amended to provide that the membership interests of
the Company may be certificated and that each of such certificates is a
"Security" governed by Article 8 of the Uniform Commercial Code of the State of
New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CALEXICO TISSUE COMPANY LLC
The Limited Liability Company Operating Agreement of Calexico Tissue Company LLC
is hereby amended as follows (all capitalized terms not defined herein shall
have the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"Section 6.9 Officers. The Managers may designate one or more
individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by
the Managers at any time, with or without cause. Each officer shall
hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and
other compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
State of New Hampshire
Department of State
CERTIFICATE OF AMENDMENT OF
JAMES RIVER-NEW HAMPSHIRE ELECTRIC, INC.
Now known as:
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.
The undersigned, as Deputy Secretary of State of the State of New Hampshire,
hereby certifies that Articles of Amendment to the Articles of Incorporation of
JAMES RIVER-NEW HAMPSHIRE ELECTRIC, INC., duly signed pursuant to the provisions
of the New Hampshire Business Corporation Act, have been received in this
office.
ACCORDINGLY the undersigned, as such Deputy Secretary of State, and by virtue of
the authority vested in him by law, hereby issues this Certificate of Amendment
to the Articles of Incorporation of JAMES RIVER-NEW HAMPSHIRE ELECTRIC, INC. and
attaches hereto a copy of the Articles of Amendment.
IN TESTIMONY WHEREOF, I hereto
set my hand and cause to be affixed
the Seal of the State of New Hampshire,
this 26th day of March A.D. 1997
/s/ Robert P. Ambrose
Robert P. Ambrose
[SEAL] Deputy Secretary of State
<PAGE>
STATE OF NEW HAMPSHIRE
FILED
MAR 26 1997
WILLIAM M. GARDNER
NEW HAMPSHIRE
SECRETARY OF STATE
Filing fee: $35.00 Form No. 14
Use black print or type. RSA 293-A:l0.06
Leave 1" margins both sides.
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
PURSUANT TO THE PROVISIONS OF THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, THE
UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT TO ITS
ARTICLES OF INCORPORATION:
FIRST: The name of the corporation is James River-New Hampshire Electric,
Inc.
SECOND: The text of each amendment adopted is:
RESOLVED, that the Record of Organization of the Corporation is hereby
amended by deleting Article I and substituting therefor the following:
ARTICLE I.
"The name of this corporation shall be "Crown Vantage-New Hampshire
Electric, Inc."
THIRD: If the amendment provides for an exchange, reclassification, or
cancellation of issued shares the provisions for implementing the amendment(s)
if not contained in the above amendment are:
Not Applicable.
FOURTH: The amendment(s) were adopted on (date) April 11, 1996
[if more space is needed, attach additional sheet(s)]
page 1 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE Form No. 14
ARTICLES OF INCORPORATION (Cont.)
OF James River-New Hampshire Electric, Inc.
FIFTH: (Check one)
A. ______ The amendment(s) were adopted by the incorporators or board
of directors without shareholder action and shareholder
action was not required.
B. XX The amendment(s) were approved by the shareholders. (Note 1)
------
<TABLE>
<CAPTION>
Number of votes
Designation Number of indisputably
(class or series) Number of votes entitled represented at
of voting group shares outstanding to be cast the meeting
- ----------------- -------------------- -------------- ----------------
<S> <C> <C> <C>
Common Stock 200 200 200
no par value
<CAPTION>
Designation Total number of
(class or series) Total number of votes cast: OR undisputed
of voting group FOR AGAINST -- votes cast FOR
- ----------------- --- ------- ----------------
<S> <C> <C> <C>
Common Stock 200 -0-
no par value
</TABLE>
page 2 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE Form No. 14
ARTICLES OF INCORPORATION (Cont.)
OF James River-New Hampshire Electric, Inc.
SIXTH: The number cast for the amendment(s) by each voting group was
sufficient for approval by each voting group.
Dated February 13, 1997
James River-New Hampshire Electric, Inc. (Note 2)
----------------------------------------
By /s/ David A. Nelson (Note 3)
-------------------
Signature of its Secretary
---------
David A. Nelson
--------------------
Print or type name
Notes: 1: All sections under "B." must be completed. If any voting group is
entitled to vote separately, give respective information for each
voting group. (See RSA 293-A:l.40 for definition of voting
group.)
2. Exact corporate name of corporation adopting articles of
amendment.
3. Signature and title of person signing for the corporation. Must
be signed by the chairman of the board of directors, president or
another officer; or see RSA 293-A:l.20(f) for alternative
signatures.
Mail fee and ORIGINAL and ONE EXACT OR CONFORMED COPY to: Secretary of State,
State House, Room 204, 107 North Main Street, Concord, NH 03301-4989
page 3 of 3
<PAGE>
THE STATE OF NEW HAMPSHIRE
RECORD OF ORGANIZATION
OF
BROWN-NEW HAMPSHIRE INC.
--------------------------
We, the undersigned, being all of lawful age, do hereby associate ourselves
together for the purpose of forming a corporation under the provisions of
Chapter 294 of the New Hampshire Revised Statutes Annotated.
ARTICLE I.
The name of this corporation shall be BROWN-NEW HAMPSHIRE INC.
ARTICLE II.
The objects for which this corporation is established are:
(1) To construct, purchase, lease or otherwise acquire, and to hold,
improve, maintain and operate any land, easements, plant, equipment or other
property or interests therein for the production, sale and distribution of
steam, electrical energy, power, water, heat or light, and to construct,
purchase, lease or otherwise acquire, and to hold, improve, maintain and operate
any other property or business; and specifically, but without limiting the
generality of the foregoing, to acquire, hold, improve, maintain and operate
the properties, rights and franchises of existing public utilities, and to carry
on the business of a public utility in New Hampshire and/or elsewhere.
<PAGE>
-2-
(2) To acquire by purchase, lease, gift, or otherwise; to hold, use and
improve; to sell, pledge, mortgage, lease, license or otherwise dispose of real
and personal property and all rights or interests therein, whether in this state
or elsewhere, equipment, patents, patent rights, inventions, secret processes,
trade-marks and trade names, and also as a going business or otherwise, all or
any part of the assets and goodwill of any person, firm, voluntary association
or corporation wherever organized, engaged in whole or in part in any business
in which the corporation is authorized to engage or engaged in doing a business
kindred to the business of this corporation; and in such case to assume all or
any part of the liabilities of such firm, person, voluntary association or
corporation; and to pay for the rights, powers, privileges or interests acquired
by the issuance of its own stock, bonds, notes or other obligations.
(3) To consolidate or merge on such terms and conditions as may be agreed
upon, by purchase or lease from, or sale or lease to, or by any other lawful
method with, any other corporation, joint stock company or association.
(4) To purchase, subscribe for, or otherwise acquire, register, hold, sell,
assign, transfer, pledge, or otherwise dispose of, or deal in so far as may be
permitted by law, stock, bonds, shares, notes and other securities and evidences
of interest in or indebtedness of any person, firm or corporation of this or any
other state, including this corporation, and while the owner or holder thereof
to exercise all rights, powers and privileges of ownership in the same manner
that individuals might do; provided that this corporation shall in no case
directly or indirectly vote upon any share of its own stock; provided, further
that this corporation shall not purchase shares of its own stock when such
purchase would render the corporation insolvent.
<PAGE>
-3-
(5) To make contracts, incur liabilities and borrow money on credit and for
the use of the corporation, to issue notes, bonds or other evidences of
indebtedness and to secure the same, if it appears desirable or necessary, by
mortgaging or hypothecating all or any part of the property of the corporation.
(6) To guarantee (a) the payment of dividends on any shares of capital
stock (other than the shares of the corporation) now or hereafter issued; (b)
the payment, as to principal and/or interest, of bonds, debentures, evidences of
indebtedness or obligations by whomsoever issued, and/or (c) the performance of
the terms of any contract or obligations now or hereafter entered into by any
parties thereto.
(7) To carry on in connection with the foregoing any other business
advantageous to the business of the corporation, and, in general, to do and
perform every other act and thing whatsoever, convenient or proper for the
accomplishment of any of the purposes or the carrying on of any of the business
of the corporation, in the transaction of any business of the corporation, to
act either as principal or agent; and to use and exercise all the powers now or
hereafter conferred by the laws of The State of New Hampshire upon business
corporations.
ARTICLE III
The principal place of business of the corporation shall be located at
Berlin, in the County of Coos, and State of New Hampshire, but the corporation
may carry on any portion of its business at other places within or without said
State.
<PAGE>
-4-
ARTICLE IV
The capital stock of the corporation shall consist of two hundred (200)
shares of common stock without nominal or par value, each share whereof shall be
entitled to one (1) vote and shall be on a par in all respects with every other
share.
ARTICLE V
Meetings of stockholders may be held either within or without New
Hampshire; provided, however, that pursuant to Chapter 294, Section 81 of New
Hampshire Revised Statutes Annotated there shall be filed with the Clerk a
record of any meeting held without New Hampshire within ten (10) days of the
date of such meeting, which record shall be duly certified under oath.
ARTICLE VI
The first meeting of the incorporators shall be held at the office of
Sulloway Hollis Godfrey & Soden, 9 Capitol Street, Concord, New Hampshire on the
10th day of March , 1965, at 11:00 o'clock in the forenoon.
NAME ADDRESS
/s/ John B. Pendleton 9 Capitol Street
- ---------------------------------- Concord, New Hampshire
/s/ Elizabeth Woodbury 9 Capitol Street
- ---------------------------------- Concord, New Hampshire
/s/ Arthur W. Mudge, II 9 Capitol Street
- ---------------------------------- Concord, New Hampshire
<PAGE>
The record of organization of
Brown - New Hampshire Inc.
having been submitted to me, I have examined the same and find that it conforms
to the provisions of the Business Corporation Law, and it is hereby approved.
Dated March 10, 1965
/s/ ILLEGIBLE
---------------------------
Assistant Attorney General
STATE OF NEW HAMPSHIRE
----------
Office of the Secretary of State
Filed for record this 10th
day of March, 1965
at 3:45 p.m. o'clock
/s/ Robert L. Stark
SECRETARY OF STATE
<PAGE>
State of New Hampshire
---------
Be it known that whereas
JOHN B . PENDLETON, ELIZABETH WOODBURY and ARTHUR W. MUDGE, II, all of
Concord, New Hampshire
have associated themselves with the intention of forming a corporation under the
name of
BROWN-NEW HAMPSHIRE INC.
- --------------------------------------------------------------------------------
for the purpose
to construct, purchase, lease or otherwise acquire, and to hold, improve,
maintain and operate any land, easements, plant, equipment or other property of
interests therein for the production, sale and distribution of steam,
electrical energy, power, water, heat or light; and for other purposes as set
forth in the Articles of Agreement.
with a capital stock consisting of
200 shares no par; all shares to be issued at this time.
and have complied with the provisions of the statutes of this State in such case
made and provided as appears from the record of organization of said corporation
duly approved by the attorney-general or assistant attorney-general and recorded
in this office; now therefore
I, ROBERT L. STARK, Secretary of State of New Hampshire, do hereby certify
that said
JOHN B. PENDLETON ELIZABETH WOODBURY
ARTHUR W. MUDGE, II
their associates and successors, are legally organized and established as, and
are hereby made, an existing corporation under the name of
BROWN-NEW HAMPSHIRE INC.
with the powers, rights and privileges, and subject to the limitations, duties
and restrictions, which by law appertain thereto.
Witness my official signature hereunto
subscribed and the seal of the State of
New Hampshire affixed, this 10th day of
March, in the year 1965.
[SEAL]
/s/ Robert L. Stark
----------------------------------------
Secretary of State.
<PAGE>
ARTICLES OF AMENDMENT TO RECORD OF ORGANIZATION
OF
JAMES RIVER-NEW HAMPSHIRE ELECTRIC, INC.
1. Name. The name of the corporation is James River-New Hampshire
Electric, Inc.
2. The Amendment. The Record of Organization is amended by adding a new
Article II, as set forth below, and renumbering the present Article II and all
subsequent articles accordingly:
"Article II. The duration of the corporation shall be perpetual."
3. Corporate Action. The Board of Directors of the corporation and the sole
stockholder, acting by unanimous written consent dated May 16, 1983, found the
foregoing amendment to be in the best interest of the corporation. On May 16,
1983 there were 200 shares of Common Stock of the corporation, no par value per
share, issued and outstanding.
4. Stated Capital. The foregoing amendment does not effect any change in
the stated capital of the corporation.
Dated: May 16, 1983.
JAMES RIVER-NEW HAMPSHIRE ELECTRIC, INC.
By /s/ David J. McKittrick
-------------------------------------
David J. McKittrick
Senior Vice President
By /s/ Richard H. Catlett, Jr.
-------------------------------------
Richard H. Catlett, Jr.
Assistant Secretary
<PAGE>
STATE OF NEW HAMPSHIRE
Filing Fee: $35.00 Form No.14
Use Black print or type. RSA 293-A:10.06
Leave 1" margins both sides.
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
PURSUANT TO THE PROVISIONS OF THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, THE
UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT TO ITS
ARTICLES OF INCORPORATION:
FIRST: The name of the corporation is
-------------------------------------
Crown Vantage-New Hampshire Electric, Inc.
- -------------------------------------------------------------------------------
SECOND: The text of each amendment adopted is:
RESOLVED, that the Record of Organization of
the Corporation is hereby amended by deleting
Article I and substituting therefor the
following:
ARTICLE I
"The name of this corporation shall be
'American Tissue - New Hampshire Electric
Inc.'"
THIRD: If the amendment provides for an exchange, reclassification, or
cancellation of issued shares the provisions for implementing the amendment(s)
if not contained in the above amendment are:
Not Applicable.
FOURTH: The amendment(s) were adopted on (date) August 16, 1999
---------------------------------
[if more space is needed, attach additional sheet(s)]
page 1 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE Form No. 14
ARTICLES OF INCORPORATION (Cont.)
OF Crown Vantage-New Hampshire Electric, Inc.
----------------------------------------------------
FIFTH: (Check One)
A. The amendment(s) were adopted by the incorporators or board of
------- directors without shareholder action and shareholder action was
not required.
B. X The amendment(s) were approved by the shareholders. (Note 1)
-------
Number of votes
Designation Number of indisputably
(class of series) Number of votes entitled represented at
of voting group shares outstanding to be cast the meeting
--------------- ------------------ ---------- -----------
Common Stock 200 200 200
no par value
Designation Total number
(class of series) Total number of votes cast: of undisputed
of voting group FOR AGAINST OR votes cast FOR
--------------- --- ------- -- --------------
Common Stock 200 -0- 200
no par value
Page 2 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE Form No. 14
ARTICLES OF INCORPORATION (Cont.)
OF Crown Vantage-New Hampshire Electric, Inc.
---------------------------------------------
SIXTH: The number cast for the amendment(s) by each voting group was
sufficient for approval by each voting group.
SEVENTH: The effective time of this document is 12:01 a.m. on the date it
is filed with the Secretary of State.
Dated August 16, 1999
-----------------------
Crown Vantage-New Hampshire Electric, Inc. (Note 2)
------------------------------------------
By /s/ Mehdi Gabayzadeh (Note 3)
-----------------------------------------
Signature of its President
-----------------------------------
Mehdi Gabayzadeh
---------------------------------------------------
Print or type name
Note: 1: All sections under "B." must be completed. If any voting group is
entitled to vote separately, give respective information for each
voting group. (See RSA 293-A:1.40 for definition of voting group.)
2. Exact corporate name of corporation adopting articles of amendment.
3. Signature and title of person signing for the corporation. Must be
signed by the chairman of the board of directors, president or another
officer; or see RSA 293-A:1.20(f) for alternative signatures.
Mail fee and ORIGINAL and ONE EXACT OR CONFORMED COPY.
----------------------------------------
Page 3 of 3
<PAGE>
State of New Hampshire
Department of State
CERTIFICATE OF AMENDMENT OF
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.
Now known as:
AMERICAN TISSUE - NEW HAMPSHIRE ELECTRIC INC.
The undersigned, as Deputy Secretary of State of the State of New Hampshire,
hereby certifies that Articles of Amendment to the Articles of Incorporation of
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC., duly signed pursuant to the
provisions of the New Hampshire Business Corporation Act, have been received in
this office.
ACCORDINGLY the undersigned, as such Deputy Secretary of State, and by virtue of
the authority vested in him by law, hereby issues this Certificate of Amendment
to the Articles of Incorporation of CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.
and attaches hereto a copy of the Articles of Amendment.
IN TESTIMONY WHEREOF, I hereto
set my hand and cause to be affixed the
Seal of the State of New Hampshire,
this 8th day of September A.D. 1999
/s/ Robert P. Ambrose
Robert P. Ambrose
[SEAL] Deputy Secretary of State
<PAGE>
STATE OF NEW HAMPSHIRE
FILED
SEP 08 1999
Filing Fee: $35.00 Form No. 14
Use Black print or type. RSA 293-A:10.06
Leave 1" margins both sides. WILLIAM M. GARDNER
NEW HAMPSHIRE
SECRETARY OF STATE
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
PURSUANT TO THE PROVISIONS OF THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, THE
UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT TO ITS
ARTICLES OF INCORPORATION:
FIRST: The name of the corporation is _____________________________________
Crown Vantage-New Hampshire Electric, Inc.
SECOND: The text of each amendment adopted is:
RESOLVED, that the Record of Organization of the Corporation is
hereby amended by deleting Article I and substituting therefor
the following:
ARTICLE I
"The name of this corporation shall be ' American Tissue - New
Hampshire Electric Inc.'"
THIRD: If the amendment provides for an exchange, reclassification, or
cancellation of issued shares the provisions for implementing the amendment (s)
if not contained in the above amendment are:
Not Applicable.
FOURTH: The amendment(s) were adopted on (date) August 16, 1999
[if more space is needed, attach additional sheet(s)]
page 1 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORTATION
OF Crown Vantage - New Hampshire Electric, Inc.
FIFTH (Check one)
A._____ The amendment (s) were adopted by the incorporators or board of
directors without shareholder action and shareholder action was
not required.
B._X_ The amendment(s) were approved by the shareholders.
(Note 1)
<TABLE>
<CAPTION>
Number of votes
Designation Number of indisputably
(class of series) Number of votes entitled represented at
of voting group shares outstanding to be cast the meeting
- ----------------- ------------------ -------------- ---------------
<S> <C> <C> <C>
Common Stock 200 200 200
no par value
<CAPTION>
Designation Total number
(class of series) Total number of votes cast: of undisputed
of voting group FOR AGAINST OR votes cast FOR
- --------------- --- ------- -- --------------
<S> <C> <C> <C>
Common Stock 200 -0- 200
no par value
</TABLE>
page 2 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORTATION
OF Crown Vantage - New Hampshire Electric, Inc.
SIXTH: The number cast for the amendment (s) by each voting group was
sufficient for approval by each voting group.
SEVENTH: The effective time of this document is 12:01 a.m. on the date it
Dated August 16, 1999
Crown Vantage-New Hampshire Electric, Inc. (Note 2)
By________________________________________ (Note 3)
Signature of its President
Mehdi Gabayzadeh
------------------------------------------
Print or Type name
Note: 1: All sections under "B." must be completed. If any voting group is
entitled to vote separately, give respective information for each
voting group. (See RSA 293-A:1.40 for definition of voting group.)
2. Exact corporate name of corporation adopting articles of amendment.
3. Signature and title of person signing for the corporation. Must be
signed by the chairman of the board of directors, president or another
officer; or see RSA 293-A:1.20(f) for alternative signatures.
Mail fee and ORIGINAL and ONE EXACT OR CONFORMED COPY.
page 3 of 3
<PAGE>
State of New Hampshire
Department of State
CERTIFICATE OF AMENDMENT OF
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.
Now known as:
AMERICAN TISSUE - NEW HAMPSHIRE ELECTRIC INC.
The undersigned, as Deputy Secretary of State of the State of New Hampshire,
hereby certifies that Articles of Amendment to the Articles of Incorporation of
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC., duly signed pursuant to the
provisions of the New Hampshire Business Corporation Act, have been received in
this office.
ACCORDINGLY the undersigned, as such Deputy Secretary of State, and by virtue of
the authority vested in him by law, hereby issues this Certificate of Amendment
to the Articles of Incorporation of CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.
and attaches hereto a copy of the Articles of Amendment.
IN TESTIMONY WHEREOF, I hereto
set my hand and cause to be affixed the
Seal of the State of New Hampshire,
this 8th day of September A.D. 1999
/s/ Robert P. Ambrose
Robert P. Ambrose
[SEAL] Deputy Secretary of State
<PAGE>
STATE OF NEW HAMPSHIRE
Filing Fee: $35.00 Form No. 14
Use Black print or type. RSA 293-A:10.06
Leave 1" margins both sides.
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
PURSUANT TO THE PROVISIONS OF THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, THE
UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT TO ITS
ARTICLES OF INCORPORATION:
FIRST: The name of the corporation is _____________________________________
Crown Vantage-New Hampshire Electric, Inc.
SECOND: The text of each amendment adopted is:
RESOLVED, that the Record of Organization of the Corporation is
hereby amended by deleting Article I and substituting therefor
the following:
ARTICLE I
"The name of this corporation shall be 'American Tissue - New
Hampshire Electric Inc.'"
THIRD: If the amendment provides for an exchange, reclassification, or
cancellation of issued shares the provisions for implementing the amendment(s)
if not contained in the above amendment are:
Not Applicable.
FOURTH: The amendment(s) were adopted on (date) August 16, 1999
[if more space is needed, attach additional sheet(s)]
page 1 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE Form No. 14
ARTICLES OF INCORPORATION (Cont.)
OF Crown Vantage - New Hampshire Electric, Inc.
FIFTH: (Check one)
A._____ The amendment (s) were adopted by the incorporators or board of
directors without shareholder action and shareholder action was
not required.
B._X_ The amendment(s) were approved by the shareholders.
(Note 1)
<TABLE>
<CAPTION>
Number of votes
Designation Number of indisputably
(class of series) Number of votes entitled represented at
of voting group shares outstanding to be cast the meeting
- ----------------- ------------------ -------------- ---------------
<S> <C> <C> <C>
Common Stock 200 200 200
no par value
<CAPTION>
Designation Total number
(class of series) Total number of votes cast: of undisputed
of voting group FOR AGAINST OR votes cast FOR
- --------------- --- ------- -- --------------
<S> <C> <C> <C>
Common Stock 200 -0- 200
no par value
</TABLE>
page 2 of 3
<PAGE>
ARTICLES OF AMENDMENT TO THE Form No. 14
ARTICLES OF INCORPORATION (Cont.)
OF Crown Vantage - New Hampshire Electric, Inc.
SIXTH: The number cast for the amendment(s) by each voting group was
sufficient for approval by each voting group.
SEVENTH: The effective time of this document is 12:01 a.m. on the date it
is filed with the Secretary of State.
Dated August 16, 1999
Crown Vantage-New Hampshire Electric, Inc. (Note 2)
By /s/ Mehdi Gabayzadeh
--------------------------------------- (Note 3)
Signature of its President
Mehdi Gabayzadeh
------------------------------------------
Print or Type name
Note: 1: All sections under "B." must be completed. If any voting group is
entitled to vote separately, give respective information for each
voting group. (See RSA 293-A:1.40 for definition of voting group.)
2. Exact corporate name of corporation adopting articles of amendment.
3. Signature and title of person signing for the corporation. Must be
signed by the chairman of the board of directors, president or another
officer; or see RSA 293-A:1.20(f) for alternative signatures.
Mail fee and ORIGINAL and ONE EXACT OR CONFORMED COPY.
page 3 of 3
BY-LAWS
OF
BROWN-NEW HAMPSHIRE INC.
----------
ARTICLE I
Name, Location and Purposes
The name, location of the principal office and purposes of this corporation
shall be as set forth in the Articles of Agreement.
ARTICLE II
Meeting of Stockholders
The annual meeting of the stockholders shall be held at Berlin, New
Hampshire, on the first Tuesday of May in each year at eleven o'clock in the
forenoon (or, if said date is a legal holiday, then on the next succeeding day
which is not a legal holiday), unless the President shall designate some other
time and place for the holding of said meeting.
Special meetings of the stockholders shall be called by the Clerk upon
written request of the President or a majority of the Board of Directors, or
stockholders entitled to vote and who own at least one-fourth part in interest
of the capital stock, stating the time, place and purpose of such meeting.
Notice of all meetings, annual and special, of the stockholders, stating
the place, day and hour thereof, and in case of special meetings, the purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at said meeting by leaving such notice with him or at his residence or
usual place of business, or by mailing the same postage prepaid, to him
<PAGE>
at his address as it appears on the books of the corporation at least five days
before such meeting. Notice of any regular or special meeting may be dispensed
with if every stockholder entitled to vote, or his attorney thereunto
authorized, by writing filed with the records of the meeting, waives such
notice. Any meeting at which all stockholders entitled to vote are present
either in person or by proxy, or of which those who are not present have waived
notice in writing, shall be valid without prior notice.
At any meeting of stockholders, the owners of a majority of the shares of
capital stock outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum for the transaction of business.
At all meetings of the stockholders a quorum may adjourn the meeting to a
definite time and place, and any business which could have been legally
transacted at such meeting may be transacted at any adjournment thereof without
new notification.
ARTICLE III
Directors and Officers
The officers of this corporation shall consist of a board of not less than
three (3) nor more than nine (9) directors, a president, a vice president, a
treasurer and a clerk, and such other officers and agents as the board of
directors may from time to time appoint. The number of directors until the first
annual meeting, shall be fixed by the incorporators at their first meeting, and
thereafter the number of directors for the ensuing year shall be fixed by the
stockholders at their annual meeting.
ARTICLE IV
Powers of Directors
The board of directors shall be elected by the incorporators in the first
instance and thereafter by the stockholders at their annual meeting, and shall
<PAGE>
hold office until others are chosen in their stead. They shall have and may
exercise all the powers of the corporation, except such as are conferred upon
the stockholders by law, by the Articles of Agreement and any other provisions
of these By-Laws. Vacancies in any office or in the board of directors may be
filled by the board or by the remaining directors, though less than a quorum.
The board of directors may by majority vote remove any officer or agent at any
time with or without cause.
ARTICLE V
President
The president shall be chosen by the incorporators in the first instance
and thereafter annually by the board of directors after the election of
directors, and shall hold office for one year and until his successor shall be
chosen. He shall be the chief executive officer of the corporation, unless
otherwise ordered by the board of directors. He shall preside at all meetings of
the stockholders and directors, with the treasurer sign all stock certificates
and shall perform such other duties as are imposed on him by these By-Laws or as
may be assigned to him by the stockholders or directors.
ARTICLE VI
Vice President
The vice president shall be chosen in the same manner and for the same term
as the president and shall exercise all the powers of the president during the
absence or disability of the president, in addition to such other duties as the
directors or stockholders may from time to time prescribe.
ARTICLE VII
Treasurer
The treasurer shall be chosen in the same manner and for the same term as
the president and shall, subject to the direction and under the supervision
<PAGE>
of the Board of Directors, have the care and custody of the funds, books and
valuable papers of the corporation, except his own bond, shall have power to
endorse for deposit or collection, all notes, drafts, checks and other
obligations for the payment of money payable to the corporation or its order and
to sign notes and drafts and checks drawn upon any bank account of the
corporation. He shall keep accurate books of account which shall be the property
of the corporation. He shall collect all moneys from time to time due and owing
to the corporation, and shall keep and disburse the same pursuant to the
contracts and obligations of the corporation, or the order of the directors or
stockholders. He shall have power to accept for and in the name and behalf of
the corporation promissory notes, drafts and checks in the ordinary course of
business. He shall execute and deliver in behalf of the corporation all such
instruments under its common seal as may be ordered by the stockholders or
directors, unless their execution and delivery is otherwise specifically
provided for, and shall with the president sign and affix the common seal to all
certificates of stock issued by the corporation, and perform such other duties
as the directors or stockholders may from time to time require. He shall give
bond in such sum and with such sureties as the directors may require.
ARTICLE VIII
Clerk
The clerk shall be chosen in the same manner and for the same term as the
president, and shall be and continue an inhabitant of New Hampshire and keep his
office therein. He shall be sworn to the faithful discharge of his duties. He
shall attend all meetings of the stockholders and directors and record the
proceedings thereof. He shall notify the
<PAGE>
stockholders and directors of their meetings, in accordance with the By-Laws,
and shall perform such other duties as the stockholders or directors may from
time to time determine and as are required by applicable statutes.
ARTICLE IX
Meetings of Board of Directors
Regular meetings of the board of directors may be held at such times and
places as the board may by vote from time to time determine, and if so
determined no notice thereof need be given. A regular meeting of the board may
be held without notice immediately after, and at the same place as the annual
meeting of stockholders.
Special meetings of the board may be held at any time and place when called
by the president or treasurer, or two or more directors upon written notice
given in hand or mailed to each director, postage prepaid, at his usual place of
residence or business not less than three days before the day of such meeting,
or by communication by telephone or telegraph at least seventy-two hours before
the time of such meeting, or at any time without call or formal notice, provided
all the directors are present or waive notice thereof by a writing filed with
the records of the meeting, and any meeting held without prior notice at which
three or more directors are present shall be legal if the absent director or
directors subsequently assent in writing to the recorded proceedings of the
meeting.
A majority of the board of directors shall constitute a quorum for the
transaction of business, but a less number may adjourn any meeting from time to
time, and the meeting may be held as adjourned without further notice. When a
quorum is present at any meeting a majority of the members in attendance shall
decide any question brought before such meeting. Meetings
<PAGE>
of the board of directors may be held within or without New Hampshire.
ARTICLE X
Certificates
Stock certificates shall be in such form, not inconsistent with law, as the
directors shall determine. All certificates shall be numbered consecutively from
the first, and shall be signed by the president and treasurer, and shall bear
the seal of the corporation.
ARTICLE XI
Transfer of Stock
Subject to the provisions of the Articles of Agreement, stock may be
transferred by the owner by a writing upon the back of the certificate by him
signed, or by a separate instrument of assignment, and the delivery of a
certificate of stock to a bona fide purchaser or a pledgee for value, together
with the written transfer of the same or a written power of attorney to sell,
transfer or assign the same signed by the owner of the certificate shall be a
sufficient delivery to transfer the title as against all parties, except the
corporation. No such transfer shall affect the right of the corporation to treat
the stockholder of record as the stockholder in fact until the old certificate
is surrendered and a new certificate is issued to the person entitled thereto.
ARTICLE XII
Pre-emptive Rights
Holders of Common Stock shall, with respect to each future issue of Common
Stock or of warrants representing rights to subscribe to or purchase Common
Stock or of securities convertible into Common Stock, have the right to purchase
pro rata such Common Stock, warrants or securities in such
<PAGE>
manner and within such period of time as may be provided in the vote or votes
authorizing the issue of such Common Stock, warrants or securities. This ARTICLE
may be altered, amended or repealed only at a meeting of the stockholders duly
warned of the purpose thereof and by the favorable vote of the holders of
two-thirds of the outstanding stock entitled to vote.
ARTICLE XIII
Seal
The seal of the corporation shall, subject to alteration by the board of
directors, consist of a flat faced circular die, with the words and figures
"Incorporated, New Hampshire, 1965", together with the name of the corporation
cut or engraved thereon. Pending the procurement of the permanent seal, the
directors may authorize the use of a wafer seal.
ARTICLE XIV
Execution of Papers
Except in cases where the stockholders or board of directors authorize the
execution thereof in some other manner, all deeds, transfers, contracts, bonds,
notes, drafts and other obligations for the payment of money made, accepted or
endorsed by the corporation, except as otherwise provided by these By-Laws,
shall be signed by the president or the treasurer.
ARTICLE XV
Amendments
These By-Laws may be altered, amended or repealed at any annual or special
meeting of the stockholders by vote of the holders of a majority of the stock
present or represented by proxy and voting at the meeting, in the notice of
which the subject matter of the proposed alteration, amendment or repeal, or the
articles to be affected thereby, shall be specified.
<PAGE>
Upon motion duly made and seconded, it was unanimously
VOTED: That until otherwise determined by the stockholders, the number of
Directors of this corporation be fixed at three (3).
Upon motion duly made and seconded, it was unanimously
VOTED: To proceed to ballot for officers and directors.
Successive ballots being taken, the following were unanimously
chosen and declared elected to the offices set before their respective names:
DIRECTORS:
John B. Pendleton 9 Capitol Street
Concord, New Hampshire
Arthur W. Mudge, II " " "
Elizabeth Woodbury " " "
PRESIDENT:
Leonard A. Pierce Brown Company
650 Main Street
Berlin, New Hampshire
VICE PRESIDENT:
John W. Jordan Brown Company
650 Main Street
Berlin, New Hampshire
TREASURER:
Franklin Hollis 9 Capitol Street
Concord, New Hampshire
CLERK:
Edward J. Reichert
Brown Company
650 Main Street
Berlin, New Hampshire
<PAGE>
Upon motion duly made and seconded, it was unanimously
VOTED: That the amount of stock presently to be issued shall be 200 shares of
the common stock without nominal or par value of the corporation and
that said shares be issued to Brown Company, a corporation duly
incorporated under the laws of the State of Maine and having a place
of business in Berlin, New Hampshire, in consideration of certain
properties and rights of Brown Company in Berlin, Gorham and
Shelburne, New Hampshire, used for the generation of electric energy
by water power and by steam and for the transmission of electric
energy, together with related materials, supplies and assets owned by
Brown Company in connection therewith.
Upon motion duly made and seconded, it was unanimously
VOTED: That the Board of Directors be, and hereby is, authorized and
instructed forthwith to cause stock certificates to be prepared in
such form, not inconsistent with the by-laws, as it may determine, and
to make the necessary arrangements for the issuing upon payment
therefor of the two hundred (200) shares of common stock of the
corporation without nominal or par value, the present issue of which
is provided for in the preceding vote.
Upon motion duly made and seconded, it was unanimously
VOTED: That the Treasurer and a majority of the Board of Directors be, and
they hereby are, authorized to prepare and execute a Record of
Organization conformably to the provisions of Chapter 294 of the New
Hampshire Revised Statutes Annotated, and upon approval thereof by the
Attorney General or Deputy Attorney General, to file the same in the
office of the Secretary of State of New Hampshire, and pay the
recording fee required by law.
Upon motion duly made and seconded, it was unanimously
VOTED: To adjourn, subject to meet again upon call by the President or Clerk
in the event any corporate action shall be necessary before any of the
stock voted to be presently issued shall have been issued, so that the
powers of the corporation shall have vested in the stockholders.
Adjourned accordingly.
A true record: Attest:
/s/ Arthur W. Mudge
----------------------------------------------------------------------
Arthur W. Mudge, II - Temporary. Clerk
<PAGE>
AFFIDAVIT
We, the undersigned, being the Treasurer and a majority of the Board of
Directors elected at the organization meeting of Brown--New Hampshire Inc., as
hereinbefore set forth, do hereby severally make oath that the foregoing is a
true copy of the Record of Organization of said corporation and contains the
original of the Articles of Agreement, the names and addresses of the officers
and Directors, and the original record of the organization meeting except the
By-Laws, duly attested by the Temporary Clerk.
/s/ Franklin Hollis
---------------------------
Treasurer
/s/ John B. Pendleton
---------------------------
/s/ Elizabeth Woodbury
---------------------------
/s/ Arthur W. [Mudge
---------------------------
Directors
THE STATE OF NEW HAMPSHIRE
MERRIMACK COUNTY March 10, 1965
Then personally appeared the above named John B. Pendleton, Arthur W.
Mudge, II and Elizabeth Woodbury, all of the Board of Directors of Brown-New
Hampshire Inc. and Franklin Hollis, Treasurer, and made oath that the foregoing
affidavit by them subscribed is true. Before me,
/s/ Lawrence E. Spellman
---------------------------
Notary Public
[SEAL]
<PAGE>
CERTIFICATE
I, Arthur W. Mudge, II, on oath depose and say that I served as temporary
clerk of Brown-New Hampshire Inc. during its incorporation and during the
organization meeting at which the By-Laws of the Corporation were adopted and
that there is attached hereto a true copy of the By-Laws of the Corporation so
adopted which have not been amended as of the date hereof.
/s/ Arthur W. Mudge
---------------------------
The State of New Hampshire Concord, N. H.
Merrimack County March 11, 1965
Subscribed and sworn to before me,
/s/ John B. Pendleton
---------------------------
Notary Public
[SEAL]
<PAGE>
MINUTES OF ORGANIZATION MEETING
OF
BROWN-NEW HAMPSHIRE INC.
----------
The first meeting of the incorporators, being all the subscribers to the
Articles of Agreement of Brown-New Hampshire Inc. was held at 9 Capitol Street,
Concord, New Hampshire, on the 10th day of March, 1965, at 11:00 o'clock in the
forenoon, pursuant to Article VI of the Articles of Agreement.
There were present John B. Pendleton, Arthur W. Mudge, II and Elizabeth
Woodbury, being all of the incorporators and subscribers to the Articles of
Agreement.
John B. Pendleton was chosen chairman of the meeting and Arthur W. Mudge,
II was chosen Temporary Clerk, to hold office and to perform the duties of Clerk
until final adjournment of the incorporators' meeting and until the Permanent
Clerk shall have qualified. Arthur W. Mudge, II, as Temporary Clerk, took the
oath of office prescribed by law before John B. Pendleton, Justice of the Peace.
The Articles of Agreement, subscribed by all the aforesaid incorporators,
were read and ordered incorporated in the Record of Organization.
A proposed code of By-Laws for the corporation was then presented to the
meeting and read section by section.
Upon motion duly made and seconded, it was unanimously
VOTED: That the following be adopted as the By-Laws of the corporation.
<PAGE>
BYLAWS OF
BROWN-NEW HAMPSHIRE, INC.
(as amended and restated August 6, 1981)
ARTICLE I - CORPORATE SEAL
The corporate seal of the corporation shall be circular and shall have
inscribed thereon, within and around the circumference, "BROWN-NEW HAMPSHIRE,
INC." In the center shall be the word "SEAL".
ARTICLE II - FISCAL YEAR
The fiscal year of the corporation shall be determined in the discretion of
the board of directors, but in the absence of any such determination it shall
coincide with the fiscal year of James River Corporation of Virginia, a Virginia
corporation.
ARTICLE III - CLOSING OF TRANSFER
BOOKS AND FIXING RECORD DATE
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors of this
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. In lieu of closing the
stock transfer books
<PAGE>
the board of directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than fifty
days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this article, such determination shall apply to any adjournment thereof.
ARTICLE IV - MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings - Meetings of stockholders may be held at such
place, either within or without the state in which this corporation was
organized, as may be provided in the notice of the meeting.
Section 2. Annual Meeting - The annual meeting of stockholders shall be
held on the first Thursday in August of each year.
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<PAGE>
Section 3. Substitute Annual Meetings - If in the judgement of the chairman
of the board of directors (the "Chairman"), or the board of directors, because
of the unavailability of necessary information, or for other sufficient reason,
an annual meeting of stockholders should not be held on the day designated in
these bylaws, a substitute annual meeting may be called in accordance with the
provisions of Section 4 of this Article. Any meeting so called shall be
designated and treated for all purposes as the annual meeting.
Section 4. Special Meetings - Special meetings of the stockholders may be
called by the Chairman, the President, the board of directors or the holders of
not less than one-tenth of all the shares entitled to vote at the meeting.
Section 5. Notice of Meetings - Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given not less than ten nor more than
fifty days before the date of the meeting (except as a different time is
specified in these bylaws or by the law of the state in which this corporation
was organized) either personally or by mail, by or at the direction of the
Chairman, the President, the Clerk, or the officer or persons calling the
meeting, to each stockholder of record entitled to vote
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<PAGE>
at such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid.
Notice of a stockholders' meeting to act on (i) an amendment of the
articles of incorporation; (ii) a reduction of stated capital; (iii) a plan of
merger, consolidation or exchange; or (iv) the sale, lease, exchange, mortgage,
pledge or other disposition of all or substantially all the property or assets
of the corporation if not made in the usual and regular course of its business,
shall be given, in the manner provided above, not less than twenty-five nor more
than fifty days before the date of the meeting. Any such notice shall be
accompanied by (a) a copy of the proposed amendment; (b) a copy of the proposed
plan of reduction or merger, consolidation or exchange; or (c) shall state that
a purpose or one of the purposes of the meeting is to consider a proposed sale,
lease, exchange, mortgage, pledge or other disposition of property and assets of
the corporation other than in the usual and regular course of its business.
Section 6. Quorum; Required Vote - A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of stockholders. Treasury shares shall not be counted to establish a quorum. If
a quorum is present the affirmative vote of a majority of the
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<PAGE>
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, except to the extent (i) that the vote of
a greater number or voting by classes is required by law or the articles of
incorporation; (ii) that in elections of directors the provisions of Article V,
Section 3 of these bylaws shall apply; and (iii) that a vote is required on any
of the matters set forth in the second paragraph of Section 5 of this Article IV
of these bylaws, in which event the affirmative vote of more than two-thirds of
the shares entitled to vote thereon shall be the act of the stockholders. Less
than a quorum may adjourn.
Section 7. Shares Entitled to Vote; Proxies - Each outstanding share of
common stock shall be entitled to vote on each matter submitted to a vote at a
meeting of stockholders. Treasury shares shall not be entitled to any vote.
Shares of other class of stock, if any, shall be entitled to such vote as nay be
provided in the articles of incorporation.
A stockholder may vote either in person or by proxy executed by the
stockholder or by his duly authorized attorney-in-fact. No proxy shall be valid
after six months from its date, unless otherwise provided in the proxy.
Section 8. Waiver of Notice - Notwithstanding any other provisions of law,
the articles of incorporation, or these bylaws, whenever notice of any meeting
for any purpose is required to be given to any stockholder, a waiver thereof in
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<PAGE>
writing signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be the equivalent to the giving of such
notice.
A stockholder who attends a meeting shall be deemed to have had timely and
proper notice of the meeting unless he attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 9. Actions by Stockholders Without a Meeting -Any action required
to be taken at a meeting of the stockholders, or any action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the actions so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same force and effect as a unanimous vote of
stockholders.
ARTICLE V - DIRECTORS
Section 1. General Powers - The business and affairs of the corporation
shall be managed by the board of directors subject to any requirement of
stockholder action contained in the law of the state in which the corporation
was organized or in the articles of incorporation.
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<PAGE>
Section 2. Number, term and qualification - The number of directors of the
corporation shall be not less than three (3) nor more than ten (10). These
numbers may be increased or decreased from time to time by amendment to these
bylaws, provided that the minimum number shall never be less than three (3). No
decrease in number shall have the effect of shortening the term of any incumbent
director. The number of directors elected by the stockholders, within the range
established by these bylaws, at their latest annual meeting shall be deemed to
be the number of directors fixed by these bylaws; provided that (i) in the event
a vacancy on the board of directors occurs which the board declines to fill, the
number of remaining incumbent directors shall be deemed to be the number of
directors fixed by these bylaws; and (ii) the board of directors shall have the
right during the period between annual meetings of the stockholders to increase
the number of directors elected by the stockholders at their latest annual
meeting by not more than two, until the maximum number set forth in these bylaws
is reached, and the number of directors as so increased shall be deemed to be
the number of directors fixed by these bylaws. Each director shall hold office
until his death, resignation, retirement, or removal or until his successor is
elected.
Section 3. Election of Directors - Except as provided in Section 5 of this
Article and in the articles of incorporation,
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<PAGE>
the directors shall be elected by the common stockholders at the annual meeting
of stockholders and those persons who receive the greatest number of votes shall
be deemed elected even though they do not receive a majority of the votes cast.
Section 4. Removal - At a meeting called expressly for that purpose any
director may be removed, with or without cause, by a vote of stockholders
holding a majority of the shares entitled to vote at an election of the
directors. If any directors are so removed, new directors may be elected at the
same meeting.
Section 5. Vacancies - Any vacancy occurring in the board of directors,
including a vacancy resulting from an increase by not more than two in the
number of directors, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the board of directors.
Section 6. Compensation - The board of directors may fix the compensation
of directors for their services as such and may provide for the payment of all
expenses incurred by directors in attending regular and special meetings of the
board of directors.
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<PAGE>
ARTICLE VI - DIRECTORS MEETINGS
Section 1. Regular Meetings - Regular meetings of the board of directors
shall be held annually, immediately following each annual meeting of
stockholders, for the purpose of electing officers and carrying on such other
business as may properly come before such meeting, and immediately following
each special meeting of stockholders to consider and act upon any matter which
may properly cone before such meeting. Any such meeting shall be held at the
place where the stockholders meeting was held. The board of directors may also
adopt a schedule of additional meetings which shall be considered regular
meetings, and such meetings shall be held at the time and place, within or
without the state in which the corporation was organized, as the Chairman or, in
his absence, the President shall designate.
Section 2. Special Meetings - Special meetings of the board of directors
shall be held on the call of the Chairman, the President or any three members of
the board of directors at the principal office of the corporation or at such
other place as the Chairman or, in his absence, the President, shall designate.
Section 3. Telephone Meetings - The board of directors may participate in
a meeting by means of a conference telephone
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<PAGE>
or similar communications equipment whereby all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting. When such a meeting is conducted by means of
a conference telephone or similar communications equipment, a written record
shall be made of the action taken at such meeting.
Section 4. Notice of Meetings - No notice need be given of regular meetings
of the board of directors.
Notice of special meetings of the board of directors shall be mailed to
each director at least (3) days, or telegraphed at least two (2) days prior to
the date of the meeting and must set forth the purpose for which the meeting is
called.
Section 5. Quorum; Required Vote - A majority of the directors shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the board of directors unless the act of a greater number is required by law
or these bylaws.
Section 6. Waiver of Notice - Notwithstanding any other provisions of law,
the articles of incorporation or these bylaws, whenever notice of any meeting
for any purpose is required to be given to any director a waiver thereof in
writing,
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<PAGE>
signed by the person or persons entitled to said notice: whether before or
after the time stated therein, shall be the equivalent to the giving of such
notice.
A director who attends a meeting shall be deemed to have had timely and
proper notice of the meeting unless he attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 7. Actions by Directors Without Meeting - Any action required to be
taken at a meeting of the directors, or any action which may be taken at a
meeting of the directors, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the directors. Such consent shall have the same force and
effect as a unanimous vote.
ARTICLE VII - COMMITTEES OF DIRECTORS
Section 1. Executive Committee - The board of directors, by resolution
adopted by a majority of the number of directors fixed by these bylaws, may
designate two or more of the directors who shall constitute the executive
committee. A majority of the members of the executive committee shall constitute
a quorum. The executive committee shall meet on the call of any of its members.
Notice of any such meeting shall be given by mail, telephone, telegraph or other
means by the close of business on the day before such meeting is to be held. If
he is a member of the executive committee and present at any of its meetings the
Chairman
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<PAGE>
shall serve as its chairman. In his absence, if he is a member of the executive
committee, the President shall serve as its chairman. Unless otherwise provided
by the law of the state in which this corporation was organized, the executive
committee small have and may exercise all of the authority of the board of
directors except to approve (i) an amendment of the articles of incorporation;
(ii) a plan of merger or consolidation; (iii) a plan of exchange under which the
corporation would be acquired; (iv) the sale, lease or exchange, or the mortgage
or pledge for a consideration other than money, of all, or substantially all,
the property and assets of the corporation otherwise than in the usual and
regular course of its business; (v) the voluntary dissolution of the
corporation; (vi) revocation of voluntary dissolution proceedings; (vii) any
employee benefit plan involving the issuance of common stock; or (viii) the
compensation paid to the Chairman or the President.
Section 2. Audit Committee - The board of directors may appoint an audit
committee consisting of not less than three directors, none of whom shall be
officers, which committee shall regularly review the adequacy of internal
financial controls, review with the corporation's independent public accountants
the annual audit and other financial statements and recommend the selection of
the corporation's independent public accountants.
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<PAGE>
Section 3. Other Committees - The board of directors may designate such
other committees with limited authority as it may deem advisable.
Section 4. Telephone Meetings - Committees may participate in meetings by
means of conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting. When such a
meeting is conducted by means of a conference telephone or similar
communications equipment, a written record shall be made of the action taken at
such meeting.
Section 5. Actions by Committees Without Meetings - Any action which may be
taken at a committee meeting, may be taken without a meeting if a consent in
writing, setting forth the action, shall be signed either before or after such
action by all of the members of the committee. Such consent shall have the same
force and effect as a unanimous vote.
Section 6. Committee Rules - Unless the board of directors otherwise
provides, each committee designated by the board of directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of direction by
the board of directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of
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<PAGE>
members of such committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the time
of such vote if a quorum is then present shall be the act of such committee.
Except to the extent that these bylaws contain provisions to the contrary, in
other respects each committee shall conduct its business in the same manner as
the board of directors is required to conduct its business.
ARTICLE VIII - OFFICERS
Section 1. Officers - The officers of the corporation shall be a Chairman,
a President, a Clerk, a Secretary and a Treasurer, and in the discretion of the
board of directors, one or more Vice-Presidents and other officers and assistant
officers as may be deemed necessary or advisable to carry on the business of the
corporation. The Chairman and the President shall be members of the board of
directors. Any two offices may be combined in the same person except the offices
of President and Clerk.
Section 2. Election, Term - Officers shall be elected at the annual meeting
of the board of directors immediately following the annual meeting of
stockholders, and may be elected at such other time or times as the board of
directors shall determine. They shall hold office, unless removed, until the
next annual meeting of the board of directors
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<PAGE>
or until their successors are elected. Any officer may resign at any time upon
written notice to the Chairman, the President, or the board of directors. Such
resignation shall take effect at the time specified therein and, unless
otherwise specified therein, no acceptance of such resignation shall be
necessary to make it effective.
Section 3. Removal of Officers - Any officer may be removed, with or
without cause, at any time by the board of directors at any duly called meeting.
Section 4. Duties of the Chairman - The Chairman shall be the chief
executive officer of the corporation and shall have general charge and
supervision of the business of the corporation. He shall preside at all meetings
of the stockholders and the board of directors. In addition he shall perform
such duties, from time to time, as maybe assigned to him by the board of
directors.
Section 5. Duties of the President - The President shall be the chief
operating officer of the corporation and have such powers and duties as
generally pertain to that position.
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<PAGE>
In the absence of the Chairman he shall preside at all meetings of the
stockholders and the board of directors. He shall further perform such duties as
may, from time to time, be assigned or delegated to him by the Chairman or the
board of directors.
Section 6. Duties of Vice-Presidents - The Vice-Presidents shall perform
such duties as may, from time to time, be assigned to them by the Chairman, the
President or the board of directors.
Section 7.a. Duties of the Clerk / Rider
a. Duties of the Clerk - The Clerk, who shall be a resident of the State of
New Hampshire, shall record all votes and proceedings of the stockholders and
make a record of all instruments and papers required to be recorded in his
office. He shall not be required to keep any record relating to the votes and
proceedings of the directors or the Executive Committee. He may affix the
corporate seal to any document the execution of which, on behalf of the
corporation, is duly authorized, and when so affixed may attest the same. The
Clerk shall also perform such other duties as may, from time to time, be
assigned to him by the Chairman, the President, the board of directors, or as
may be required by law.
b. Duties of the Secretary - The Secretary shall record all votes and
proceedings of the board of directors and the Executive Committee and make a
record of all instruments and papers required to be recorded in his office. He
may affix the corporate seal to any document the execution of which, on behalf
of the corporation, is duly authorized, and when so affixed may attest the same.
The Secretary shall also perform such other duties as may, from time to time, be
assigned to him by the Chairman, the President, the board of directors, or as
may be required by law.
Section 8. Duties of the Treasurer - The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
corporation, and shall
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deposit or cause to be deposited, in the name of the corporation, all monies or
valuable effects in such banks, trust companies or other depositories as shall,
from time to time, be selected by or under authority of the board of directors;
if required by the board of directors, he shall give a bond for the faithful
discharge of his duties, with such surety or sureties as the board of directors
may determine; he shall be custodian of the records of the corporation; he shall
keep or cause to be kept full and accurate records of all receipts and
disbursements in books of the corporation and shall render to the Chairman, the
President and the board of directors, whenever requested, an account of the
financial condition of the corporation; and, in general, he shall perform all
the duties incident to the office of treasurer of a corporation, and such other
duties as may be assigned to him by the Chairman, the President, the board of
directors or as may be provided by law.
Section 9. Duties of Other Officers - The other officers, if any, of the
corporation shall have such powers and duties in the management of the
corporation as shall be stated in a resolution of the board of directors
creating the offices to which they have been elected and, to the extent that
such powers and duties are not so stated, they shall have such powers and duties
as generally pertain to their respective offices, subject to the
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control of the Chairman, the President and the board of directors.
Section 10. Voting Securities of Other Corporations - Any one of the
Chairman, the President or the Treasurer shall have power to act for and vote on
behalf of the corporation at all meetings of the stockholders of any corporation
in which this corporation holds stock, or in connection with any consent of
stockholders in lieu of any such meeting.
Section 11. Bonds - The board of directors may by resolution require that
any or all officers, agents and employees of the corporation give bond to the
corporation, with sufficient sureties, conditioned upon the faithful performance
of the duties of their respective offices or positions.
ARTICLE IX - CERTIFICATES OF STOCK
Section 1. Form and Issuance - Certificates of stock shall be in such form
as may be approved by the board of directors, and shall be signed by the
President or any Vice-President and the Clerk or an Assistant Clerk, or the
Treasurer or an Assistant Treasurer, and may (but need not) be sealed with the
seal of the corporation or a facsimile thereof. Any such signature may be a
facsimile, engraved or printed, if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any such officer who has signed or
whose facsimile signature has been placed upon any such certificate shall have
ceased to be such before
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such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
Section 2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates - The corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 3. Transfer - The board of directors shall have power and authority
to make all such rules and regulations as they may deem expedient concerning
the issue, registration and transfer of certificates of stock and may appoint
transfer agents or clerks and registrars thereof. Unless otherwise provided,
transfers of shares of stock by the corporation shall be made upon its books by
surrender of the certificates for the shares transferred accompanied by an
assignment in writing by the holder and may be accomplished either by the holder
in person or by a duly authorized attorney-in-fact.
ARTICLE X - AMENDMENTS
Section 1. New Bylaws and Alterations - These bylaws may be amended or
repealed and new bylaws may be made at any
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regular or special meeting of the board of directors by a majority of the board.
However, bylaws made by the board of directors may be repealed or changed and
new bylaws may be made by the stockholders and the stockholders may prescribe
that any bylaw made by them shall not be altered, amended, or repealed by the
directors.
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ARTICLES OF ORGANIZATION
OF
CORAM REALTY LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Coram Realty LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December
31, 2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The limited liability company is to be managed by one or more
managers.
IN WITNESS WHEREOF, this certificate has been subscribed this 7 day of December,
1996, by the undersigned who affirms the statements made herein are true under
the penalties of perjury.
/s/ Nourallah Elghanayan
---------------------------------
Nourallah Elghanayan, Member
and Sole Organizer
<PAGE>
ARTICLES OF ORGANIZATION
OF
CORAM REALTY LLC
Section 203 of the Limited Limited Liability Company Law
[STAMP]
State of New York
Department of State
Filed Dec 9 1996
Filer: Mandel and Resnick, P.C.
220 East 42nd Street
New York, NY 10017
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CORAM REALTY LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the ___ day of December 1996, by and among Nourollah Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having
an address at 135 Engineers Road, Hauppauge, NY 11788, Jeffrey Elghanayan,
having an address at 2481 Monaco Drive, Laguna Beach, CA 92651- 1006, Mehdi
Gabayzadeh, having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi
Gabayzadeh and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having
an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and
Joseph Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at
135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany,
as trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing, holding, managing, operating and
improving certain real property and the improvements located thereon situated in
Coram, New York, more particularly known as 466 Mill Road and 468 Mill Road,
Coram, New York (the "Premises"), and leasing the Premises pursuant to such
leases as may hereafter be entered into with respect to the Premises; and
Whereas, the limited liability company will own the Premises and will manage,
operate and lease the Premises as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
<PAGE>
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this Agreement. The name of the Company shall be Coram Realty LLC and
all business of the Company shall be conducted in that name. One or more Persons
has acted or will act as an organizer or organizers to form the Company and
shall cause the Articles of Organization ("Articles") to be filed or recorded in
the appropriate public office(s) as may be required by the Act and shall
thereafter do and continue to do all other things as may be required to perfect
and maintain the Company as a limited liability company under the State of New
York. "Person" shall mean any person, corporation, governmental authority,
limited liability company, partnership, trust, unincorporated association or
other entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Premises, (ii) engage in any and all business
activities and transactions reasonably necessary and incidental to the purposes
of the Company, including obtaining financing and refinancing, leasing, selling,
exchanging and transferring all or any part of the Premises; and (iii) engage in
any other lawful act or activity for which a limited liability company may be
formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Premises and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for
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<PAGE>
service of process on the Company shall be Corporation Service Company or any
successor appointed by the Managers, in accordance with the Act. The registered
office of the Company in the State of New York is located at Corporation Service
Company, 500 Central Avenue, Albany, New York 12206.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
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account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between or among the Members. Except as
otherwise required in the Act or this Agreement, no Member shall have any
liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate to be determined by
the Managers. No Member shall be obligated to lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
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<PAGE>
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and (iv) notwithstanding any other
provision of this Article 3, any items which are specially allocated pursuant to
Article 3 hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined
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<PAGE>
in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2)
of the Regulations. This Section 3.3(a) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-1(f) of the Regulations and shall
be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment
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increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to the Members in
accordance with their interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv) (m)(2) applies, or to the Members to whom such distribution
was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
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<PAGE>
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
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<PAGE>
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Premises. All references herein to "fiscal year" or "taxable year" shall
be considered references to the annual accounting period ending each September
30, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all
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<PAGE>
instruments governing any indebtedness of the Company and any amendments to any
of those documents, shall be kept at all times at the principal office of the
Managers. The Managers shall maintain such books and records and collect all
Company income and (solely from such income and the proceeds of any financing
thereof) pay the expenses thereof, and make distributions to the Members as
provided herein. The Members and their respective duly authorized
representatives shall have the right to examine such books, records, accounts
and documents at any and all reasonable times and to make copies or extracts
therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
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(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. Nourollah Elghanayan is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this
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Article or by the other provisions of this Agreement shall, in their sole
discretion, have the full and absolute right, power and authority in the
management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Premises;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Premises;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
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Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful
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misconduct, gross negligence, breach of the Managers' fiduciary duties and/or
breach of this Agreement. The Managers do not in any way guaranty the return of
any Capital Contribution to a Member or a profit for the Members from the
operations of the Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be
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filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Medizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
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indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
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7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose of any other action, the
Managers may fix, in advance, a date as the record date for any such
determination of Members. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of such meeting, nor more then fifty (50)
days prior to any other action. When a determination of Members of record
entitled to notice of or to vote at any meeting of Members has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general
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assignment by the Company for the benefit of creditors; the filing of any
petition or answer by the Company seeking to adjudicate it a bankrupt or
insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of the Company or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting
to, or acquiescing in the entry of an order for relief or the appointment
of a receiver, trustee, custodian, or other similar official for the
Company or for any substantial part of its property; or action taken by the
Company to authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber
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or dispose of all or any portion of his, her or its Membership Interest or any
rights therein without the unanimous written consent of the Members, other than
the transferring Member, and any attempted disposition shall be ineffective to
transfer such interest. Each Member hereby acknowledges the reasonableness of
the restrictions on transfer imposed by this Agreement in view of the Company
purposes and the relationship of the Members. Accordingly, the restrictions on
transfer contained herein shall be specifically enforceable. If a Membership
Interest of a Member shall, with the consent of the Members, be transferred
pursuant to this Section, the transferee shall become the assignee of the
Member's Membership Interest in the Company, provided such assignment shall be
by instrument in form and substance reasonably satisfactory to the Members
(which instrument shall contain a statement by the assignee of his, her or its
adoption and assumption of all of the applicable terms of this Agreement, as
same may be amended); provided, however, nothing contained in this Article 9
shall prevent any Member from transferring all or part of his, her or its
Membership Interest in the Company (x) by way of will or intestacy, or inter
vivos gift or trust, to or for the benefit of members of the Member's immediate
family, or (y) to a partnership, corporation or other entity, all of the
outstanding interests of which entity are owned (of record and beneficially) by
such Member and/or a permitted transferee, (each of (x) and (y) being referred
to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
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Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power
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under the Act to dissolve the Company, (d) transfer all or any portion of his,
her or its Membership Interest in the Company, (e) petition for judicial
dissolution of the Company, (g) demand a return of such Member's contributions
or profits (or a bond or other security for the return of such contributions or
profits) or (h) take any action to file a certificate of dissolution or its
equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the
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appraisers shall determine the fair market value of the defaulting Member's
Membership Interest as of the date of the Exercise Notice. Such determination of
fair market value shall be final and binding on all parties. Each Member shall
pay the fees and expenses of its own appraiser, except that in the event an
Appointee is required, the fees and expenses of the Appointee shall be paid
jointly by the participating Members. The purchase price for the defaulting
Member's Membership Interest shall be paid, and the closing of such purchase
shall take place, in accordance with this section. If more than one Member
exercises such buy-out rights, each such Member shall be entitled to acquire the
portion of the defaulting Member's Membership Interest which bears the same
proportion as the purchasing Members' Membership Interest bears to the aggregate
Membership Interests of the Members participating in the transaction. The
payment of the purchase price, and the closing of the purchase, shall be in
accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
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<PAGE>
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve
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<PAGE>
shall, after the passage of a reasonable period of time, be distributed in
accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with,
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<PAGE>
violate or result in the breach of any law, regulation, order or rule of any
governmental department, agency or instrumentality applicable to it, him or
them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel and Resnik, P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the
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<PAGE>
parties hereto, their heirs, legal representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
___ day of December, 1996.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
---------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
---------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
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<PAGE>
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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<PAGE>
EXHIBIT A
The name, date of admission and percentage interest of each of the Members
("Membership Interest") are as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
Nourollah Elghanayan 12/7/96 16.67%
Victoria Elghanayan 12/7/96 16.67%
Jeffrey Elghanayan 12/7/96 16.66%
Mehdi Gabayzadeh 12/7/96 26.0%
Mehdi Gabayzadeh 12/7/96 8.0%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 12/7/96 8.0%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 12/7/96 8.0%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
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<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CORAM REALTY LLC
----------
The Limited Liability Company Operating Agreement of CORAM REALTY LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
Member
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CORAM REALTY LLC
The Limited Liability Company Operating Agreement of Coram Realty LLC is hereby
amended as follows (all capitalized terms not defined herein shall have the
meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"Section 6.9 Officers. The Managers may designate one or more
individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by
the Managers at any time, with or without cause. Each officer shall
hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and
other compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
ARTICLES OF ORGANIZATION
OF
ENGINEERS ROAD, LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Engineers Road, LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss.701 of the
LLCL, the latest date on which the Company may dissolve is December
31, 2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o American Tissue Corporation, 35 Engle Street,
Hicksville, New York 11801.
FIFTH: The limited liability company is to be managed by one or more members.
IN WITNESS WHEREOF, this certificate has been subscribed this 17th day of
January, 1996, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
/s/ Mehdi Gabayzadeh
--------------------------
Mehdi Gabayzadeh, Member
and Sole Organizer
<PAGE>
ARTICLES OF ORGANIZATION
OF
ENGINEERS ROAD, LLC
----------
(Under section 203 of the Limited Liability Company Law.)
Filer: MANDEL AND RESNIK, P.C.
220 EAST 42ND STREET
NEW YORK, N.Y. 10017
[STAMP]
State of New York
Department of State
Filed Jan 19 1996
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ENGINEERS ROAD, LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 19th day of January 1996, by and among Nourollah Elghanayan, having an
address at 35 Engel Street, Hicksville, NY 11801, Mehdi Gabayzadeh, having an
address at 35 Engel Street, Hicksville, NY 11801, Victoria Elghanayan, having an
address at 35 Engel Street, Hicksville, NY 11801, Jeffrey Elghanayan, having an
address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh and
Joseph Neissany, as trustees of the John Gabayzadeh Trust, having an address at
35 Engel Street, Hicksville, NY 11801, Mehdi Gabayzadeh and Joseph Neissany, as
trustees of the Diane Gabayzadeh Trust, having an address at 35 Engel Street,
Hicksville, NY 11801, Mehdi Gabayzadeh and Joseph Neissany, as trustees of the
Deborah Gabayzadeh Trust, having an address at 35 Engel Street, Hicksville, NY
11801.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing, holding, managing, operating and
improving certain real property and the improvements located thereon situated in
Hauppauge, New York, more particularly known as 135 Engineers Road, Hauppauge,
New York 11788 (the "Premises"), and leasing the Premises pursuant to such
leases as may hereafter be entered into with respect to the Premises; and
Whereas, the limited liability company will own the Premises and will manage,
operate and lease the Premises as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this
<PAGE>
Agreement. The name of the Company shall be Engineers Road, LLC and all business
of the Company shall be conducted in that name. One or more Persons has acted or
will act as an organizer or organizers to form the Company and shall cause the
Articles of Organization ("Articles") to be filed or recorded in the appropriate
public office(s) as may be required by the Act and shall thereafter do and
continue to do all other things as may be required to perfect and maintain the
Company as a limited liability company under the State of New York. "Person"
shall mean any person, corporation, governmental authority, limited liability
company, partnership, trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Premises, (ii) engage in any and all business
activities and transactions reasonably necessary and incidental to the purposes
of the Company, including obtaining financing and refinancing, leasing, selling,
exchanging and transferring all or any part of the Premises; and (iii) engage in
any other lawful act or activity for which a limited liability company may be
formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Premises and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York 11788 or at such other
location as may be determined by the Managers (as hereinafter defined) from time
to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service Company or any successor appointed by the Managers, in
accordance with the Act. The registered office of the Company in the State of
New York is located at Corporation Service Company, 500 Central Avenue, Albany,
New York 12206.
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<PAGE>
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified;
-3-
<PAGE>
provided, however, that any change in the manner of maintaining capital accounts
shall not materially alter the economic agreement between or among the Members.
Except as otherwise required in the Act or this Agreement, no Member shall have
any liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate per annum equal to 1%
over the rate of interest announced presently by Citibank, N.A., in New York,
from time to time, as Citibank's "base rate". No Member shall be obligated to
lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
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<PAGE>
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and (iv) notwithstanding any other
provision of this Article 3, any items which are specially allocated pursuant to
Article 3 hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is
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<PAGE>
intended to comply with the minimum gain chargeback requirement in Section
1.704-1(f) of the Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the
Members to whom such distribution was
-6-
<PAGE>
made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
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(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of
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Cash Flow to a Member shall be repaid by that Member promptly after receipt of a
written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Premises. All references herein to "fiscal year" or "taxable year" shall
be considered references to the annual accounting period ending each September
30, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing thereof) pay the expenses thereof, and make
distributions to the Members as provided herein. The Members and their
respective duly authorized representatives shall have the right to examine
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such books, records, accounts and documents at any and all reasonable times and
to make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company
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under Section 195 of the Code ratably over a period of sixty months as
permitted by Section 709(b) of the Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. ________________________ is hereby designated to act as
the "Tax Matters Member" under the Code and in any similar capacity under state
or local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power and authority
in the management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
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(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Premises;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Premises;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which
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under the Act or this Agreement is prohibited or requires the consent of the
Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a Member or a profit for the Members from the operations of the
Company.
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6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and
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shall hold office until the expiration of such term and until the Manager's
successor has been elected and qualified. A Manager chosen to fill a position
resulting from an increase in the number of Managers shall hold office until the
next annual meeting of Members and until a successor has been elected and
qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
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7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of
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Members or any adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining Members entitled
to receive payment of any distribution or the allotment of any rights, or for
the purpose of any other action, the Managers may fix, in advance, a date as the
record date for any such determination of Members. Such date shall not be more
than fifty (50) nor less than ten (10) days before the date of such meeting, nor
more then fifty (50) days prior to any other action. When a determination of
Members of record entitled to notice of or to vote at any meeting of Members has
been made as provided in this section, such determination shall apply to any
adjournment thereof, unless the Managers fix a new record date for the adjourned
meeting. A list of Members as of the record date shall be produced at any
meeting of Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general assignment by the Company for the
benefit of creditors; the filing of any petition or answer by the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of the Company or its debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors,
or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian, or other
similar official for the Company or
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for any substantial part of its property; or action taken by the Company to
authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber or dispose of all or any
portion of his, her or its Membership Interest or any rights therein without the
unanimous written consent of the Members, other than the transferring Member,
and any attempted disposition shall be ineffective to transfer such interest.
Each Member hereby acknowledges the reasonableness of the restrictions on
transfer imposed by this Agreement in view of the Company purposes and the
relationship of the Members. Accordingly, the restrictions on transfer contained
herein shall be specifically enforceable. If a Membership Interest of a Member
shall, with the consent of the Members, be transferred
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pursuant to this Section, the transferee shall become the assignee of the
Member's Membership Interest in the Company, provided such assignment shall be
by instrument in form and substance reasonably satisfactory to the Members
(which instrument shall contain a statement by the assignee of his, her or its
adoption and assumption of all of the applicable terms of this Agreement, as
same may be amended); provided, however, nothing contained in this Article 9
shall prevent any Member from transferring all or part of his, her or its
Membership Interest in the Company (x) by way of will or intestacy, or inter
vivos gift or trust, to or for the benefit of members of the Member's immediate
family, or (y) to a partnership, corporation or other entity, all of the
outstanding interests of which entity are owned (of record and beneficially) by
such Member and/or a permitted transferee, (each of (x) and (y) being referred
to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
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during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power under the Act to dissolve the Company, (d)
transfer all or any portion of his, her or its Membership Interest in the
Company, (e) petition for judicial dissolution of the Company, (g) demand a
return of such Member's contributions or profits (or a bond or other security
for the return of such contributions or profits) or (h) take any action to file
a certificate of dissolution or its equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
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<PAGE>
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the appraisers shall
determine the fair market value of the defaulting Member's Membership Interest
as of the date of the Exercise Notice. Such determination of fair market value
shall be final and binding on all parties. Each Member shall pay the fees and
expenses of its own appraiser, except that in the event an Appointee is
required, the fees and expenses of the Appointee shall be paid jointly by the
participating Members. The purchase price for the defaulting Member's Membership
Interest shall be paid, and the closing of such purchase shall take place, in
accordance with this section. If more than one Member exercises
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<PAGE>
such buy-out rights, each such Member shall be entitled to acquire the portion
of the defaulting Member's Membership Interest which bears the same proportion
as the purchasing Members' Membership Interest bears to the aggregate Membership
Interests of the Members participating in the transaction. The payment of the
purchase price, and the closing of the purchase, shall be in accordance with the
following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by
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<PAGE>
the vote or written consent of a majority in interest of all of the
remaining Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve shall, after the passage of a reasonable period of time,
be distributed in accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
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<PAGE>
Thereafter, to the Members in accordance with their Membership Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with, violate or result in the breach of
any law, regulation, order or rule of any governmental department, agency or
instrumentality applicable to it, him or them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when
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<PAGE>
delivered, if delivered by hand against receipt therefor, (ii) three (3) days
after being deposited in the United States mail, if mailed, by registered or
certified mail, return receipt requested, postage prepaid, or (iii) upon
transmission if by facsimile with a confirmation copy delivered on the second
business day by recognized overnight courier, to each party's respective address
set forth on the first page of this Agreement, with a copy given in like manner
to Mandel and Resnik, P.C., 220 East 42nd Street, New York, New York 10017,
Attention: Barry H.
Mandel, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
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<PAGE>
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
19th day of January, 1996.
/s/ Nourollah Elghanayan
----------------------------------
Nourollah Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
/s/ Victoria Elghanayan
----------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
----------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
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<PAGE>
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
<TABLE>
<CAPTION>
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
<S> <C> <C> <C>
Nourollah Elghanayan 1/19/96 16.67%
Mehdi Gabayzadeh 1/19/96 26%
Victoria
Elghanayan 1/19/96 16.67%
Jeffrey Elghanayan 1/19/96 16.66%
Mehdi Gabayzadeh 1/19/96 8%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 1/19/96 8%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 1/19/96 8%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
</TABLE>
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<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ENGINEERS ROAD, LLC
----------
The Limited Liability Company Operating Agreement of ENGINEERS ROAD, LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ENGINEERS ROAD, LLC
The Limited Liability Company Operating Agreement of Engineers Road, LLC is
hereby amended as follows (all capitalized terms not defined herein shall have
the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"6.9 Officers. The Managers may designate one or more individuals as
officers of the Company, who shall have such titles and exercise and
perform such powers and duties as shall be assigned to them from time
to time by the Managers. Any officer may be removed by the Managers at
any time, with or without cause. Each officer shall hold office until
his or her successor is elected and qualified. Any number of offices
may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
ARTICLES OF ORGANIZATION
OF
GRAND LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Grand LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December 31,
2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, Attention: Barry H. Mandel, Esq.
FIFTH: The limited liability company is to be managed by one or more members.
IN WITNESS WHEREOF, this certificate has been subscribed this 16th day of
February, 1996, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
/s/ Mehdi Gabayzadeh
--------------------------
Mehdi Gabayzadeh, Member
and Sole Organizer
1
<PAGE>
ARTICLES OF ORGANIZATION
OF
ENGINEERS ROAD, LLC
-------------------------------------------------
(Under section 203 of the Limited Liability Company Law.)
Filer: Mandel And Resnik, P.C.
220 East 42nd Street
New York, NY 10017
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED JAN 19 1996
TAX$________
BY: TLG
<PAGE>
ARTICLES OF ORGANIZATION
OF
GRAND LLC
-------------------------------------------------
Section 203 of the Limited Liability Company Law.
MANDEL AND RESNIK, P.C.
220 EAST 42ND STREET
NEW YORK, NY 10017
GIR
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED FEB 21 1996
TAX$________
BY: PEM
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
GRAND LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 6th day of March 1996, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788, Jeffrey Elghanayan, having
an address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh,
having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh
and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph
Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at 135
Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany, as
trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing, holding, managing, operating and
improving certain real property and the improvements located thereon situated in
Waterford, New York, more particularly known as Bells Lane, Waterford, New York
(the "Premises"), and leasing the Premises pursuant to such leases as may
hereafter be entered into with respect to the Premises; and
Whereas, the limited liability company will own the Premises and will manage,
operate and lease the Premises as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
<PAGE>
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this Agreement. The name of the Company shall be Grand LLC and all
business of the Company shall be conducted in that name. One or more Persons has
acted or will act as an organizer or organizers to form the Company and shall
cause the Articles of Organization ("Articles") to be filed or recorded in the
appropriate public office(s) as may be required by the Act and shall thereafter
do and continue to do all other things as may be required to perfect and
maintain the Company as a limited liability company under the State of New York.
"Person" shall mean any person, corporation, governmental authority, limited
liability company, partnership, trust, unincorporated association or other
entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Premises, (ii) engage in any and all business
activities and transactions reasonably necessary and incidental to the purposes
of the Company, including obtaining financing and refinancing, leasing, selling,
exchanging and transferring all or any part of the Premises; and (iii) engage in
any other lawful act or activity for which a limited liability company may be
formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Premises and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service
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<PAGE>
Company or any successor appointed by the Managers, in accordance with the Act.
The registered office of the Company in the State of New York is located at
Corporation Service Company, 500 Central Avenue, Albany, New York 12206.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b)
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<PAGE>
and the applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between or among the Members. Except as
otherwise required in the Act or this Agreement, no Member shall have any
liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate per annum equal to 1%
over the rate of interest announced presently by Citibank, N.A., in New York,
from time to time, as Citibank's "base rate". No Member shall be obligated to
lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
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ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and (iv) notwithstanding any other
provision of this Article 3, any items which are specially allocated pursuant to
Article 3 hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
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pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-1(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704-2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment
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decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom
such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of
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the Company, within the meaning of Regulations Section 1.752-3(a)(3), the
Members' interests in Company profits are in proportion to their Membership
Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
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4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Premises. All references herein to "fiscal year" or "taxable year" shall
be considered references to the annual accounting period ending each September
30, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income
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and (solely from such income and the proceeds of any financing thereof) pay the
expenses thereof, and make distributions to the Members as provided herein. The
Members and their respective duly authorized representatives shall have the
right to examine such books, records, accounts and documents at any and all
reasonable times and to make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30 as the Fiscal Year;
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(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. __________________ is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power
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and authority in the management of the Company business to do any and all things
necessary to effectuate the purposes of the Company including, without
limitation, the right, power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Premises;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Premises;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
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Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful
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misconduct, gross negligence, breach of the Managers' fiduciary duties and/or
breach of this Agreement. The Managers do not in any way guaranty the return of
any Capital Contribution to a Member or a profit for the Members from the
operations of the Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be
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filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Medizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
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indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
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<PAGE>
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose of any other action, the
Managers may fix, in advance, a date as the record date for any such
determination of Members. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of such meeting, nor more then fifty (50)
days prior to any other action. When a determination of Members of record
entitled to notice of or to vote at any meeting of Members has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general
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<PAGE>
assignment by the Company for the benefit of creditors; the filing of any
petition or answer by the Company seeking to adjudicate it a bankrupt or
insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of the Company or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting
to, or acquiescing in the entry of an order for relief or the appointment
of a receiver, trustee, custodian, or other similar official for the
Company or for any substantial part of its property; or action taken by the
Company to authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber
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or dispose of all or any portion of his, her or its Membership Interest or any
rights therein without the unanimous written consent of the Members, other than
the transferring Member, and any attempted disposition shall be ineffective to
transfer such interest. Each Member hereby acknowledges the reasonableness of
the restrictions on transfer imposed by this Agreement in view of the Company
purposes and the relationship of the Members. Accordingly, the restrictions on
transfer contained herein shall be specifically enforceable. If a Membership
Interest of a Member shall, with the consent of the Members, be transferred
pursuant to this Section, the transferee shall become the assignee of the
Member's Membership Interest in the Company, provided such assignment shall be
by instrument in form and substance reasonably satisfactory to the Members
(which instrument shall contain a statement by the assignee of his, her or its
adoption and assumption of all of the applicable terms of this Agreement, as
same may be amended); provided, however, nothing contained in this Article 9
shall prevent any Member from transferring all or part of his, her or its
Membership Interest in the Company (x) by way of will or intestacy, or inter
vivos gift or trust, to or for the benefit of members of the Member's immediate
family, or (y) to a partnership, corporation or other entity, all of the
outstanding interests of which entity are owned (of record and beneficially) by
such Member and/or a permitted transferee, (each of (x) and (y) being referred
to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
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<PAGE>
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power
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<PAGE>
under the Act to dissolve the Company, (d) transfer all or any portion of his,
her or its Membership Interest in the Company, (e) petition for judicial
dissolution of the Company, (g) demand a return of such Member's contributions
or profits (or a bond or other security for the return of such contributions or
profits) or (h) take any action to file a certificate of dissolution or its
equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the
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<PAGE>
appraisers shall determine the fair market value of the defaulting Member's
Membership Interest as of the date of the Exercise Notice. Such determination of
fair market value shall be final and binding on all parties. Each Member shall
pay the fees and expenses of its own appraiser, except that in the event an
Appointee is required, the fees and expenses of the Appointee shall be paid
jointly by the participating Members. The purchase price for the defaulting
Member's Membership Interest shall be paid, and the closing of such purchase
shall take place, in accordance with this section. If more than one Member
exercises such buy-out rights, each such Member shall be entitled to acquire the
portion of the defaulting Member's Membership Interest which bears the same
proportion as the purchasing Members' Membership Interest bears to the aggregate
Membership Interests of the Members participating in the transaction. The
payment of the purchase price, and the closing of the purchase, shall be in
accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
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<PAGE>
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve
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<PAGE>
shall, after the passage of a reasonable period of time, be distributed in
accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with,
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<PAGE>
violate or result in the breach of any law, regulation, order or rule of any
governmental department, agency or instrumentality applicable to it, him or
them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel and Resnik, P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Barry H. Mandel, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the
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<PAGE>
parties hereto, their heirs, legal representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
6th day of March, 1996.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
---------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
---------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
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<PAGE>
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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<PAGE>
EXHIBIT A
The name, date of admission and percentage interest of each of the Members
("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
Nourollah Elghanayan 3/6/96 16.67%
Victoria Elghanayan 3/6/96 16.67%
Jeffrey Elghanayan 3/6/96 16.66%
Mehdi Gabayzadeh 3/6/96 26%
Mehdi Gabayzadeh 3/6/96 8%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 3/6/96 8%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 3/6/96 8%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
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<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
GRAND LLC
----------
The Limited Liability Company Operating Agreement of GRAND LLC (the "Company")
is hereby amended to provide that the membership interests of the Company may be
certificated and that each of such certificates is a "Security" governed by
Article 8 of the Uniform Commercial Code of the State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh, President
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<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
GRAND LLC
The Limited Liability Company Operating Agreement of GRAND LLC is hereby amended
as follows (all capitalized terms not defined herein shall have the meanings set
forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"Section 6.9 Officers. The Managers may designate one or more
individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by
the Managers at any time, with or without cause. Each officer shall
hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and
other compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT
OF
AMERICAN TISSUE - GILPIN REALTY CORPORATION
Under Section 805 of the Business Corporation Law
- --------------------------------------------------------------------------------
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED NOV 22 1995
FILED BY: Mary Pat Joy
Corporation Service Company
4 Central Avenue
Albany, NY 12210
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE - GILPIN REALTY CORPORATION
(Under Section 805 of the Business Corporation Law)
The undersigned, Mehdi Gabayzadeh, Executive Vice-President and Secretary of
American Tissue - Gilpin Realty Corporation certifies and sets forth:
1. The name of the Corporation is American Tissue - Gilpin Realty
Corporation.
2. The date that the Certificate of Incorporation of American Tissue -
Gilpin Realty Corporation was filed by the Department of State is the 1st day of
August, 1991, under the original name American Tissue Realty Corporation.
3. The Certificate of Incorporation is hereby amended, pursuant to Section
801(b)(1) of the Business Corporation Law, to effect a change in the name of the
Corporation.
4. Paragraph First of the Certificate of Incorporation of American Tissue -
Gilpin Realty Corporation is hereby amended to read as follows:
"The name of the Corporation is Gilpin Realty Corp."
1
<PAGE>
5. This change to the Certificate of Incorporation of American Tissue -
Gilpin Realty Corporation was authorized by the resolution of all the Directors
and all of the Shareholders of the Corporation, dated November 1, 1995.
In witness whereof, the undersigned, who affirms that the statements made
herein are true under the penalties of perjury, has executed this certificate
this 10th day of November, 1995.
/s/ Mehdi Gabayzadeh
------------------------
Mehdi Gabayzadeh,
Executive Vice-President
and Secretary
[NOTARY STAMP]
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30, 1996
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE REALTY CORPORATION
Under Section 402 of the Business Corporation Law
The undersigned, being a natural person of at least eighteen years of age
and acting as the incorporator of the corporation hereby being formed under the
Business Corporation Law, certifies that:
FIRST: The name of the corporation is American Tissue Realty Corporation
(hereinafter called the "Corporation").
SECOND: The Corporation is formed for the following purpose:
To engage in any lawful act or activity for which Corporations may be
organized under the Business Corporation Law, provided, however, that the
Corporation is not formed to engage in any act or activity requiring the consent
or approval of any state official, department, board, agency or other body
without first obtaining consent of such body.
THIRD: The county in which the Corporation is to be located is Suffolk
County, State of New York.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is two hundred (200), all of which are without par value, all
of which are of the same class, and all of which are to be designated as Common
Shares.
FIFTH: The Secretary of State is designated as the agent of the Corporation
upon whom process against the Corporation may be served. The post office address
within or without the State of New York to which the Secretary of State shall
mail a copy of any process against the Corporation served upon him is:
Rivkin, Radler, Bayh, Hart & Kremer
EAB Plaza
Uniondale, New York 11556
Attention: Brian Sahn, Esq.
SIXTH: No holder of any of the shares of any class or the Corporation shall
be entitled as of right to subscribe for, purchase, or otherwise acquire, any
shares of any class of the Corporation which the Corporation proposes to issue,
or any rights or options which the Corporation proposes to grant for the
purchase of shares of any class of the Corporation or for the
<PAGE>
purchase of any shares, bonds, securities or obligations of the Corporation
which carry any rights to subscribe for, purchase or otherwise acquire, shares
of any class of the Corporation; and any and all of such shares, bonds,
securities or obligations of the Corporation, whether now or hereafter
authorized or created, may be issued, or may be reissued or transferred if the
same have been reacquired and have treasury status, and any and all of such
rights and options may be granted by the Board of Directors to such persons,
firms, Corporations and associations, and for such lawful consideration, and on
such terms, as the Board of Directors in its discretion may determine, without
first offering the same, or any portion thereof, to any said holder. Without
limiting the generality of the foregoing stated denial of any and all preemptive
rights, no holder of shares of any class of the Corporation shall have any
preemptive rights in respect of the matters, proceedings or transactions
specified in subparagraphs (1) to (6), inclusive, of paragraphs (e) of Section
622 of the Business Corporation Law.
SEVENTH: The liability of any director of the Corporation shall be limited
to the fullest extent permitted by Section 402(b) of the Business Corporation
Law, as it is now in effect and as it may from time to time be amended.
EIGHTH: Except as otherwise specifically provided in this Certificate of
Incorporation, no provision of this Certificate of Incorporation is intended to
be construed as limiting, prohibiting, denying or abrogating any of the general
or specific powers or rights conferred under the Business Corporation Law upon
the Corporation, upon its shareholders, bondholders and security holders, and
upon its directors, officers and other corporate personnel, including, in
particular, the power of the Corporation to furnish indemnification, as the same
are conferred by the Business Corporation Law.
IN WITNESS WHEREOF, I have signed this certificate this 25th day of July,
1991 affirming that the statements made herein are true under the penalties of
perjury.
/s/ Brian Sahn
-------------------------
BRIAN SAHN, ESQ.
Rivkin, Radler, Bayh,
Hart & Kremer
EAB Plaza
Uniondale, New York 11556
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE REALTY CORPORATION
FILED BY: BRIAN SAHN, ESQ.
Rivkin, Radler, Bayh,
Hart & Kremer
EAB Plaza
Uniondale, New York 11556-0111
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED AUG 1 1991
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE REALTY CORPORATION
FILED BY: BRIAN SAHN, ESQ.
Rivkin, Radler, Bayh,
Hart & Kremer
EAB Plaza
Uniondale, New York 11556-0111
[STAMP]
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED AUG 21 1991
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN TISSUE REALTY CORPORATION
The undersigned, Sole Incorporator of American Tissue Realty Corporation, a
New York corporation (the "Corporation"), hereby certifies as follows:
1. The Corporation's name is American Tissue Realty Corporation.
2. The Certificate of Incorporation of the Corporation was filed with the
Department of State on August 1, 1991.
3. The Certificate of Incorporation of the Corporation is hereby amended
pursuant to Section 801 of the Business Corporation Law to effect the following
change: to change the name of the Corporation from American Tissue Realty
Corporation to American Tissue - Gilpin Realty Corporation
4. To effect the foregoing, the Corporation's Certificate of Incorporation
is amended as follows:
Existing paragraph FIRST is deleted and the following substituted
therefor:
"FIRST: The name of the Corporation is American Tissue - Gilpin
Realty Corporation
5. The amendment to the Certificate of Incorporation was authorized by the
corporation's incorporator, there being no officers, no directors, no
shareholders of record, or subscribers for shares whose subscriptions have been
accepted.
1
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and signed this
certificate and affirms the statements contained herein are true under penalty
of perjury as of August 7, 1991.
/s/ Brian Sahn
-----------------------------
Brian Sahn
Sole Incorporator
BY-LAWS
OF
AMERICAN TISSUE - GILPIN REALTY CORPORATION
(A New York Corporation)
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the
corporation shall be held at the office of the corporation in the State of New
York or at such other place within or without the State of New York, and on such
date in each calendar year as may be determined by the Board of Directors and as
shall be designated in the notice of said meeting, for the purpose of electing
directors and for the transaction of such other business as may properly be
brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall be
held at the office of the corporation in the State of New York, or at such other
place within or without the State of New York as may be designated from time to
time by the Board of Directors. Whenever the Board of Directors shall fail to
fix such place, or, whenever shareholders entitled to call a special meeting
shall call the same, the meeting shall be held at the office of the corporation
in the State of New York. Special meetings of the shareholders shall be held
upon call of the Board of Directors, of the President, of any Vice-President,
of the Secretary or of any two directors, at such time as may be fixed by the
Board of Directors or by the President, such Vice-President, the Secretary or
such two directors, as the case may be, and as shall be stated in the notice of
said meeting, except when the Business Corporation Law confers upon the
shareholders the right to demand the call of such meeting and to fix the date
thereof.
SECTION 3. NOTICE OF MEETINGS. The notice of all meetings shall be in
writing, shall state the place, date and hour of the meeting, and, unless it is
the annual meeting, shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. The notice of an annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of such other business as may properly come before the
meeting, and shall state the purpose or purposes of the meeting if any other
action is to be taken at such annual meeting which could be taken at a special
meeting. The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called. If the Board of Directors
shall adopt, amend, or repeal a by-law
<PAGE>
regulating an impending election of directors, the notice of the next meeting
for the election of directors shall contain the statements prescribed by law. If
any action is proposed to be taken which would, if taken, entitle the
shareholders to receive payment for their shares, the notice shall include a
statement of that purpose and to that effect. A copy of the notice of any
meeting shall be served either personally or by mail, not less than ten days nor
more than fifty days before the date of the meeting, to each shareholder at his
record address or at such other address which he may have furnished by request
in writing to the Secretary of the Corporation. If a meeting is adjourned to
another time or place and if any announcement of the adjourned time or place is
made at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the Board of Directors, after adjournment, fixes a new record
date for the adjourned meeting. Notice of a meeting need not be given to any
shareholder who submits a signed waiver of notice before or after the meeting.
The attendance of a shareholder at a meeting without protesting, prior to the
conclusion of the meeting, the lack of notice of such meeting, shall constitute
a waiver of notice by him.
SECTION 4. QUORUM. The holders of record of a majority of the outstanding
shares of the corporation entitled to vote at the meeting, present in person or
by proxy, shall, except as otherwise provided by law or the Certificate of
Incorporation, constitute a quorum at all meetings of the shareholders; if there
be no such quorum, the holders of a majority of such shares so present or so
represented may adjourn the meeting from time to time, without further notice,
until a quorum shall have been obtained. When a quorum is once present to
organize a meeting, it is not broken by the subsequent withdrawal of any
shareholder.
SECTION 5. PRESIDING OFFICER. Meetings of the shareholders shall be
presided over by the President, or, if he is not present, by a Vice-President,
or if neither the President nor a Vice-President is present, by a chairman to
be chosen at the meeting. The Secretary of the corporation, or in his absence,
an Assistant Secretary, shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present, the meeting shall choose
any person present to act as secretary of the meeting.
SECTION 6. VOTING: RECORD DATE; LIST OF SHAREHOLDERS; PROXIES; INSPECTORS.
Every shareholder entitled to vote at any meeting may so vote by proxy and shall
be entitled to one vote for each share entitled to vote and held by him. At all
elections of directors the voting may, but need not, be by ballot, and a
plurality of the votes cast thereat shall elect. Except as otherwise required by
law, or by the Certificate of Incorporation, any other action shall be
authorized by a majority of the votes cast.
<PAGE>
For the purpose of determining the shareholders entitled to notice of, or
to vote at, any meeting of shareholders or any adjournment thereof, or to
express consent to, or dissent from, any proposal without a meeting, or for the
purpose of determining the shareholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action,
the Board of Directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more than fifty days
nor less than ten days before the date of such meeting, nor more than fifty days
prior to any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of, or to vote at, a meeting of
shareholders, shall be at the close of business on the day next preceding the
day on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any purpose,
other than that specified in the preceding clause, shall be at the close of
business on the day on which the resolution of the directors relating thereto is
adopted. When a determination of shareholders of record entitled to notice of,
or to vote at, any meeting of shareholders has been made as provided in this
paragraph, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date under this paragraph for the
adjourned meeting.
A list of shareholders as of the record date, certified by the Secretary or
other officer responsible for its preparation, or by the transfer agent, if any,
shall be produced at any meeting of shareholders upon the request thereat, or
prior thereto, of any shareholder. If the right to vote at any meeting is
challenged, the inspectors of election, if any, or the person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to the shareholders entitled to vote thereat may vote at such
meeting.
Every shareholder may authorize another person or persons to act for him by
proxy in all matters in which a shareholder is entitled to participate, whether
by waiving notice of any meeting, voting or participating at a meeting, or
expressing consent or dissent without a meeting. Every proxy must be signed by
the shareholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except as otherwise provided by the Business Corporation Law.
The Board of Directors, in advance of any meeting, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the person presiding at the meeting may, and on the request of
any
<PAGE>
shareholder shall, appoint one or more inspectors. In case any person appointed
fails to appear or act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the meeting, or at the meeting by the person
presiding thereat. Each inspector, if any, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting or of any shareholder, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. Each inspector shall be
entitled to reasonable compensation for his services, to be paid by the
corporation.
SECTION 7. ACTION WITHOUT MEETING. Whenever shareholders are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the holders of
all outstanding shares entitled to vote thereon. However, this section shall not
be construed to alter or modify any provision of law or of the Certificate of
Incorporation under which the written consent of the holders of less than all
outstanding shares is sufficient for corporate action.
SECTION 8. MEANING OF "SHAREHOLDERS". As used herein in respect of the
right to notice of a meeting of shareholders, or to a waiver thereof, or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shareholders" refers to an
outstanding share or shares and to a holder or holders of record of outstanding
shares, when the corporation is authorized to issue only one class of shares,
and said reference is also intended to include any outstanding share or shares
and any holder or holders of record of outstanding shares of any class or series
of shares upon which or upon whom the Certificate of Incorporation or upon which
or upon whom the Business Corporation Law confers such rights, notwithstanding
that the Certificate of Incorporation may provide for more than one class or
series of shares, one or more of which are limited or denied such rights
thereunder.
<PAGE>
ARTICLE II
DIRECTORS
SECTION 1. ROLE OF DIRECTORS; AGE REQUIREMENT; NUMBER. The business of the
corporation shall be managed by its Board of Directors. The use of the phrase
"entire Board of Directors" herein refers to the total number of directors which
the corporation would have if there were no vacancies.
Each director shall be at least eighteen (18) years of age. A director need
not be a shareholder, a citizen of the United States, or a resident of the State
of New York. The number of directors constituting the entire Board of Directors
shall be at least three; however, so long as the shares of the corporation shall
be owned beneficially and of record by fewer than three shareholders, the number
of directors may be less than three, but not less than the number of
shareholders. The number of directors may be increased or decreased from time to
time by action of the Board of Directors or of the shareholders, provided that
any action of the Board of Directors to effect such increase or decrease shall
require the vote of a majority of the entire Board of Directors. No decrease
shall shorten the term of any incumbent director.
SECTION 2. TERM; VACANCIES. The first Board of Directors shall be elected
by the incorporator or incorporators and shall hold office until the first
annual meeting of shareholders and until their respective successors have been
elected and qualified. Thereafter, directors who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified. Newly created directorships and any vacancies in the
Board of Directors, including vacancies resulting from the removal of directors
for cause or without cause, may be filled by vote of a majority of the directors
then in office, although less than a quorum exists.
SECTION 3. QUORUM AND VOTING. A majority of the entire Board of Directors
shall constitute a quorum for the transaction of business. A majority of the
directors present, whether or not a quorum is present, may adjourn a meeting to
another time and place. Except as herein otherwise provided, the vote of a
majority of the directors present at the time of the vote at a meeting duly
assembled, a quorum being present at such time, shall be the act of the Board of
Directors.
SECTION 4. MEETINGS. Meetings of the Board of Directors shall be held at
such place within or without the State of New York as may from time to time be
fixed by resolution of the Board of Directors, or as may be specified in the
notice of the meeting. Regular meetings of the Board of Directors shall be
<PAGE>
held at such times as may from time to time be fixed by resolution of the Board
of Directors. Special meetings may be held at any time upon the call of the
Chairman of the Board, if any, or of the President or any Vice-President or the
Secretary or any director by written notice personally served upon, or by
telegraphic notice sent to, each director not less than two days before such
meeting or by written notice mailed to each director not less than five days
before the date of such meeting. A meeting of the Board of Directors may be held
without notice immediately after the annual meeting of shareholders at the same
place at which such meeting is held. Notice need not be given of regular
meetings of the Board of Directors held at times fixed by resolution of the
Board of Directors. Any requirement of furnishing a notice shall be waived by
any director who signs a waiver of notice before or after a meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to him. The notice of any meeting need not specify the
purpose of the meeting, and any and all business may be transacted at such
meeting. The Chairman of the Board of Directors, if any, shall preside at all
meetings of the Board of Directors, and in his absence or inability to act, the
President shall preside, and in his absence or inability to act, such person as
may be chosen by the meeting shall preside. Any one or more members of the Board
of Directors or any committee thereof may participate in any meeting of such
Board or committee by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
SECTION 5. EXECUTIVE COMMITTEE. By resolution adopted by a majority of the
entire Board of Directors, the directors may designate from their number three
or more directors to constitute an Executive Committee and other committees,
each of which, to the extent provided in the resolution designating it, shall
have the authority of the Board of Directors with the exception of any authority
the delegation of which is prohibited by law. A majority of any such committee
may determine its action and fix the time and place of its meetings, unless the
Board of Directors shall otherwise provide. The Board of Directors shall have
power at any time to fill vacancies in, to change the membership of, to
designate alternate members of, or to discharge any such committee.
SECTION 6. ACTION BY CONSENT. Notwithstanding any other provision of these
By-Laws, any action required or permitted to be taken by the Board of
Directors, the Executive Committee or any other committee of the Board of
Directors designated pursuant to these By-Laws, may be taken without a meeting
if all the members of the Board of Directors or the committee consent in writing
to the adoption of a resolution authorizing the action. The resolution and the
written consents thereto by the members of the Board of Directors or committee
<PAGE>
shall be filed with the minutes of the proceedings of the Board of Directors or
committee.
SECTION 7. DECLARATION OF DIVIDENDS. Subject always to the provisions of
law and the Certificate of Incorporation, the Board of Directors shall have full
power to determine whether any, and if any, what part of any, funds legally
available for the payment of dividends shall be declared as dividends and paid
to shareholders; the division of the whole or any part of such funds of the
corporation shall rest wholly within the lawful discretion of the Board of
Directors, and it shall not be required at any time, against such discretion, to
divide or pay any part of such funds among or to the shareholders as dividends
or otherwise; and before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Board of Directors from time to time, in their absolute discretion, think proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the Board shall think conducive to the interest of the corporation,
and the Board may modify or abolish any such reserve in the manner in which it
was created.
SECTION 8. REMOVAL OF DIRECTORS. At any special meeting of the
shareholders, duly called as provided in these By-Laws, any director or
directors may be removed from office by the shareholders, either with or without
cause, and his successor or their successors may be elected at such meeting. One
or more directors may be removed for cause by the Board of Directors.
ARTICLE III
OFFICERS
SECTION 1. ELECTION. The Board of Directors of the Corporation, promptly
after the election thereof held in each year, may elect a Chairman of the Board
of Directors, a President, one or more Vice-Presidents, a Secretary and a
Treasurer, and from time to time may appoint such Assistant Secretaries,
Assistant Treasurers and such other officers, agents and employees as it may
deem proper. Any two or more offices may be held by the same person, except the
offices of president and secretary. When all of the issued and outstanding stock
of the corporation is owned by one person, such person may hold all or any
combination of offices. The President may, but need not, be chosen from among
the directors. The Chairman of the Board of Directors, if any, shall be chosen
from among the directors.
SECTION 2. TERM. The term of office of all officers shall be one year and
until their respective successors have been elected and qualified, but any
officer may be removed from office, either with or without cause at any time by
the Board of Directors. A vacancy in any office arising from any cause may be
<PAGE>
filled for the unexpired portion of the term by the Board of Directors.
SECTION 3. DUTIES. The officers of the corporation shall each have such
powers and duties as are set forth in these By-Laws and as generally pertain to
their respective offices, and as from time to time may be conferred upon them by
the Board of Directors. The Chairman of the Board of Directors, if there be a
Chairman, shall preside at all meetings of the Board of Directors and shall have
such other powers and duties as may from time to time be assigned by the Board
of Directors. The President shall be the chief executive officer of the
corporation and shall have the general management and superintendence of the
affairs of the corporation, subject to direction of the Board of Directors. He
shall preside at all meetings of the shareholders and, in the absence or
disability of the Chairman of the Board of Directors, or if there be no
Chairman, shall preside at all meetings of the Board of Directors. The Secretary
shall keep the minutes of meetings of the Board of Directors and of the
shareholders; shall be the custodian of the records and of the seal of the
corporation; shall attend to all correspondence and shall perform other duties
incidental to such office. The Treasurer shall have care and custody of the
funds and securities of the corporation; shall keep complete and accurate books
of account and financial records of the corporation; shall render financial
reports to the Board of Directors and the shareholders and shall perform other
duties incidental to such office. The Vice-President or Vice-Presidents, the
Assistant Secretary or Assistant Secretaries, the Assistant Treasurer or
Assistant Treasurers shall, in the order of their respective seniorities, in the
absence or disability of the President, Secretary or Treasurer, respectively,
perform the duties of such officer and shall generally assist the President,
Secretary or Treasurer, respectively.
SECTION 4. DELEGATION OF DUTIES. Unless otherwise ordered by the Board of
Directors, the President, or, in the event of his inability to act, the
Vice-President designated by the Board of Directors to act in the absence of the
President, shall have full power and authority on behalf of the corporation to
attend and to act and to vote at any meetings of security holders of
corporations in which the corporation may hold securities, and at such meetings
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities, and which as the owner thereof the corporation
might have possessed and exercised, if present. The Board of Directors by
resolution from time to time may confer like powers upon any other person or
persons.
ARTICLE IV
CERTIFICATES REPRESENTING SHARES
SECTION 1. FORM; TRANSFER; CONSIDERATION. The interest of each shareholder
of the corporation shall be
<PAGE>
evidenced by certificates representing shares in such form not inconsistent with
the Certificate of Incorporation as the Board of Directors may from time to time
prescribe. Certificates representing shares shall have set forth thereon the
statements prescribed by law and shall be signed by the President or a
Vice-President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer and may be sealed with the corporate seal or a
facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the corporation itself or its employee. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
Upon compliance with provisions restricting the transferability of shares,
if any, transfer of shares of the corporation shall be made only on the share
record of the corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the corporation or with a transfer agent or a registrar, if any,
and upon the surrender of the certificate or certificates for such shares
properly endorsed and the payment of all taxes due thereon.
A certificate representing shares shall not be issued until the full amount
of consideration therefor has been paid, except as the Business Corporation Law
may otherwise permit.
SECTION 2. FRACTIONS OF SHARES. The corporation may issue certificates for
fractions of a share where necessary to effect transactions authorized by the
Business Corporation Law which shall entitle the holder, in proportion to his
fractional holdings, to exercise voting rights, receive dividends and
participate in liquidating distributions; or it may pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined; or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder except as therein
provided.
SECTION 3. REPLACEMENT OF SHARES. No certificate representing shares shall
be issued in place of any certificate alleged to have been lost, destroyed or
stolen, except on production of such evidence of such loss, destruction or theft
as the Board of Directors may require, and on delivery to the corporation, if
the Board of Directors shall so require, of a bond of indemnity in such amount,
upon such terms and secured by such surety as the Board of Directors may in its
discretion require.
<PAGE>
SECTION 4. GENERAL REGULATION. The Board of Directors shall have power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates representing
shares of the corporation.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be determined by the Board of
Directors.
ARTICLE VI
CORPORATE SEAL
The Corporate seal shall have inscribed thereon the name of the corporation
and the year of its incorporation, and shall be in such form and contain such
other words and/or figures as the Board of Directors shall determine. The
corporate seal may be used by printing, engraving, lithographing, stamping or
otherwise making, placing or affixing, or causing to be printed, engraved,
lithographed, stamped or otherwise made, placed or affixed upon any paper or
document, by any process whatsoever, an impression, facsimile, or other
reproduction of said corporate seal.
ARTICLE VII
GENERAL
SECTION 1. FINANCIAL INFORMATION. The directors may appoint the Treasurer
or other fiscal officer and/or the Secretary or any other officer to cause to be
prepared and furnished to shareholders entitled thereto any special financial
notice and/or financial statement, as the case may be, which may be required by
any provision of law.
SECTION 2. BOOKS AND RECORDS. The corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of the shareholders, of the Board of Directors, and/or any committee which the
directors may appoint, and shall keep at the office of the corporation in the
State of New York or at the office of the transfer agent or registrar, if any,
in said state, a record containing the names and addresses of all shareholders,
the number and class of shares held by each, and the dates when they
respectively became the owners of record thereof. Any of the foregoing books,
minutes, or records may be in written form or in any other form capable of being
converted into written form within a reasonable time.
SECTION 3. ARTICLES AND SECTION HEADINGS IN BYLAWS. The article and section
headings in these By-Laws are used for
<PAGE>
the purpose of convenience only, and are meant to have no effect whatsoever upon
the interpretation of the By-Laws.
ARTICLE VIII
REIMBURSEMENT OF CORPORATION
Any payments made to or on behalf of an officer of the Corporation such as
salary, commission, bonus, interest, rent, travel, entertainment or other
expense incurred by him, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be reimbursed by such
officer to the Corporation to the extent of such disallowance. It shall be the
duty of the Directors as a Board to enforce payment of each such amount
disallowed. In lieu of payment by the officer, subject to the determination of
the Directors, proportionate amounts may be withheld from his future
compensation payments until the amount owed to the Corporation has been
recovered.
ARTICLE IX
AMENDMENTS
The shareholders entitled to vote in the election of directors may amend or
repeal the By-Laws and may adopt new By-Laws. Except as otherwise required by
law or by the provisions of these By-Laws, the Board of Directors may also
amend or repeal the By-Laws and adopt new By-Laws, but By-Laws adopted by the
Board of Directors may be amended or repealed by the said shareholders.
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "HYDRO OF AMERICA LLC", FILED IN THIS OFFICE ON THE EIGHTH
DAY OF APRIL, A.D. 1999, AT 9 O'CLOCK A.M.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE o 1793 o 1847 o 1907
[SEAL]
SECRETARY'S OFFICE /s/ Edward J. Freel
1793 DELAWARE 1855 -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
9676854
3027230 8100
DATE:
991137853 04-08-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/08/1999
991137853 -- 3027230
CERTIFICATE OF FORMATION
OF
HYDRO OF AMERICA LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
HYDRO OF AMERICA LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD: (Use this paragraph only if the company is to have specific date of
dissolution: "The latest date on which the limited liability company is to
dissolve is: _________________".)
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this eighth
day of April, A.D. 1999.
/s/ Kerry Starr
- -----------------------------
Authorized Person
Kerry Starr
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
HYDRO OF AMERICA LLC
As of April 10, 1999
This Limited Liability Company Operating Agreement ("Agreement") of Hydro of
America, LLC, a Delaware limited liability company (the "Company"), is adopted
and entered into by Pulp & Paper of America LLC, as member (the "Member")
pursuant to and in accordance with the Delaware Limited Liability Company Act,
as amended from time to time (the "Act"). Terms used in this Agreement which are
not otherwise defined shall have the respective meanings given those terms in
the Act.
W I T N E S S E T H:
Whereas, Pulp & Paper of America LLC proposes to form a limited liability
company for the purposes of, among other things, owning all of the issued and
outstanding shares of Crown Vantage-New Hampshire Electric, Inc. (the "Shares").
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Pulp & Paper of America LLC agrees as follows:
Article 1 - Company Formation
1.1. Name. The name of the Company is Hydro of America LLC.
1.2. Purpose. The purpose of the Company is to (i) own the Shares; (ii) engage
in any and all business activities and transactions reasonably necessary and
incidental to the purposes of the Company, including obtaining financing and
refinancing, leasing, selling, exchanging and transferring all or any part of
the Shares; and (iii) engage in any other lawful act or activity for which a
limited lability company may be formed under the Act.
1.3. Term. The Company shall commence on the filing of a certificate of
formation of the Company and shall continue until it is dissolved and its
affairs wound up in accordance with the Act and this Agreement.
<PAGE>
1.4. Principal Offices. The principals place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York, or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5. Agent. The Secretary of State of Delaware is hereby designated as the agent
of the Company.
Article 2 - Membership Interests; Members
2.1. Members. The name, address, initial Capital Contribution, date of admission
to the Company and Membership Interest allocated to the Member is set forth on
Exhibit "A" annexed hereto and are incorporated by reference herein. For
purposes of this Agreement: (i) "Member" shall mean Pulp & Paper of America LLC
and any person subsequently admitted to the Company; (ii) "Capital Contribution"
shall mean any contribution by a Member to the capital of the Company in cash,
property or services rendered or a promissory note or other obligation to
contribute cash or property or to render services; and (iii) "Membership
Interest" shall mean, with respect to a Member, the ratio of the value of the
Capital Contribution of such member to the aggregate value of all Capital
Contributions.
2.2. Membership Interests. There shall be one class of membership interests,
voting interests.
2.3. Liability of Members. Each Member, in its capacity as such, shall not be
personally responsible for the obligations or liabilities of the Company except
to the extent provided in the Act.
Article 3 - Management
3.1. The management of the business and affairs of the Company shall be vested
exclusively in the "Managers". Unless otherwise agreed to by a majority of the
interests of the Members, there shall be two (2) Managers of the Company.
Nourollah Elghanayan and Mehdi Gabayzadeh are initially designated as the
Managers and shall continue to serve as such until their respective deaths,
disabilities or retirements. In addition to the powers specifically granted in
this Agreement, the Managers shall have the power to do any and all acts
necessary or convenient to or for the furtherance of the purposes of the Company
set forth in this Agreement.
3.2. Except to the extent that the Managers agree to delegate the authority with
respect to specified matters, all decisions shall be made by unanimous vote of
the Managers.
Article 4 - Financial Interests of Members
4.1. The Company has been organized with the intention that it qualify for
taxation as a partnership for federal income tax purposes. Each Member
acknowledges that the provisions of Subchapter K of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations (the "Regulations") promulgated
thereunder will apply to the Company, and intend that the allocations of taxable
income and loss, distributions to each Member, and maintenance
- 2 -
<PAGE>
of capital accounts all conform to the requirements of the applicable
Regulations.
4.2. A capital account ("Capital Account") shall be established and maintained
for each Member on the books of the Company in accordance with the Regulations.
The rights of each Member to share in the capital of the Company, either by way
of distributions or upon withdrawal from, or the liquidation of, the Company,
shall be determined by reference to its Capital Account.
4.3. The Member shall not be required to contribute capital to the Company, and
no Member shall be entitled to receive interest on its, his or her capital
contributions.
4.4. The Company's profits and losses, including gains and losses attributable
to the sale or other disposition of all or any portion of the Company's
property, shall be allocated or borne, as the case may be, by the Members and
shall be allocated among the Members in accordance with their respective sharing
percentage ("Sharing Percentage").
4.5. Distributions shall be made to the Members at such times and in such
amounts as determined by the Managers.
Article 5 - Exculpation and Indemnification
5.1. The Managers are vested with full discretion and authority with respect to
the business of the Company and administration of its affairs and shall not have
personal liability to the Company or its Member for damages for any act pursuant
hereto, including any breach of duty in their capacity as Managers.
5.2. To the fullest extent permitted by law, the Company shall indemnify and
hold harmless, and may advance expenses to, the Members or any Manager
(collectively, the "Indemnitees"), from and against any and all claims and
demands whatsoever arising out of the business and affairs of the Company;
provided, however, that no indemnification may be made to or on behalf of any
Indemnitee if a judgment or other final adjudication adverse to such Indemnitee
establishes (i) that his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (ii) that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled.
The provision of this section shall continue to afford protection to each
Indemnitee regardless of whether such Indemnitee remains a Member, Manager,
employee or agent of the Company.
Article 6 - Representations
6.1. Each Member represents and warrants as follows:
(a) the Member has full power and authority to enter into this Agreement
and to perform all of its obligations hereunder, and has taken all action
required by law or otherwise in connection with or as a condition precedent to
the foregoing; and
- 3 -
<PAGE>
(b) neither the execution or delivery of this Agreement, nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking, to which the
Member is a party or its properties or assets are or may be bound; or (ii)
conflict with, violate or result in the breach of any law, regulation, order or
rule of any governmental department, agency or instrumentality applicable to it.
Article 7 - Miscellaneous
7.1. Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor; (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel & Resnik P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
7.2. Further Assurances. The Member shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
7.3. Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
7.4. Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
7.5. Amendment. This Agreement may be amended only with the written approval of
the Members; provided, however, that no such amendment may be made if such
amendment would cause a default of any mortgage obligation of the Company or if
such amendment would cause a breach of any agreement to which the Company is a
party, or if any such amendment would cause a breach of any Company obligation.
7.6. Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
7.7. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
7.8. Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
- 4 -
<PAGE>
7.9. Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
7.10. Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
7.11. Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
In Witness Whereof, the undersigned Members have duly executed this Agreement as
of the date first above written.
Pulp & Paper of America LLC
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan, Manager
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
- 5 -
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
HYDRO OF AMERICA LLC
----------
The Limited Liability Company Operating Agreement of HYDRO OF AMERICA LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of Delaware.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
Pulp & Paper of America LLC,
member
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh, Manager
<PAGE>
EXHIBIT A
The name, date of admission, initial contribution and percentage interest of the
Member ("Membership Interest") is as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- --------------- ----------
Pulp & Papers of America LLC 04/10/99 $1,000.00 100%
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "LANDFILL OF AMERICA LLC", FILED IN THIS OFFICE ON THE
EIGHTH DAY OF APRIL, A.D. 1999, AT 9 O'CLOCK A.M.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE o 1793 o 1847 o 1907
[SEAL]
SECRETARY'S OFFICE /s/ Edward J. Freel
1793 DELAWARE 1855 -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
9676858
3027227 8100
DATE:
991137841 04-08-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AN 04/08/1 999
991137841 -- 3027227
CERTIFICATE OF FORMATION
OF
LANDFILL OF AMERICA LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
LANDFILL OF AMERICA LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD: (Use this paragraph only if the company is to have specific date of
dissolution: "The latest date on which the limited liability company is to
dissolve is: _______________".)
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this eighth
day of April, A.D. 1999.
/s/ Kerry Starr
- -----------------------------
Authorized Person
Kerry Starr
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
LANDFILL OF AMERICA LLC
As of April 10, 1999
This Limited Liability Company Operating Agreement ("Agreement") of Landfill of
America, LLC, a Delaware limited liability company (the "Company"), is adopted
and entered into by Pulp & Paper of America LLC, as member (the "Member")
pursuant to and in accordance with the Delaware Limited Liability Company Act,
as amended from time to time (the "Act"). Terms used in this Agreement which are
not otherwise defined shall have the respective meanings given those terms in
the Act.
W I T N E S S E T H:
Whereas, Pulp & Paper of America LLC proposes to form a limited liability
company for the purposes of, among other things, owning and operating
substantially all of the assets of that certain landfill located in Berlin, New
Hampshire (the "Landfill").
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Pulp & Paper of America LLC agrees as follows:
Article 1 - Company Formation
1.1. Name. The name of the Company is Landfill of America LLC.
1.2. Purpose. The purpose of the Company is to (i) own and operate the Landfill;
(ii) engage in any and all business activities and transactions reasonably
necessary and incidental to the purposes of the Company, including obtaining
financing and refinancing, leasing, selling, exchanging and transferring all or
any part of the Landfill; and (iii) engage in any other lawful act or activity
for which a limited lability company may be formed under the Act.
1.3. Term. The Company shall commence on the filing of a certificate of
formation of the Company and shall continue until it is dissolved and its
affairs wound up in accordance with the Act and this Agreement.
<PAGE>
1.4. Principal Offices. The principals place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York, or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5. Agent. The Secretary of State of Delaware is hereby designated as the agent
of the Company.
Article 2 - Membership Interests; Members
2.1. Members. The name, address, initial Capital Contribution, date of admission
to the Company and Membership Interest allocated to the Member is set forth on
Exhibit "A" annexed hereto and are incorporated by reference herein. For
purposes of this Agreement: (i) "Member" shall mean Pulp & Paper of America LLC
and any person subsequently admitted to the Company; (ii) "Capital Contribution"
shall mean any contribution by a Member to the capital of the Company in cash,
property or services rendered or a promissory note or other obligation to
contribute cash or property or to render services; and (iii) "Membership
Interest" shall mean, with respect to a Member, the ratio of the value of the
Capital Contribution of such member to the aggregate value of all Capital
Contributions.
2.2. Membership Interests. There shall be one class of membership interests,
voting interests.
2.3. Liability of Members. Each Member, in its capacity as such, shall not be
personally responsible for the obligations or liabilities of the Company except
to the extent provided in the Act.
Article 3 - Management
3.1. The management of the business and affairs of the Company shall be vested
exclusively in the "Managers". Unless otherwise agreed to by a majority of the
interests of the Members, there shall be two (2) Managers of the Company.
Nourollah Elghanayan and Mehdi Gabayzadeh are initially designated as the
Managers and shall continue to serve as such until their respective deaths,
disabilities or retirements. In addition to the powers specifically granted in
this Agreement, the Managers shall have the power to do any and all acts
necessary or convenient to or for the furtherance of the purposes of the Company
set forth in this Agreement.
3.2. Except to the extent that the Managers agree to delegate the authority with
respect to specified matters, all decisions shall be made by unanimous vote of
the Managers.
Article 4 - Financial Interests of Members
4.1. The Company has been organized with the intention that it qualify for
taxation as a partnership for federal income tax purposes. Each Member
acknowledges that the provisions of Subchapter K of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations (the "Regulations") promulgated
thereunder will apply to the Company, and intend that the allocations of taxable
income and loss, distributions to each Member, and maintenance
- 2 -
<PAGE>
of capital accounts all conform to the requirements of the applicable
Regulations.
4.2. A capital account ("Capital Account") shall be established and maintained
for each Member on the books of the Company in accordance with the Regulations.
The rights of each Member to share in the capital of the Company, either by way
of distributions or upon withdrawal from, or the liquidation of, the Company,
shall be determined by reference to its Capital Account.
4.3. The Member shall not be required to contribute capital to the Company, and
no Member shall be entitled to receive interest on its, his or her capital
contributions.
4.4. The Company's profits and losses, including gains and losses attributable
to the sale or other disposition of all or any portion of the Company's
property, shall be allocated or borne, as the case may be, by the Members and
shall be allocated among the Members in accordance with their respective sharing
percentage ("Sharing Percentage").
4.5. Distributions shall be made to the Members at such times and in such
amounts as determined by the Managers.
Article 5 - Exculpation and Indemnification
5.1. The Managers are vested with full discretion and authority with respect to
the business of the Company and administration of its affairs and shall not have
personal liability to the Company or its Member for damages for any act pursuant
hereto, including any breach of duty in their capacity as Managers.
5.2. To the fullest extent permitted by law, the Company shall indemnify and
hold harmless, and may advance expenses to, the Members or any Manager
(collectively, the "Indemnitees"), from and against any and all claims and
demands whatsoever arising out of the business and affairs of the Company;
provided, however, that no indemnification may be made to or on behalf of any
Indemnitee if a judgment or other final adjudication adverse to such Indemnitee
establishes (i) that his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (ii) that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled.
The provision of this section shall continue to afford protection to each
Indemnitee regardless of whether such Indemnitee remains a Member, Manager,
employee or agent of the Company.
Article 6 - Representations
6.1. Each Member represents and warrants as follows:
(a) the Member has full power and authority to enter into this Agreement
and to perform all of its obligations hereunder, and has taken all action
required by law or otherwise in connection with or as a condition precedent to
the foregoing; and
- 3 -
<PAGE>
(b) neither the execution or delivery of this Agreement, nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking, to which the
Member is a party or its properties or assets are or may be bound; or (ii)
conflict with, violate or result in the breach of any law, regulation, order or
rule of any governmental department, agency or instrumentality applicable to it.
Article 7 - Miscellaneous
7.1. Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor; (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel & Resnik P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
7.2. Further Assurances. The Member shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
7.3. Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
7.4. Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
7.5. Amendment. This Agreement may be amended only with the written approval of
the Members; provided, however, that no such amendment may be made if such
amendment would cause a default of any mortgage obligation of the Company or if
such amendment would cause a breach of any agreement to which the Company is a
party, or if any such amendment would cause a breach of any Company obligation.
7.6. Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
7.7. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
7.8. Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
- 4 -
<PAGE>
7.9. Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
7.10. Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
7.11. Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
In Witness Whereof, the undersigned Members have duly executed this Agreement as
of the date first above written.
Pulp & Paper of America LLC
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan, Manager
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
- 5 -
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
LANDFILL OF AMERICA LLC
----------
The Limited Liability Company Operating Agreement of LANDFILL OF AMERICA LLC
(the "Company") is hereby amended to provide that the membership interests of
the Company may be certificated and that each of such certificates is a
"Security" governed by Article 8 of the Uniform Commercial Code of the State of
Delaware.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
Pulp & Paper of America LLC,
member
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh, Manager
- 6 -
<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Member ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- --------------- ----------
Pulp & Paper of America LLC 04/10/99 $1,000.00 100%
ARTICLES OF ORGANIZATION
OF
MARKWOOD LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Markwood LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December
31, 2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, attention: Barry H. Mandel, Esq.
FIFTH: The limited liability company is to be managed by one or more members.
IN WITNESS WHEREOF, this certificate has been subscribed this 16th day of
February, 1996, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
/s/ Medhi Gabaysadeh
------------------------------
Medhi Gabaysadeh, Member
and Sole Organizer
1
<PAGE>
ARTICLES OF ORGANIZATION
OF
MARKWOOD LLC
------------------------------
Section 203 of the Limited Liability Company Law
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED FEB 21 1996
TAX$___________
BY: INIT.
Filer: Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
2
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
MARKWOOD LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 6th day of March 1996, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788, Jeffrey Elghanayan, having
an address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh,
having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh
and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph
Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at 135
Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany, as
trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing and holding all of the outstanding
shares of common stock of Fabricaciones Metalicas Mexicanas, S.A. (the "Stock"),
a corporation formed under the laws of Mexico and a promissory note issued by
Fabricaciones Metalicas Mexicanas, S.A. to Performance Industries, Inc. (the
"Note"); and
Whereas, the limited liability company will own and hold the Stock as
hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this
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Agreement. The name of the Company shall be Markwood LLC and all business of the
Company shall be conducted in that name. One or more Persons has acted or will
act as an organizer or organizers to form the Company and shall cause the
Articles of Organization ("Articles") to be filed or recorded in the appropriate
public office(s) as may be required by the Act and shall thereafter do and
continue to do all other things as may be required to perfect and maintain the
Company as a limited liability company under the State of New York. "Person"
shall mean any person, corporation, governmental authority, limited liability
company, partnership, trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to (i) own and hold the Stock and
the Note; (ii) engage in any and all business activities and transactions
reasonably necessary and incidental to the purposes of the Company; and (iii)
engage in any other lawful act or activity for which a limited liability company
may be formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Stock and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York 11788 or at such other
location as may be determined by the Managers (as hereinafter defined) from time
to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service Company or any successor appointed by the Managers, in
accordance with the Act. The registered office of the Company in the State of
New York is located at Corporation Service Company, 500 Central Avenue, Albany,
New York 12206.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests
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allocated to each of the Members are set forth on Exhibit "A" hereto and are
incorporated by reference herein. For purposes of this Agreement: (i) "Member"
shall mean each Person who or which executes a counterpart of this Agreement as
a Member and each Person who or which may hereafter become a party to this
Agreement; (ii) "Capital Contribution" shall mean, with respect to any Member,
any contribution by a Member to the capital of the Company in cash, property or
services rendered or a promissory note or other obligation to contribute cash or
property or to render services; and (iii) "Membership Interest" shall mean with
respect to the Company, the value of all Capital Contributions and with respect
to any Member, the ratio of the value of the Capital Contribution of such Member
to the aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between or among the Members. Except as
otherwise required in the Act or this Agreement, no Member shall have any
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liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate per annum equal to 1%
over the rate of interest announced presently by Citibank, N.A., in New York,
from time to time, as Citibank's "base rate". No Member shall be obligated to
lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section
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<PAGE>
703(a)(1) shall be included in taxable income or loss), with the following
adjustments: (i) any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this Article 3 shall be added to such taxable income or loss; (ii) any
expenditures of the Company described in Code Section 705(a)(2)(B) or treated as
Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits
or Losses pursuant to this Article 3 shall be subtracted from such taxable
income or loss; (iii) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining capital accounts as a result of a distribution other
than in liquidation of a Member's interest in the Company, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses; and (iv) notwithstanding any other provision of
this Article 3, any items which are specially allocated pursuant to Article 3
hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-1(f) of the
Regulations and shall be interpreted consistently therewith.
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(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the
Members to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction
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realized as a direct or indirect result of the issuance of an interest in the
Company to a Member (the "Issuance Items") shall be allocated among the Members
so that, to the extent possible, the net amount of such Issuance Items, together
with all other allocations under this Agreement to each Member, shall be equal
to the net amount that would have been allocated to each such Member if the
Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined
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in Regulation Section 1.704-2(b)(3) or a Partner Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period (except escrows funded
by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
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4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Stock. All references herein to "fiscal year" or "taxable year" shall be
considered references to the annual accounting period ending each September 30,
except that the first and last of such periods may consist of less than twelve
(12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing thereof) pay the expenses thereof, and make
distributions to the Members as provided herein. The Members and their
respective duly authorized representatives shall have the right to examine such
books, records, accounts and documents at any and all reasonable times and to
make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers,
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which accounts shall be used for the payment of the disbursements properly
chargeable to the Company and in which shall be deposited all cash receipts of
the Company. All amounts required by this Article 5 to be deposited in those
accounts shall be and remain the property of the Company and shall be received,
held and disbursed by the Managers only for the purposes herein specified. There
shall not be deposited into those accounts any funds other than Company funds.
Withdrawals shall be made from those accounts only for the purpose of making
payment of Company expenditures and distributions herein authorized, and only by
the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
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(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. __________________________ is hereby designated to act
as the "Tax Matters Member" under the Code and in any similar capacity under
state or local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power and authority
in the management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company;
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(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) maintain the books of account of the Company; and
(xii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding
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upon the Company. The Managers shall devote such time, effort and personnel to
the Company affairs as is necessary for the conduct thereof; provided, however,
it is understood and agreed that the Managers and/or their affiliates may be
interested, directly or indirectly, in various other businesses and undertakings
and, subject to the fulfillment of their obligations under this Agreement, the
Managers shall not be required to devote their entire time to the business of
the Company and shall not be restricted in any manner from participating in
other businesses or activities. In carrying out their obligations, the Managers
shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a Member or a profit for the Members from the operations of the
Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or
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which reports the Managers deem the furnishing thereof to be in the best
interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such
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titles and exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by the
Managers at any time, with or without cause. Each officer shall hold office
until his or her successor is elected and qualified. Any number of offices may
be held by the same individual. The salaries and other compensation of the
officers shall be fixed by the Managers. The Managers and Members hereby
designate that the drawing, endorsing and making of all checks and other
commercial paper of the Company, and the transaction of all business of the
Company with its banks, shall be by Nourollah Elghanayan, Mehdi Gabayzadeh,
James Mehdizadeh or Robert Medizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by
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an administrator, executor, guardian, conservator, committee, or other
fiduciary, except a trustee, may be voted by him, either in person or by proxy,
without transfer of such interests into his name. Membership Interests held by a
trustee may be voted by him, either in person or by proxy, only after the
Membership Interests have been transferred into his name as trustee or into the
name of his nominee. Membership Interests standing in the name of a domestic or
foreign corporation of any type or kind may be voted by such officer, agent or
proxy as the by-laws of such corporation may provide, or, in the absence of such
provision, as the board of directors of such corporation may determine. A Member
shall not sell his vote or issue a proxy to vote to any person for any sum of
money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose
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of any other action, the Managers may fix, in advance, a date as the record date
for any such determination of Members. Such date shall not be more than fifty
(50) nor less than ten (10) days before the date of such meeting, nor more then
fifty (50) days prior to any other action. When a determination of Members of
record entitled to notice of or to vote at any meeting of Members has been made
as provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general assignment by the Company for the
benefit of creditors; the filing of any petition or answer by the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of the Company or its debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors,
or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian, or other
similar official for the Company or for any substantial part of its
property; or action taken by the Company to authorize any of the actions
set forth above.
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7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber or dispose of all or any
portion of his, her or its Membership Interest or any rights therein without the
unanimous written consent of the Members, other than the transferring Member,
and any attempted disposition shall be ineffective to transfer such interest.
Each Member hereby acknowledges the reasonableness of the restrictions on
transfer imposed by this Agreement in view of the Company purposes and the
relationship of the Members. Accordingly, the restrictions on transfer contained
herein shall be specifically enforceable. If a Membership Interest of a Member
shall, with the consent of the Members, be transferred pursuant to this Section,
the transferee shall become the assignee of the Member's Membership Interest in
the Company, provided such assignment shall be by instrument in form and
substance reasonably satisfactory to the Members (which
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instrument shall contain a statement by the assignee of his, her or its adoption
and assumption of all of the applicable terms of this Agreement, as same may be
amended); provided, however, nothing contained in this Article 9 shall prevent
any Member from transferring all or part of his, her or its Membership Interest
in the Company (x) by way of will or intestacy, or inter vivos gift or trust, to
or for the benefit of members of the Member's immediate family, or (y) to a
partnership, corporation or other entity, all of the outstanding interests of
which entity are owned (of record and beneficially) by such Member and/or a
permitted transferee, (each of (x) and (y) being referred to as a "Permitted
Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter
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shall be made to the transferee. Solely for purposes of making such allocations
and distributions, the Company shall recognize a transfer not later than the end
of the calendar month during which it is given notice stating the date such
Membership Interest was transferred and such other information as the Managers
may reasonably require. Without waiving the Company's or nontransferring
Members' remedies hereunder, if a transfer is not a transfer permitted pursuant
to this Agreement, then all of such items shall be allocated, and all
distributions shall be made, to the Person who, according to the books and
records of the Company, on the last day of the Fiscal Year during which the
transfer occurs, was the owner of the Membership Interest. The Company shall
incur no liability for making allocations and distributions in accordance with
the provisions of this Article, whether or not the Company has knowledge of any
transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power under the Act to dissolve the Company, (d)
transfer all or any portion of his, her or its Membership Interest in the
Company, (e) petition for judicial dissolution of the Company, (g) demand a
return of such Member's contributions or profits (or a bond or other security
for the return of such contributions or profits) or (h) take any action to file
a certificate of dissolution or its equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him,
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her or it and such default shall continue for more than thirty (30) days after
written notice thereof from any other Member, or if such default cannot
reasonably be cured within thirty (30) days, such Member shall fail to commence
to cure within such period and diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall have more than ten
(10) years experience valuing the stock of closely held corporations. Within ten
(10) days after the expiration of the aforesaid 20-day period, the participating
Members shall give notice to the other(s) specifying the name and address of an
appraiser. If only two appraisers are so chosen, the two appraisers shall meet
within ten (10) days after their designation and shall together appoint a third
appraiser ("Appointee") within such ten day period. A majority of the appraisers
shall determine the fair market value of the defaulting Member's Membership
Interest as of the date of the Exercise Notice. Such determination of fair
market value shall be final and binding on all parties. Each Member shall pay
the fees and expenses of its own appraiser, except that in the event an
Appointee is required, the fees and expenses of the Appointee shall be paid
jointly by the participating Members. The purchase price for the defaulting
Member's Membership Interest shall be paid, and the closing of such purchase
shall take place, in accordance with this section. If more than one Member
exercises such buy-out rights, each such Member shall be entitled to acquire the
portion of the defaulting Member's Membership Interest which bears the same
proportion as the purchasing Members' Membership Interest bears to the aggregate
Membership Interests of the Members participating in the
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transaction. The payment of the purchase price, and the closing of the purchase,
shall be in accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
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(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Stock, in the order
of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve shall, after the passage of a reasonable period of time,
be distributed in accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
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(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with, violate or result in the breach of
any law, regulation, order or rule of any governmental department, agency or
instrumentality applicable to it, him or them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by
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facsimile with a confirmation copy delivered on the second business day by
recognized overnight courier, to each party's respective address set forth on
the first page of this Agreement, with a copy given in like manner to Mandel and
Resnik, P.C., 220 East 42nd Street, New York, New York 10017, Attention: Barry
H. Mandel, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so
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<PAGE>
stricken out or otherwise eliminated had never appeared in this Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
6th day of March, 1996.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
---------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
---------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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<PAGE>
EXHIBIT A
The name, date of admission and percentage interest of each of the Members
("Membership Interest") are as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
Nourollah Elghanayan 3/6/96 16.67%
Victoria Elghanayan 3/6/96 16.67%
Jeffrey Elghanayan 3/6/96 16.66%
Mehdi Gabayzadeh 3/6/96 26%
Mehdi Gabayzadeh 3/6/96 8%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 3/6/96 8%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 3/6/96 8%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
-27-
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
MARKWOOD LLC
----------
The Limited Liability Company Operating Agreement of MARKWOOD LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
MARKWOOD LLC
The Limited Liability Company Operating Agreement of Markwood LLC is hereby
amended as follows (all capitalized terms not defined herein shall have the
meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"Section 6.9 Officers. The Managers may designate one or more
individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by
the Managers at any time, with or without cause. Each officer shall
hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and
other compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
ARTICLES OF ORGANIZATION
OF
100 REALTY MANAGEMENT LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is 100 Realty Management
LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December
31, 2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The limited liability company is to be managed by one or more
managers.
IN WITNESS WHEREOF, this certificate has been subscribed this 16th day of April,
1997, by the undersigned who affirms that the statements made herein are true
under the penalties of perjury.
/s/ Nourollah Elghanayan
-----------------------------
Nourollah Elghanayan,
Sole Organizer
<PAGE>
ARTICLES OF ORGANIZATION
OF
100 REALTY MANAGEMENT LLC
--------------------------------
Section 203 of the Limited Liability Companmy Law
Filer:
American Tissue Corporation
135 Engineers Road
Hauppauge, NY 11788
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED APR 17 1997
TAX$ 2
BY: INIT.
2
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
100 REALTY MANAGEMENT LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 17th day of April 1997, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, and Mehdi Gabayzadeh, having an
address at 135 Engineers Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, managing and operating certain business and
financial affairs of business entities including limited liability companies
(the "Businesses") engaged in, among other things, the business of purchasing,
holding, managing, operating and improving real property and the improvements
located thereon; and
Whereas, the limited liability company will manage and operate the Businesses as
hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this Agreement. The name of the Company shall be 100 Realty Management
LLC and all business of the Company shall be conducted in that name. One or more
Persons (as hereinafter defined) has acted or will act as an organizer or
organizers to form the Company and shall cause the Articles of Organization
("Articles") to be filed or recorded in any appropriate public office as may be
required by the Act and shall thereafter do and continue to do all other things
as may be required to perfect and maintain the Company as a limited liability
company under the State of New York. "Person" shall mean any person,
corporation, governmental authority, limited liability company, partnership,
trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to: (i) manage and operate certain
business and financial affairs of the Businesses; (ii) engage in any and all
business activities and transactions reasonably necessary and incidental to the
purposes
<PAGE>
of the Company, including opening checking accounts and initiating business and
financial systems of management; and (iii) engage in any other lawful act or
activity for which a limited liability company may be formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets, shall be in the name of and owned by the Company and no Member (as
hereinafter defined) shall have any ownership interest in such property in such
Member's individual name or right and each Member's interest in the Company
shall be personal property for all purposes. The Company's credit and assets
shall be used solely for the benefit of the Company, and no asset of the Company
shall be transferred or encumbered for or in payment of any individual
obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service Company or any successor appointed by the Managers, in
accordance with the Act. The registered office of the Company in the State of
New York is located at Corporation Service Company, 80 State Street, Albany, New
York 12207.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each
<PAGE>
Member, as of the date hereof, a capital account to which will be credited an
amount equal to such Member's Capital Contributions to the Company. The capital
account of any Member whose interest in the Company is increased by means of a
transfer to such Member of all or part of the interest of another Member, shall
be appropriately adjusted to reflect such transfer. From time to time, each
Member's share of gain, income, losses and distributions shall be credited or
charged, as the case may be, to such Member's capital account. Each Member's
capital account will be created and maintained consistent with tax accounting
and other principles set forth in Section 704(b) of the Internal Revenue Code of
1986, as amended (the "Code"), or its counterpart in any subsequently enacted
code and Treasury Regulation Section 1.704-1(b) promulgated thereunder and shall
be interpreted and applied in a manner consistent with such Regulation. If, at
any time, the Company shall suffer a loss as a result of which the capital
account of any Member shall be a negative amount, such loss shall be carried as
a charge against that Member's capital account, and that Member's share of
subsequent profits of the Partnership shall be applied to restore such capital
account deficit. Immediately following the transfer of any interest in the
Company, the capital account of the transferee Member shall be equal to the
capital account of the transferor Member attributable to the transferred
interest. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Members' capital accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes taking into account any adjustments required pursuant to Code Section
704(b) and the applicable regulations promulgated thereunder. If, in the opinion
of the Managers, the manner in which Capital Accounts are to be maintained
pursuant to this Agreement should be modified to comply with Code Section
704(b), then the method in which capital accounts are maintained shall be so
modified; provided, however, that any change in the manner of maintaining
capital accounts shall not materially alter the economic agreement between or
among the Members. Except as otherwise required in the Act or this Agreement, no
Member shall have any liability to restore all or any portion of a deficit
balance in a capital account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate to be determined by
the Managers. No Member shall be obligated to lend any funds to the Company.
-3-
<PAGE>
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition
-4-
<PAGE>
of the asset and shall be taken into account for purposes of computing Profits
or Losses; and (iv) notwithstanding any other provision of this Article 3, any
items which are specially allocated pursuant to Article 3 hereof shall not be
taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-1(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
-5-
<PAGE>
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the
Members to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that,
-6-
<PAGE>
after such offsetting allocations are made, each Member's capital account
balance is, to the extent possible, equal to the capital account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Section 3.1. In
exercising their discretion under this Section 3.4, the Managers shall take into
account future Regulatory Allocations under Section 3.3(a) and Section 3.3(b)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any
-7-
<PAGE>
other extraordinary event, such as an insured casualty or condemnation, for that
period, less the sum of (i) principal and interest payments made during that
period on any indebtedness of the Company (other than loans by the Members)
(except to the extent that the amounts thereof were reserved against and funded
from such reserves), (ii) any net additions to the reserves of the Company that
the Managers may deem necessary for any contingent or contested liabilities of
the Company and any liquidated liabilities of the Company which are not yet due
and payable; provided, however, that (x) any funds so reserved shall be
deposited in a segregated account (bearing interest, if feasible) with a bank or
trust company designated by the Managers or otherwise invested in a manner to be
designated by the Managers and (y) at the expiration of such period as the
Managers shall deem advisable, any such funds not so disbursed shall be
distributed among the Members as provided below, and (iii) any other cash
payments (except distributions to the Members and payments taken out of the
aforementioned reserves) made or escrows established during that period which
are required in connection with the management of the Businesses (except escrows
funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be
-8-
<PAGE>
kept on a fiscal basis. All references herein to "fiscal year" or "taxable year"
shall be considered references to the annual accounting period ending each
September 30, except that the first and last of such periods may consist of less
than twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing thereof) pay the expenses thereof, and make
distributions to the Members as provided herein. The Members and their
respective duly authorized representatives shall have the right to examine such
books, records, accounts and documents at any and all reasonable times and to
make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal
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<PAGE>
information tax return for the Company and each such Member's Form K-1,
which proposed return and form shall be subject to the approval of the
Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant
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to Section 754 of the Code.
5.7 Tax Matters Member. Nourollah Elghanayan is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power and authority
in the management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and the management and
operation of the Businesses;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness
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necessary, convenient or incidental to the accomplishment of the purposes
of the Company and secure the same by mortgage, pledge or other lien on
Company property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all
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persons who were Members at any time during the Company's prior fiscal year
an annual certified report of the Company, including all necessary tax
information, a report of a firm of independent certified public accountants
containing certified financial statements, and any other information
regarding the Company and its operations during the prior fiscal year
reasonably deemed by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a Member or a profit for the Members from the operations of the
Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at
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all times be and remain liable to the Company for the performance of their
duties as Managers of the Company. In that regard, the Managers shall not enter
into any transaction or agreement with any affiliate of the Managers in
connection with which any such person or entity shall receive, directly or
indirectly, a fee or other form of compensation from the Company, except as may
be specifically authorized by the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by any two (2) of Nourollah Elghanayan,
Mehdi Gabayzadeh, James Mehdizadeh or Robert Mehdizadeh, signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each
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year as may be determined by the vote or written consent of the Membership
Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any
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business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any Members. The Members who are present in
person or by proxy and who are entitled to vote may, by a majority of votes
cast, adjourn the meeting despite the absence of a quorum. At an adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted that might have been transacted at the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose of any other action, the
Managers may fix, in advance, a date as the record date for any such
determination of Members. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of such meeting, nor more then fifty (50)
days prior to any other action. When a determination of Members of record
entitled to notice of or to vote at any meeting of Members has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
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(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general assignment by the Company for the
benefit of creditors; the filing of any petition or answer by the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of the Company or its debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors,
or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian, or other
similar official for the Company or for any substantial part of its
property; or action taken by the Company to authorize any of the actions
set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
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performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber or dispose of all or any
portion of his, her or its Membership Interest or any rights therein without the
unanimous written consent of the Members, other than the transferring Member,
and any attempted disposition shall be ineffective to transfer such interest.
Each Member hereby acknowledges the reasonableness of the restrictions on
transfer imposed by this Agreement in view of the Company purposes and the
relationship of the Members. Accordingly, the restrictions on transfer contained
herein shall be specifically enforceable. If a Membership Interest of a Member
shall, with the consent of the Members, be transferred pursuant to this Section,
the transferee shall become the assignee of the Member's Membership Interest in
the Company, provided such assignment shall be by instrument in form and
substance reasonably satisfactory to the Members (which instrument shall contain
a statement by the assignee of his, her or its adoption and assumption of all of
the applicable terms of this Agreement, as same may be amended); provided,
however, nothing contained in this Article 9 shall prevent any Member from
transferring all or part of his, her or its Membership Interest in the Company
(x) by way of will or intestacy, or inter vivos gift or trust, to or for the
benefit of members of the Member's immediate family, or (y) to a partnership,
corporation or other entity, all of the outstanding interests of which entity
are owned (of record and beneficially) by such Member and/or a permitted
transferee, (each of (x) and (y) being referred to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
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(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly
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or indirectly, take any action to require partition or appraisal of the Company
or of any of its assets or cause the sale of any Company property, and
notwithstanding any provisions of applicable law to the contrary, each Member
(and its legal representatives, successors or assigns) hereby irrevocably waives
any and all right to maintain any action for partition or to compel any sale
with respect to his, her or its Membership Interest, or with respect to any
assets or properties of the Company, except as expressly provided in this
Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power under the Act to dissolve the Company, (d)
transfer all or any portion of his, her or its Membership Interest in the
Company, (e) petition for judicial dissolution of the Company, (g) demand a
return of such Member's contributions or profits (or a bond or other security
for the return of such contributions or profits) or (h) take any action to file
a certificate of dissolution or its equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "Nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the
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defaulting Member's Membership Interest as of the date of the notice of election
to purchase such interest, taking into account the existence of such default and
the actual damages suffered by the Nondefaulting Members, the status of the
Company at such time, and any losses incurred as a result of the default. As
soon as is practicable, the fair market value of the defaulting Member's
Membership Interest shall be determined by agreement of the participating
Members, provided, however, if agreement is not reached within twenty (20) days
of the giving of the Exercise Notice, the fair market value of the defaulting
Member's Membership Interest shall be determined by three appraisers, all of
whom shall be Members of the American Institute of Real Estate Appraisers.
Within ten (10) days after the expiration of the aforesaid 20-day period, the
participating Members shall give notice to the other(s) specifying the name and
address of an appraiser. If only two appraisers are so chosen, the two
appraisers shall meet within ten (10) days after their designation and shall
together appoint a third appraiser ("Appointee") within such ten day period. A
majority of the appraisers shall determine the fair market value of the
defaulting Member's Membership Interest as of the date of the Exercise Notice.
Such determination of fair market value shall be final and binding on all
parties. Each Member shall pay the fees and expenses of its own appraiser,
except that in the event an Appointee is required, the fees and expenses of the
Appointee shall be paid jointly by the participating Members. The purchase price
for the defaulting Member's Membership Interest shall be paid, and the closing
of such purchase shall take place, in accordance with this section. If more than
one Member exercises such buy-out rights, each such Member shall be entitled to
acquire the portion of the defaulting Member's Membership Interest which bears
the same proportion as the purchasing Members' Membership Interest bears to the
aggregate Membership Interests of the Members participating in the transaction.
The payment of the purchase price, and the closing of the purchase, shall be in
accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds
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from such sale at the closing and any interest and principal owing on any
outstanding loans made by the defaulting Member must be paid in full. Following
the date of closing, the defaulting Member shall have no further rights to any
distributions of Cash Flow or other distributions attributable and allocable to
the period from and after the closing, and all such rights shall vest in the
purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following events ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the Nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and
-22-
<PAGE>
who shall immediately proceed to wind up and terminate the business and affairs
of the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and
liabilities of the Company (other than any loans or advances that may have
been made by the Members to the Company) in the order of priority as
provided by law;
Second, to the creation of any reserve deemed reasonably necessary by
the liquidating trustee to fund any unmatured or contingent liabilities of
the Company, which reserve shall, after the passage of a reasonable period
of time, be distributed in accordance with the provisions of this Section
12.3;
Third, to the repayment of any loans made by any Member to the
Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership
Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
-23-
<PAGE>
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with, violate or result in the breach of
any law, regulation, order or rule of any governmental department, agency or
instrumentality applicable to it, him or them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel and Resnik, P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the
-24-
<PAGE>
written approval of all of the Members; provided, however, that no such
amendment may be made if such amendment would cause a default of any mortgage
obligation of the Company or if such amendment would cause a breach of any
agreement to which the Company is a party, or if any such amendment would cause
a breach of any Company obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver
-25-
<PAGE>
such further documents as may be reasonably requested by any other party in
order to carry out the provisions and purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
17th day of April, 1997.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
-26-
<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
Nourollah Elghanayan 4/17/97 50.0%
Mehdi Gabayzadeh 4/17/97 50.0%
-27-
<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- ----------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
100 REALTY MANAGEMENT LLC
The Limited Liability Company Operating Agreement of 100 REALTY MANAGEMENT LLC
(the "Company") is hereby amended to provide that the membership interests of
the Company may be certificated and that each of such certificates is a
"Security" governed by Article 8 of the Uniform Commercial Code of the State of
New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By /s/ Mehdi Gabayzadeh
-------------------------------
Mehdi Gabayzadeh
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
100 REALTY MANAGEMENT LLC
The Limited Liability Company Operating Agreement of 100 Realty Management LLC
is hereby amended as follows (all capitalized terms not defined herein shall
have the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"Section 6.9 Officers. The Managers may designate one or more
individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by
the Managers at any time, with or without cause. Each officer shall
hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and
other compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
CERTIFICATE OF FORMATION
OF
PAPER OF AMERICA LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
PAPER OF AMERICA LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD: (Use this paragraph only if the company is to have specific date of
dissolution: "The latest date on which the limited liability company is to
dissolve is: ______________________".)
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this eighth
day of April, A.D. 1999.
/s/ Kerry Starr
- ----------------------------------
Authorized Person
Kerry Starr
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/08/1999
991137816 -- 3027222
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "PAPER OF AMERICA LLC", FILED IN THIS OFFICE ON THE EIGHTH
DAY OF APRIL, A.D. 1999, AT 9 O'CLOCK A.M.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE o 1793 o 1847 o 1907
[SEAL]
SECRETARY'S OFFICE /s/ Edward J. Freel
1793 DELAWARE 1855 -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
9676842
3027222 8100
DATE:
991137816 04-08-99
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PAPER OF AMERICA LLC
As of April 10, 1999
This Limited Liability Company Operating Agreement ("Agreement") of Paper of
America, LLC, a Delaware limited liability company (the "Company"), is adopted
and entered into by Pulp & Paper of America LLC, as member (the "Member")
pursuant to and in accordance with the Delaware Limited Liability Company Act,
as amended from time to time (the "Act"). Terms used in this Agreement which are
not otherwise defined shall have the respective meanings given those terms in
the Act.
W I T N E S S E T H:
Whereas, Pulp & Paper of America LLC proposes to form a limited liability
company for the purposes of, among other things, owning and operating
substantially all of the assets of that certain paper mill located in Gorham,
New Hampshire (the "Paper Mill").
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Pulp & Paper of America LLC agrees as follows:
Article 1 - Company Formation
1.1. Name. The name of the Company is Paper of America LLC.
1.2. Purpose. The purpose of the Company is to (i) own and operate the Paper
Mill; (ii) engage in any and all business activities and transactions reasonably
necessary and incidental to the purposes of the Company, including obtaining
financing and refinancing, leasing, selling, exchanging and transferring all or
any part of the Paper Mill; and (iii) engage in any other lawful act or activity
for which a limited lability company may be formed under the Act.
1.3. Term. The Company shall commence on the filing of a certificate of
formation of the Company and shall continue until it is dissolved and its
affairs wound up in accordance with the Act and this Agreement.
<PAGE>
1.4. Principal Offices. The principals place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York, or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5. Agent. The Secretary of State of Delaware is hereby designated as the agent
of the Company.
Article 2 - Membership Interests; Members
2.1. Members. The name, address, initial Capital Contribution, date of admission
to the Company and Membership Interest allocated to the Member is set forth on
Exhibit "A" annexed hereto and are incorporated by reference herein. For
purposes of this Agreement: (i) "Member" shall mean Pulp & Paper of America LLC
and any person subsequently admitted to the Company; (ii) "Capital Contribution"
shall mean any contribution by a Member to the capital of the Company in cash,
property or services rendered or a promissory note or other obligation to
contribute cash or property or to render services; and (iii) "Membership
Interest" shall mean, with respect to the Company, the value of all Capital
Contributions of Pulp & Paper of America LLC and with respect to a Member the
ratio of the value of the Capital Contribution of such member to the aggregate
value of all Capital Contributions.
2.2. Membership Interests. There shall be one class of membership interests,
voting interests.
2.3. Liability of Members. Each Member, in its capacity as such, shall not be
personally responsible for the obligations or liabilities of the Company except
to the extent provided in the Act.
Article 3 - Management
3.1. The management of the business and affairs of the Company shall be vested
exclusively in the "Managers". Unless otherwise agreed to by a majority of the
interests of the Members, there shall be two (2) Managers of the Company.
Nourollah Elghanayan and Mehdi Gabayzadeh are initially designated as the
Managers and shall continue to serve as such until their respective deaths,
disabilities or retirements. In addition to the powers specifically granted in
this Agreement, the Managers shall have the power to do any and all acts
necessary or convenient to or for the furtherance of the purposes of the Company
set forth in this Agreement.
3.2. Except to the extent that the Managers agree to delegate the authority with
respect to specified matters, all decisions shall be made by unanimous vote of
the Managers.
Article 4 - Financial Interests of Members
4.1. The Company has been organized with the intention that it qualify for
taxation as a partnership for federal income tax purposes. Each Member
acknowledges that the provisions of Subchapter K of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations (the "Regulations") promulgated
thereunder will apply to the Company, and intend
- 2 -
<PAGE>
that the allocations of taxable income and loss, distributions to each Member,
and maintenance of capital accounts all conform to the requirements of the
applicable Regulations.
4.2. A capital account ("Capital Account") shall be established and maintained
for each Member on the books of the Company in accordance with the Regulations.
The rights of each Member to share in the capital of the Company, either by way
of distributions or upon withdrawal from, or the liquidation of, the Company,
shall be determined by reference to its Capital Account.
4.3. The Member shall not be required to contribute capital to the Company, and
no Member shall be entitled to receive interest on its, his or her capital
contributions.
4.4. The Company's profits and losses, including gains and losses attributable
to the sale or other disposition of all or any portion of the Company's
property, shall be allocated or borne, as the case may be, by the Members and
shall be allocated among the Members in accordance with their respective sharing
percentage ("Sharing Percentage").
4.5. Distributions shall be made to the Members at such times and in such
amounts as determined by the Managers.
Article 5 - Exculpation and Indemnification
5.1. The Managers are vested with full discretion and authority with respect to
the business of the Company and administration of its affairs and shall not have
personal liability to the Company or its Member for damages for any act pursuant
hereto, including any breach of duty in their capacity as Managers.
5.2. To the fullest extent permitted by law, the Company shall indemnify and
hold harmless, and may advance expenses to, the Members or any Manager
(collectively, the "Indemnitees"), from and against any and all claims and
demands whatsoever arising out of the business and affairs of the Company;
provided, however, that no indemnification may be made to or on behalf of any
Indemnitee if a judgment or other final adjudication adverse to such Indemnitee
establishes (i) that his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (ii) that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled.
The provision of this section shall continue to afford protection to each
Indemnitee regardless of whether such Indemnitee remains a Member, Manager,
employee or agent of the Company.
Article 6 - Representations
6.1. Each Member represents and warrants as follows:
(a) the Member has full power and authority to enter into this Agreement
and to perform all of its obligations hereunder, and has taken all action
required by law or otherwise in connection with or as a condition precedent to
the foregoing; and
- 3 -
<PAGE>
(b) neither the execution or delivery of this Agreement, nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking, to which the
Member is a party or its properties or assets are or may be bound; or (ii)
conflict with, violate or result in the breach of any law, regulation, order or
rule of any governmental department, agency or instrumentality applicable to it.
Article 7 - Miscellaneous
7.1. Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor; (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel & Resnik P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
7.2. Further Assurances. The Member shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
7.3. Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
7.4. Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
7.5. Amendment. This Agreement may be amended only with the written approval of
the Members; provided, however, that no such amendment may be made if such
amendment would cause a default of any mortgage obligation of the Company or if
such amendment would cause a breach of any agreement to which the Company is a
party, or if any such amendment would cause a breach of any Company obligation.
7.6. Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
7.7. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
7.8. Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
- 4 -
<PAGE>
7.9. Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
7.10. Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
7.11. Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
In Witness Whereof, the undersigned Members have duly executed this Agreement as
of the date first above written.
Pulp & Paper of America LLC
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan, Manager
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
- 5 -
<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of the Member ("Membership Interest") is as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
Pulp & Paper of America LLC 04/10/99 $1,000.00 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PAPER OF AMERICA LLC
----------
The Limited Liability Company Operating Agreement of PAPER OF AMERICA LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of Delaware.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
Pulp & Paper of America LLC,
member
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
ARTICLES OF ORGANIZATION
OF
PULP & PAPER OF AMERICA LLC
- --------------------------------------------------------------------------------
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is:
PULP & PAPER OF AMERICA LLC
SECOND: The county within the State of New York in which the office of
Pulp & Paper of America LLC (the "Company") is to be located
is Suffolk.
THIRD: In addition to the events of dissolution set forth in Section
701 of the Limited Liability Company Law of New York, the
latest date on which the Company may dissolve is December 31,
2028.
FOURTH: The Secretary of State is designated as agent of the Company
upon whom process against it may be served. The post office
address within this state to which the Secretary of State
shall mail a copy of any process against the Company is: c/o
Mandel & Resnik P.C., 220 East 42nd Street, New York, New
York, 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The Company is to be managed by one or more members.
IN WITNESS WHEREOF, this certificate has been subscribed this 19th day of
February, 1999, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
/s/ Mehdi Gabayzadeh
--------------------------
Mehdi Gabayzadeh,
Sole Organizer
1
<PAGE>
ARTICLES OF ORGANIZATION
OF
PULP & PAPER OF AMERICA LLC
------------------------------
Section 203 of the Limited Liability Company Law
Filer:
Mandel And Resnick, P.C.
220 East 42nd Street
20th Floor
New York, NY 10017
142693DMF
STATE OF NEW YORK
DEPARTMENT OF STATE
FEB 22 1999
BY: /s/ SRW
-------------
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PULP & PAPER OF AMERICA LLC
----------
This Limited Liability Company Operating Agreement ("Agreement") of Pulp & Paper
of America LLC, a New York limited liability company, (the "Company") is adopted
and entered into by American Tissue Inc., with offices at 135 Engineers Road,
Hauppauge, NY 11788, as member (the "Member").
W I T N E S S E T H:
Whereas, American Tissue Inc. proposes to form a limited liability company for
the purposes of, among other things, owning and operating, either directly or
through its wholly owned subsidiaries, substantially all of the assets of that
certain integrated pulp and paper mill located in Berlin & Gorham, New
Hampshire, and related hydroelectric generating facilities and landfill (the
"B-G Facility").
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
American Tissue Inc. agrees as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Name. The name of the Company is Pulp & Paper of America LLC.
1.2 Formation. American Tissue Inc. hereby forms a limited liability company
pursuant to and in accordance with the provisions of the New York Limited
Liability Company Act, as amended from time to time (the"Act"), and upon the
terms and conditions set forth in this Agreement.
1.3 Purposes. The purpose of the Company is to (i) own and operate, either
directly or through the wholly owned subsidiaries of the Company, the B-G
Facility; (ii) engage in any and all business activities and transactions
reasonably necessary and incidental to the purposes of the Company, including
obtaining financing and refinancing, leasing, selling, exchanging and
transferring all or any part of the B-G Facility; and (iii) engage in any other
lawful act or activity for which a limited liability company may be formed under
the Act.
<PAGE>
1.4 Title. Title to, and all rights and interests of the Company in and to, its
assets shall be in the name of and owned by the Company, and the Member shall
not have any ownership interest in such property in the Member's individual name
or right and the Member's interest in the Company shall be personal property for
all purposes. The Company's credit and assets shall be used solely for the
benefit of the Company, and no asset of the Company shall be transferred or
encumbered for or in payment of any individual obligation of the Member.
1.5 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York, or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Member. The name, address, initial Capital Contribution, date of admission
to the Company and Membership Interest allocated to the Member is set forth on
Exhibit "A" annexed hereto and incorporated by reference herein. For purposes of
this Agreement: (i) "Member" shall mean American Tissue Inc. and any person
subsequently admitted to the Company; (ii) "Capital Contribution" shall mean any
contribution by the Member to the capital of the Company in cash, property or
services rendered or a promissory note or other obligation to contribute cash or
property or to render services; and (iii) "Membership Interest" shall mean the
percentage set forth opposite the Member's name on Exhibit "A".
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to the
Member's Capital Contributions to the Company. From time to time, the Member's
allocable share of the Company's gain, income, losses and distributions shall be
credited or charged, as the case may be, to the Member's capital account. Each
Member's capital account will be created and maintained consistent with tax
accounting and other principles set forth in Section 704(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), or its counterpart in any
subsequently enacted code and Treasury Regulation Section 1.704-1(b) promulgated
thereunder and shall be interpreted and applied in a manner consistent with such
Regulation. If, at any time, the Company shall suffer a loss as a result of
which the capital account of a Member shall be a negative amount, such loss
shall be carried as a charge against the Member's capital account, and the
subsequent profits of the Company shall be applied to restore such capital
account deficit. For purposes of computing the amount of any item of income,
gain, deduction or loss to be reflected in a Member's capital accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes taking into account any adjustments required pursuant to Code Section
704(b) and the applicable regulations promulgated thereunder. If, in the opinion
of the Managers, the manner in which Capital Accounts are to be maintained
pursuant to this Agreement should be modified to comply with Code Section
704(b), then the
- 2 -
<PAGE>
method in which capital accounts are maintained shall be so modified. Except as
otherwise required in the Act or this Agreement, a Member shall have no
liability to restore all or any portion of a deficit balance in its capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by a Member as agreed to by such Member from time to time.
2.4 Loans. If a Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan and shall be a debt due from the Company to the
Member. A Member shall not be obligated to lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, a Member shall not
demand or receive a return of its Capital Contributions or withdraw from the
Company without the consent of the Manager.
(b) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a member without the written consent of the Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3: "Profits" and "Losses" as used herein shall mean the
profits and losses of the Company as determined in accordance with generally
accepted accounting principles consistently applied.
3.2 Allocations. Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their ownership interests.
ARTICLE 4 - DISTRIBUTIONS
4.1 Distribution of Cash Flow. The Company may distribute to the Members cash
available for distribution in such amounts and at such times as may be
determined by the Members from time to time.
4.2 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined
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<PAGE>
on an annual basis and any over-distribution of Cash Flow to a Member shall be
repaid by the Member promptly after receipt of a written notice from the
Managers requesting repayment and setting forth the calculation of the repayment
due.
4.3 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or a Member shall be treated as amounts distributed to
the Member pursuant to this Article 4 for all purposes under this Agreement. The
Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Member with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by the Member against any
distribution to be made to the Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the B-G Facility. All references herein to "fiscal year" shall be considered
references to the annual accounting period ending each September 30th, except
that the first and last of such periods may consist of less than twelve (12)
months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing thereof) pay the expenses thereof, and make
distributions to the Member as provided herein. The Member and its duly
authorized representatives shall have the right to examine such books, records,
accounts and documents at any and all reasonable times and to make copies or
extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of
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<PAGE>
the disbursements properly chargeable to the Company and in which shall be
deposited all cash receipts of the Company. All amounts required by this Article
5 to be deposited in those accounts shall be and remain the property of the
Company and shall be received, held and disbursed by the Managers only for the
purposes herein specified. There shall not be deposited into those accounts any
funds other than Company funds. Withdrawals shall be made from those accounts
only for the purpose of making payment of Company expenditures and distributions
herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. Each Member shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and the Member's Form K-1, which proposed return and form shall be subject
to the approval of the Member; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to the Member a copy of each such
return, together with any schedules or other information which the Member may
reasonably require in connection with the Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) to adopt September 30th as the Fiscal Year;
(ii) to adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) to elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor a Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar
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<PAGE>
provisions of applicable state law, and no provisions of this Agreement shall be
interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of the Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of the majority of the interests of the Members. During the term of this
Agreement, each Member shall vote its Membership Interest to provide for the
election and maintenance of Nourollah Elghanayan and Mehdi Gabayzadeh as the
Managers. The Managers shall have full responsibility and exclusive discretion
in the management and control of the business and affairs of the Company and
shall make all decisions relating thereto. Except as otherwise expressly set
forth in this Agreement, the Managers (acting for and on behalf of the Company),
in extension and not in limitation of the rights and powers given by this
Article or by the other provisions of this Agreement shall, in their sole
discretion, have the full and absolute right, power and authority in the
management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the ownership or
operation of the B-G Facility;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
- 6 -
<PAGE>
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Property;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the written consent of the Members take
any action which under the Act or this Agreement is prohibited or requires the
consent of the Member.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Member, and shall have a fiduciary responsibility for the safekeeping and use of
all funds and assets of the Company. All decisions made for and on behalf of the
Company by the Managers shall be binding upon the Company. The Managers shall
devote such time, effort and personnel to the Company affairs as is necessary
for the conduct thereof; provided, however, it is understood and agreed that the
Managers and/or their affiliates may be interested, directly or indirectly, in
various other businesses and undertakings and, subject to the fulfillment of
their obligations under this Agreement, the Managers shall not be required to
devote their entire time to the business of the Company and shall not be
restricted in any manner from participating in other businesses or activities.
In carrying out their obligations, the Managers shall:
(i) render periodic reports to each Member with respect to the operations
of the Company on at least a semi-annual basis;
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<PAGE>
(ii) on or before March 1st of every year, mail to each Member an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to the Members for any actions
taken in good faith and reasonably believed to be in the best interests of the
Company, or for errors of judgment, but shall be liable for any damage or loss
sustained by the Company or a Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a Member or a profit for the Member from the operations of the
Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
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<PAGE>
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. Any vacancy occurring
for any reason in the number of Managers may be filled by the vote or written
consent of the remaining Manager then in office; provided, however, that if
there are no remaining Manager, each vacancy shall be filled by the vote or
written consent of the Members. A Manager elected to fill a vacancy shall be
elected for the unexpired term of the Manager's predecessor in office and shall
hold office until the expiration of such term and until the Manager's successor
has been elected and qualified. A Manager chosen to fill a position resulting
from an increase in the number of Managers shall hold office until a successor
has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Member hereby designate that the drawing, endorsing and making of all checks and
other commercial paper of the Company, and the transaction of all business of
the Company with its banks, shall be by Nourollah Elghanayan, Mehdi Gabayzadeh,
James Mehdizadeh or Robert Mehdizadeh, any two signing jointly.
ARTICLE 7 - INDEMNIFICATION
7.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of the Member or any
such Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by the Member or such Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by the Member
or such Manager, officer, director or partner in connection with the defense of
any action based on any such act or omission, which attorneys' fees may be paid
as incurred, and otherwise to the maximum extent permitted by the Act.
7.2 Limitations. Notwithstanding anything to the contrary in Section 7.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
7 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
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<PAGE>
ARTICLE 8 - DISSOLUTION AND WINDING UP
8.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the sale, disposition or condemnation of all or substantially all
of the assets of the Company and the collection and distribution of any
proceeds thereof;
(ii) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of the Member or the occurrence of any other event that
terminates the continued membership of the Member;
(iii) upon written demand of the Member provided, however, that no demand
for termination and dissolution may be made by the Member if such demand
would cause a default of any mortgage obligation of the Company or a breach
of any agreement to which the Company is a party, or if such demand would
cause a breach of any Company obligation; or
(iv) the occurrence of any event which makes it unlawful for the Company
business to be continued, or impossible to carry out, or causes the
dissolution of the Company under the Act.
8.2 Final Accounting. Upon the termination of this Agreement and the dissolution
of the Company, a full and general accounting of the Company's assets,
liabilities, capital, income and expenses shall be taken by the Company's
accountant and a copy of such accounting shall be provided to the Member within
one hundred twenty (120) days after dissolution. The Managers shall designate a
third-party who shall act as liquidating trustee, and who shall immediately
proceed to wind up and terminate the business and affairs of the Company.
8.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Member to the Company), including all costs of sale of the B-G Facility, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which
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<PAGE>
reserve shall, after the passage of a reasonable period of time, be distributed
in accordance with the provisions of this Section 8.3;
Third, to the repayment of any loans made by the Member to the Company; and
Fourth, to the Member.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 8.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each Member shall be furnished with a statement prepared by the
Company's accountants, which shall set forth the assets and liabilities of the
Company as of the date of complete liquidation. The Managers shall cause to be
filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 9 - REPRESENTATIONS
Each Member represents and warrants as follows:
(a) the Member has full power and authority to enter into this Agreement
and to perform all of its obligations hereunder, and has taken all action
required by law or otherwise in connection with or as a condition precedent to
the foregoing; and
(b) neither the execution or delivery of this Agreement, nor the
consummation of the transactions herein contemplated, will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which the
Member is a party or by which the Member or its properties or assets are or may
be bound; or (ii) conflict with, violate or result in the breach of any law,
regulation, order or rule of any governmental department, agency or
instrumentality applicable to it.
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<PAGE>
ARTICLE 10 - MISCELLANEOUS
10.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor; (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel & Resnik P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
10.2 Further Assurances. Each Member shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
10.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
10.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
10.5 Amendment. This Agreement may be amended only with the written approval of
the Member; provided, however, that no such amendment may be made if such
amendment would cause a default of any mortgage obligation of the Company or if
such amendment would cause a breach of any agreement to which the Company is a
party, or if any such amendment would cause a breach of any Company obligation.
10.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
10.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
10.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
10.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
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<PAGE>
10.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
10.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
In witness whereof, the Member has executed this Agreement as of the 1st day of
March, 1999.
AMERICAN TISSUE INC.
By: /s/ Nourollah Elghanayan
-------------------------------------------
Nourollah Elghanayan, Chairman of the Board
By: /s/ Mehdi Gabayzadeh
-------------------------------------------
Mehdi Gabayzadeh, President
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<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of the Member ("Membership Interest") is as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
American Tissue Inc. 03/01/99 $1,000.00 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PULP & PAPER OF AMERICA LLC
----------
The Limited Liability Company Operating Agreement of PULP & PAPER OF AMERICA LLC
(the "Company") is hereby amended to provide that the membership interests of
the Company may be certificated and that each of such certificates is a
"Security" governed by Article 8 of the Uniform Commercial Code of the State of
New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF ORGANIZATION
OF
PULP & PAPER OF AMERICA LLC
Under Section 211 of the Limited Liability Company Law
It is hereby certified that:
FIRST: The name of the limited liability company is:
Pulp & Paper of America LLC.
SECOND: The date of filing of the original articles of organization is:
February 22, 1999.
THIRD: The Articles of Organization are hereby amended by striking out
the Article Five thereof and by substituting in lieu of said
article the following new Article Five:
"The Company is to be managed by one or more managers."
Dated as of: March 1, 1999
American Tissue Inc.,
Member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "PULP OF AMERICA LLC", FILED IN THIS OFFICE ON THE EIGHTH
DAY OF APRIL, A.D. 1999, AT 9 O'CLOCK A.M.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE o 1793 o 1847 o 1907
[SEAL]
SECRETARY'S OFFICE /s/ Edward J. Freel
1793 DELAWARE 1855 -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
9676846
3027223 8100
<PAGE>
CERTIFICATE OF FORMATION
OF
PULP OF AMERICA LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
PULP OF AMERICA LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD: (Use this paragraph only if the company is to have specific date of
dissolution: "The latest date on which the limited liability company is to
dissolve is: ".)
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this eighth
day of April, A.D. 1999.
/s/ Kerry Starr
- -----------------------------
Authorized Person
Kerry Starr
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/08/1999
991137822 -- 3027223
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PULP OF AMERICA LLC
As of April 10, 1999
This Limited Liability Company Operating Agreement ("Agreement") of Pulp of
America LLC, a Delaware limited liability company (the "Company"), is adopted
and entered into by Pulp & Paper of America LLC, as member (the "Member")
pursuant to and in accordance with the Delaware Limited Liability Company Act,
as amended from time to time (the "Act"). Terms used in this Agreement which are
not otherwise defined shall have the respective meanings given those terms in
the Act.
W I T N E S S E T H:
Whereas, Pulp & Paper of America LLC proposes to form a limited liability
company for the purposes of, among other things, owning and operating
substantially all of the assets of that certain pulp mill located in Berlin, New
Hampshire (the "Pulp Mill").
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Pulp & Paper of America LLC agrees as follows:
Article 1 - Company Formation
1.1. Name. The name of the Company is Pulp of America LLC.
1.2. Purpose. The purpose of the Company is to (i) own and operate the Pulp
Mill; (ii) engage in any and all business activities and transactions reasonably
necessary and incidental to the purposes of the Company, including obtaining
financing and refinancing, leasing, selling, exchanging and transferring all or
any part of the Pulp Mill; and (iii) engage in any other lawful act or activity
for which a limited lability company may be formed under the Act.
1.3. Term. The Company shall commence on the filing of a certificate of
formation of the Company and shall continue until it is dissolved and its
affairs wound up in accordance with the Act and this Agreement.
<PAGE>
1.4. Principal Offices. The principals place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York, or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5. Agent. The Secretary of State of Delaware is hereby designated as the agent
of the Company.
Article 2 - Membership Interests; Members
2.1. Members. The name, address, initial Capital Contribution, date of admission
to the Company and Membership Interest allocated to the Member is set forth on
Exhibit "A" annexed hereto and are incorporated by reference herein. For
purposes of this Agreement: (i) "Member" shall mean Pulp & Paper of America LLC
and any person subsequently admitted to the Company; (ii) "Capital Contribution"
shall mean any contribution by a Member to the capital of the Company in cash,
property or services rendered or a promissory note or other obligation to
contribute cash or property or to render services; and (iii) "Membership
Interest" shall mean, with respect to a Member, the ratio of the value of the
Capital Contribution of such member to the aggregate value of all Capital
Contributions.
2.2. Membership Interests. There shall be one class of membership interests,
voting interests.
2.3. Liability of Members. Each Member, in its capacity as such, shall not be
personally responsible for the obligations or liabilities of the Company except
to the extent provided in the Act.
Article 3 - Management
3.1. The management of the business and affairs of the Company shall be vested
exclusively in the "Managers". Unless otherwise agreed to by a majority of the
interests of the Members, there shall be two (2) Managers of the Company.
Nourollah Elghanayan and Mehdi Gabayzadeh are initially designated as the
Managers and shall continue to serve as such until their respective deaths,
disabilities or retirements. In addition to the powers specifically granted in
this Agreement, the Managers shall have the power to do any and all acts
necessary or convenient to or for the furtherance of the purposes of the Company
set forth in this Agreement.
3.2. Except to the extent that the Managers agree to delegate the authority with
respect to specified matters, all decisions shall be made by unanimous vote of
the Managers.
Article 4 - Financial Interests of Members
4.1. The Company has been organized with the intention that it qualify for
taxation as a partnership for federal income tax purposes. Each Member
acknowledges that the provisions of Subchapter K of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations (the "Regulations") promulgated
thereunder will apply to the Company, and intend that the allocations of taxable
income and loss, distributions to each Member, and maintenance
- 2 -
<PAGE>
of capital accounts all conform to the requirements of the applicable
Regulations.
4.2. A capital account ("Capital Account") shall be established and maintained
for each Member on the books of the Company in accordance with the Regulations.
The rights of each Member to share in the capital of the Company, either by way
of distributions or upon withdrawal from, or the liquidation of, the Company,
shall be determined by reference to its Capital Account.
4.3. The Member shall not be required to contribute capital to the Company, and
no Member shall be entitled to receive interest on its, his or her capital
contributions.
4.4. The Company's profits and losses, including gains and losses attributable
to the sale or other disposition of all or any portion of the Company's
property, shall be allocated or borne, as the case may be, by the Members and
shall be allocated among the Members in accordance with their respective sharing
percentage ("Sharing Percentage").
4.5. Distributions shall be made to the Members at such times and in such
amounts as determined by the Managers.
Article 5 - Exculpation and Indemnification
5.1. The Managers are vested with full discretion and authority with respect to
the business of the Company and administration of its affairs and shall not have
personal liability to the Company or its Member for damages for any act pursuant
hereto, including any breach of duty in their capacity as Managers.
5.2. To the fullest extent permitted by law, the Company shall indemnify and
hold harmless, and may advance expenses to, the Members or any Manager
(collectively, the "Indemnitees"), from and against any and all claims and
demands whatsoever arising out of the business and affairs of the Company;
provided, however, that no indemnification may be made to or on behalf of any
Indemnitee if a judgment or other final adjudication adverse to such Indemnitee
establishes (i) that his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (ii) that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled.
The provision of this section shall continue to afford protection to each
Indemnitee regardless of whether such Indemnitee remains a Member, Manager,
employee or agent of the Company.
Article 6 - Representations
6.1. Each Member represents and warrants as follows:
(a) the Member has full power and authority to enter into this Agreement
and to perform all of its obligations hereunder, and has taken all action
required by law or otherwise in connection with or as a condition precedent to
the foregoing; and
- 3 -
<PAGE>
(b) neither the execution or delivery of this Agreement, nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking, to which the
Member is a party or its properties or assets are or may be bound; or (ii)
conflict with, violate or result in the breach of any law, regulation, order or
rule of any governmental department, agency or instrumentality applicable to it.
Article 7 - Miscellaneous
7.1. Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor; (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel & Resnik P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
7.2. Further Assurances. The Member shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
7.3. Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
7.4. Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
7.5. Amendment. This Agreement may be amended only with the written approval of
the Members; provided, however, that no such amendment may be made if such
amendment would cause a default of any mortgage obligation of the Company or if
such amendment would cause a breach of any agreement to which the Company is a
party, or if any such amendment would cause a breach of any Company obligation.
7.6. Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
7.7. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
7.8. Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
- 4 -
<PAGE>
7.9. Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
7.10. Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
7.11. Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
In Witness Whereof, the undersigned Members have duly executed this Agreement as
of the date first above written.
Pulp & Paper of America LLC
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan, Manager
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
- 5 -
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
PULP OF AMERICA LLC
----------
The Limited Liability Company Operating Agreement of PULP OF AMERICA LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of Delaware.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
Pulp & Paper of America LLC,
member
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
<PAGE>
EXHIBIT A
The name, date of admission, initial contribution and percentage interest of the
Member ("Membership Interest") is as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- --------------- ----------
Pulp & Papers of America LLC 04/10/99 $1,000.00 100%
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION
OF "RALWAY OF AMERICA, LLC" CHANGING ITS NAME FROM "RAILWAY OF AMERICA, LLC" TO
"RAILWAY OF AMERICA LLC", FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF JUNE,
A.D. 1999, AT 9 O'CLOCK A.M.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE o 1793 o 1847 o 1907
[SEAL]
SECRETARY'S OFFICE /s/ Edward J. Freel
1793 DELAWARE 1855 -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
9830250
3059569 8100
DATE:
991259734 06-25-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/22/1999
991251415 -- 3059569
CERTIFICATE OF FORMATION
OF
RAILWAY OF AMERICA, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
RAILWAY OF AMERICA, LLC
SECOND: Its registered office in the State of Delaware is to be located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the Company,
has executed, signed and acknowledged this Certificate of Formation this
twenty-second day of June, A.D. 1999.
/s/ Melissa Suiter
- ------------------------
Authorized Person
Melissa Suiter
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED
LIABILITY COMPANY OF "RAILWAY OF AMERICA, LLC", FILED IN THIS OFFICE ON THE
TWENTY-SECOND DAY OF JUNE, A.D. 1999, AT 9 O'CLOCK A.M.
[SEAL]
GREAT SEAL OF THE STATE OF DELAWARE o 1793 o 1847 o 1907
[SEAL]
SECRETARY'S OFFICE /s/ Edward J. Freel
1793 DELAWARE 1855 -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
9819964
3059569 8100
DATE:
991251415 06-22-99
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/25/1999
991259734 - 3059569
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF
LIMITED LIABILITY COMPANY
OF
RAILWAY OF AMERICA, LLC
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON JUNE 22, 1999
RAILWAY OF AMERICA, LLC a limited liability company, formed and existing
under and by virtue of the Limited Liability Company Act of the State of
Delaware.
DOES HEREBY CERTIFY:
1. The name of the limited liability company is:
RAILWAY OF AMERICA, LLC
2. That a Certificate of Formation was filed by the Secretary of State
of Delaware and that said Certificate requires correction as permitted
by Section 18-211 of the Limited Liability Company Act of the State of
Delaware.
3. The inaccuracy of defect of said Certificate to be corrected is as
follows: The name in article First was incorrectly shown with a comma.
4. Article First is corrected to read as follows:
FIRST: The name of the limited liability company is
RAILWAY OF AMERICA LLC
IN WITNESS WHEREOF, the undersigned has executed this certificate this
twenty-fifth day of June, 1999.
Authorized Person
By: /s/ Melissa Suiter
------------------
Melissa Suiter
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
RAILWAY OF AMERICA LLC
As of June 25, 1999
This Limited Liability Company Operating Agreement ("Agreement") of Railway of
America, LLC, a Delaware limited liability company (the "Company"), is adopted
and entered into by Pulp & Paper of America LLC, as member (the "Member")
pursuant to and in accordance with the Delaware Limited Liability Company Act,
as amended from time to time (the "Act"). Terms used in this Agreement which are
not otherwise defined shall have the respective meanings given those terms in
the Act.
W I T N E S S E T H:
Whereas, Pulp & Paper of America LLC proposes to form a limited liability
company for the purposes of, among other things, owning all of the issued and
outstanding shares of Berlin Mills Railway, Inc. (the "Shares").
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Pulp & Paper of America LLC agrees as follows:
Article 1 - Company Formation
1.1. Name. The name of the Company is Railway of America LLC.
1.2. Purpose. The purpose of the Company is to (i) own the Shares; (ii) engage
in any and all business activities and transactions reasonably necessary and
incidental to the purposes of the Company, including obtaining financing and
refinancing, leasing, selling, exchanging and transferring all or any part of
the Shares; and (iii) engage in any other lawful act or activity for which a
limited lability company may be formed under the Act.
1.3. Term. The Company shall commence on the filing of a certificate of
formation of the Company and shall continue until it is dissolved and its
affairs wound up in accordance with the Act and this Agreement.
<PAGE>
1.4. Principal Offices. The principals place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York, or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5. Agent. The Secretary of State of Delaware is hereby designated as the agent
of the Company.
Article 2 - Membership Interests; Members
2.1. Members. The name, address, initial Capital Contribution, date of admission
to the Company and Membership Interest allocated to the Member is set forth on
Exhibit "A" annexed hereto and are incorporated by reference herein. For
purposes of this Agreement: (i) "Member" shall mean Pulp & Paper of America LLC
and any person subsequently admitted to the Company; (ii) "Capital Contribution"
shall mean any contribution by a Member to the capital of the Company in cash,
property or services rendered or a promissory note or other obligation to
contribute cash or property or to render services; and (iii) "Membership
Interest" shall mean, with respect to a Member, the ratio of the value of the
Capital Contribution of such member to the aggregate value of all Capital
Contributions.
2.2. Membership Interests. There shall be one class of membership interests,
voting interests.
2.3. Liability of Members. Each Member, in its capacity as such, shall not be
personally responsible for the obligations or liabilities of the Company except
to the extent provided in the Act.
Article 3 - Management
3.1. The management of the business and affairs of the Company shall be vested
exclusively in the "Managers". Unless otherwise agreed to by a majority of the
interests of the Members, there shall be two (2) Managers of the Company.
Nourollah Elghanayan and Mehdi Gabayzadeh are initially designated as the
Managers and shall continue to serve as such until their respective deaths,
disabilities or retirements. In addition to the powers specifically granted in
this Agreement, the Managers shall have the power to do any and all acts
necessary or convenient to or for the furtherance of the purposes of the Company
set forth in this Agreement.
3.2. Except to the extent that the Managers agree to delegate the authority with
respect to specified matters, all decisions shall be made by unanimous vote of
the Managers.
Article 4 - Financial Interests of Members
4.1. The Company has been organized with the intention that it qualify for
taxation as a partnership for federal income tax purposes. Each Member
acknowledges that the provisions of Subchapter K of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations (the "Regulations") promulgated
thereunder will apply to the Company, and intend that the allocations of taxable
income and loss, distributions to each Member, and maintenance
- 2 -
<PAGE>
of capital accounts all conform to the requirements of the applicable
Regulations.
4.2. A capital account ("Capital Account") shall be established and maintained
for each Member on the books of the Company in accordance with the Regulations.
The rights of each Member to share in the capital of the Company, either by way
of distributions or upon withdrawal from, or the liquidation of, the Company,
shall be determined by reference to its Capital Account.
4.3. The Member shall not be required to contribute capital to the Company, and
no Member shall be entitled to receive interest on its, his or her capital
contributions.
4.4. The Company's profits and losses, including gains and losses attributable
to the sale or other disposition of all or any portion of the Company's
property, shall be allocated or borne, as the case may be, by the Members and
shall be allocated among the Members in accordance with their respective sharing
percentage ("Sharing Percentage").
4.5. Distributions shall be made to the Members at such times and in such
amounts as determined by the Managers.
Article 5 - Exculpation and Indemnification
5.1. The Managers are vested with full discretion and authority with respect to
the business of the Company and administration of its affairs and shall not have
personal liability to the Company or its Member for damages for any act pursuant
hereto, including any breach of duty in their capacity as Managers.
5.2. To the fullest extent permitted by law, the Company shall indemnify and
hold harmless, and may advance expenses to, the Members or any Manager
(collectively, the "Indemnitees"), from and against any and all claims and
demands whatsoever arising out of the business and affairs of the Company;
provided, however, that no indemnification may be made to or on behalf of any
Indemnitee if a judgment or other final adjudication adverse to such Indemnitee
establishes (i) that his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated or (ii) that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled.
The provision of this section shall continue to afford protection to each
Indemnitee regardless of whether such Indemnitee remains a Member, Manager,
employee or agent of the Company.
Article 6 - Representations
6.1. Each Member represents and warrants as follows:
(a) the Member has full power and authority to enter into this Agreement
and to perform all of its obligations hereunder, and has taken all action
required by law or otherwise in connection with or as a condition precedent to
the foregoing; and
- 3 -
<PAGE>
(b) neither the execution or delivery of this Agreement, nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking, to which the
Member is a party or its properties or assets are or may be bound; or (ii)
conflict with, violate or result in the breach of any law, regulation, order or
rule of any governmental department, agency or instrumentality applicable to it.
Article 7 - Miscellaneous
7.1. Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor; (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel & Resnik P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Nicholas J. Kaiser, Esq.
7.2. Further Assurances. The Member shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
7.3. Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
7.4. Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
7.5. Amendment. This Agreement may be amended only with the written approval of
the Members; provided, however, that no such amendment may be made if such
amendment would cause a default of any mortgage obligation of the Company or if
such amendment would cause a breach of any agreement to which the Company is a
party, or if any such amendment would cause a breach of any Company obligation.
7.6. Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
7.7. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
7.8. Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
- 4 -
<PAGE>
7.9. Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
7.10. Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
7.11. Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
In Witness Whereof, the undersigned Members have duly executed this Agreement as
of the date first above written.
Pulp & Paper of America LLC
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan, Manager
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
- 5 -
<PAGE>
EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of the Member ("Membership Interest") is as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- --------------- ----------
Pulp & Paper of America LLC 06/25/99 $1,000.00 100%
- 6 -
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
RAILWAY OF AMERICA LLC
----------
The Limited Liability Company Operating Agreement of RAILWAY OF AMERICA LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of Delaware.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
Pulp & Paper of America LLC,
member
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, Manager
- 1 -
ARTICLES OF ORGANIZATION
OF
SARATOGA REALTY LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Saratoga Realty LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss. 701 of the
LLCL, the latest date on which the Company may dissolve is December
31, 2026.
FOURTH: The secretary of state is designated as agent of the limited liability
company upon whom process against it may be served. The post office
address within this state to which the secretary of state shall mail a
copy of any process against the limited liability company served upon
him or her is c/o Mandel and Resnik, P.C., 220 East 42nd Street, New
York, New York 10017, Attention: Nicholas J. Kaiser, Esq.
FIFTH: The limited liability company is to be managed by one or more
managers.
IN WITNESS WHEREOF, this certificate has been subscribed this 16th day of April,
1997, by the undersigned who affirms that the statements made herein are true
under the penalties of perjury.
/s/ Nourollah Elghanayan
----------------------------------
Nourollah Elghanayan
Sole Organizer
<PAGE>
ARTICLES OF ORGANIZATION
OF
SARATOGA REALTY LLC
----------
Section 203 of the Limited Liability Company Law
Filer: Accts Payable, Director
American Tissue Corporation
135 Engineers Road
Hauppauge, NY 11788
cms
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED APR 17 1997
TAX $--
BY: LAS
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
SARATOGA REALTY LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the 17th day of April 1997, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788, Jeffrey Elghanayan, having
an address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh,
having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh
and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph
Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at 135
Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany, as
trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of, among other things, purchasing, holding, managing, operating and
improving certain real property and the improvements located thereon situated in
Saratoga, New York, more particularly known as 3 Duplainville Road, Saratoga
Springs, New York (the "Premises"), and leasing the Premises pursuant to such
leases as may hereafter be entered into with respect to the Premises; and
Whereas, the limited liability company will own the Premises and will manage,
operate and lease the Premises as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the "Act") and upon the terms and conditions set
forth in this Agreement. The name of the Company shall be Saratoga Realty LLC
and all business of the Company shall be conducted in that name. One or more
Persons (as hereinafter defined) has acted or will act as an organizer or
organizers to form the Company and shall cause the Articles of Organization
("Articles") to be filed or recorded any appropriate public office as may be
required by the Act and shall thereafter do and continue to do all other things
as may be required to perfect and maintain the Company as a
<PAGE>
limited liability company under the State of New York. "Person" shall mean any
person, corporation, governmental authority, limited liability company,
partnership, trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to: (i) own, hold, manage, maintain,
mortgage, hypothecate, encumber, lease, develop, improve, alter, remodel, expand
and otherwise operate the Premises; (ii) engage in any and all business
activities and transactions reasonably necessary and incidental to the purposes
of the Company, including obtaining financing and refinancing, leasing, selling,
exchanging and transferring all or any part of the Premises; and (iii) engage in
any other lawful act or activity for which a limited liability company may be
formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Premises and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member (as hereinafter defined) shall
have any ownership interest in such property in such Member's individual name or
right and each Member's interest in the Company shall be personal property for
all purposes. The Company's credit and assets shall be used solely for the
benefit of the Company, and no asset of the Company shall be transferred or
encumbered for or in payment of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service Company or any successor appointed by the Managers, in
accordance with the Act. The registered office of the Company in the State of
New York is located at Corporation Service Company, 80 State Street, Albany, New
York 12207.
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which
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executes a counterpart of this Agreement as a Member and each Person who or
which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in which capital accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between or among the Members. Except as
otherwise required in the Act or this Agreement, no Member shall have any
liability to restore all or any portion of a deficit balance in a capital
account.
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2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. Members' loans shall bear interest at a rate to be determined by
the Managers. No Member shall be obligated to lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any
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expenditures of the Company described in Code Section 705(a)(2)(B) or treated as
Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits
or Losses pursuant to this Article 3 shall be subtracted from such taxable
income or loss; (iii) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining capital accounts as a result of a distribution other
than in liquidation of a Member's interest in the Company, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses; and (iv) notwithstanding any other provision of
this Article 3, any items which are specially allocated pursuant to Article 3
hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-1(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each
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Member who has a share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Member's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(b) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the
Members to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal
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to the net amount that would have been allocated to each such Member if the
Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to
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the capital of the Company shall, solely for tax purposes, be allocated among
the Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its initial
value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Premises (except escrows funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for monthly payments, all distributions of Cash
Flow ultimately shall be determined on an annual basis and any over-distribution
of Cash Flow to a Member shall be repaid by that Member promptly after receipt
of a written notice from the Managers requesting repayment and setting forth the
calculation of the repayment due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
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The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Premises. All references herein to "fiscal year" or "taxable year" shall
be considered references to the annual accounting period ending each September
30, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing thereof) pay the expenses thereof, and make
distributions to the Members as provided herein. The Members and their
respective duly authorized representatives shall have the right to examine such
books, records, accounts and documents at any and all reasonable times and to
make copies or extracts therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held
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and disbursed by the Managers only for the purposes herein specified. There
shall not be deposited into those accounts any funds other than Company funds.
Withdrawals shall be made from those accounts only for the purpose of making
payment of Company expenditures and distributions herein authorized, and only by
the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of
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applicable state law, and no provisions of this Agreement shall be interpreted
to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. Mehdi Gabayzadeh is hereby designated to act as the "Tax
Matters Member" under the Code and in any similar capacity under state or local
law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power and authority
in the management of the Company business to do any and all things necessary to
effectuate the purposes of the Company including, without limitation, the right,
power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and the management,
maintenance and operation of the Premises;
(ii) employ and dismiss from employment consultants, managers and
accountants;
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(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage architects, engineers and contractors, mechanics or materialmen
to effect repairs and improvements at the Premises;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for
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and on behalf of the Company by the Managers shall be binding upon the Company.
The Managers shall devote such time, effort and personnel to the Company affairs
as is necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a Member or a profit for the Members from the operations of the
Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or
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which reports the Managers deem the furnishing thereof to be in the best
interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by the vote or written consent of a majority of the
Membership Interests. A Manager elected to fill a vacancy shall be elected for
the unexpired term of the Manager's predecessor in office and shall hold office
until the expiration of such term and until the Manager's successor has been
elected and qualified. A Manager chosen to fill a position resulting from an
increase in the number of Managers shall hold office until the next annual
meeting of Members and until a successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such
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titles and exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by the
Managers at any time, with or without cause. Each officer shall hold office
until his or her successor is elected and qualified. Any number of offices may
be held by the same individual. The salaries and other compensation of the
officers shall be fixed by the Managers. The Managers and Members hereby
designate that the drawing, endorsing and making of all checks and other
commercial paper of the Company, and the transaction of all business of the
Company with its banks, shall be by any two (2) of Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Mehdizadeh, signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by
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an administrator, executor, guardian, conservator, committee, or other
fiduciary, except a trustee, may be voted by him, either in person or by proxy,
without transfer of such interests into his name. Membership Interests held by a
trustee may be voted by him, either in person or by proxy, only after the
Membership Interests have been transferred into his name as trustee or into the
name of his nominee. Membership Interests standing in the name of a domestic or
foreign corporation of any type or kind may be voted by such officer, agent or
proxy as the by-laws of such corporation may provide, or, in the absence of such
provision, as the board of directors of such corporation may determine. A Member
shall not sell his vote or issue a proxy to vote to any person for any sum of
money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose
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of any other action, the Managers may fix, in advance, a date as the record date
for any such determination of Members. Such date shall not be more than fifty
(50) nor less than ten (10) days before the date of such meeting, nor more then
fifty (50) days prior to any other action. When a determination of Members of
record entitled to notice of or to vote at any meeting of Members has been made
as provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general assignment by the Company for the
benefit of creditors; the filing of any petition or answer by the Company
seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of the Company or its debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors,
or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian, or other
similar official for the Company or for any substantial part of its
property; or action taken by the Company to authorize any of the actions
set forth above.
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7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber or dispose of all or any
portion of his, her or its Membership Interest or any rights therein without the
unanimous written consent of the Members, other than the transferring Member,
and any attempted disposition shall be ineffective to transfer such interest.
Each Member hereby acknowledges the reasonableness of the restrictions on
transfer imposed by this Agreement in view of the Company purposes and the
relationship of the Members. Accordingly, the restrictions on transfer contained
herein shall be specifically enforceable. If a Membership Interest of a Member
shall, with the consent of the Members, be transferred pursuant to this Section,
the transferee shall become the assignee of the Member's Membership Interest in
the Company, provided such assignment shall be by instrument in form and
substance reasonably satisfactory to the Members (which instrument shall contain
a statement by the assignee of his, her
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or its adoption and assumption of all of the applicable terms of this Agreement,
as same may be amended); provided, however, nothing contained in this Article 9
shall prevent any Member from transferring all or part of his, her or its
Membership Interest in the Company (x) by way of will or intestacy, or inter
vivos gift or trust, to or for the benefit of members of the Member's immediate
family, or (y) to a partnership, corporation or other entity, all of the
outstanding interests of which entity are owned (of record and beneficially) by
such Member and/or a permitted transferee, (each of (x) and (y) being referred
to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making
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such allocations and distributions, the Company shall recognize a transfer not
later than the end of the calendar month during which it is given notice stating
the date such Membership Interest was transferred and such other information as
the Managers may reasonably require. Without waiving the Company's or
nontransferring Members' remedies hereunder, if a transfer is not a transfer
permitted pursuant to this Agreement, then all of such items shall be allocated,
and all distributions shall be made, to the Person who, according to the books
and records of the Company, on the last day of the Fiscal Year during which the
transfer occurs, was the owner of the Membership Interest. The Company shall
incur no liability for making allocations and distributions in accordance with
the provisions of this Article, whether or not the Company has knowledge of any
transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power under the Act to dissolve the Company, (d)
transfer all or any portion of his, her or its Membership Interest in the
Company, (e) petition for judicial dissolution of the Company, (g) demand a
return of such Member's contributions or profits (or a bond or other security
for the return of such contributions or profits) or (h) take any action to file
a certificate of dissolution or its equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty
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(30) days after written notice thereof from any other Member, or if such default
cannot reasonably be cured within thirty (30) days, such Member shall fail to
commence to cure within such period and diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "Nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the Nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not reached within twenty (20) days of the giving of the Exercise
Notice, the fair market value of the defaulting Member's Membership Interest
shall be determined by three appraisers, all of whom shall be Members of the
American Institute of Real Estate Appraisers. Within ten (10) days after the
expiration of the aforesaid 20-day period, the participating Members shall give
notice to the other(s) specifying the name and address of an appraiser. If only
two appraisers are so chosen, the two appraisers shall meet within ten (10) days
after their designation and shall together appoint a third appraiser
("Appointee") within such ten day period. A majority of the appraisers shall
determine the fair market value of the defaulting Member's Membership Interest
as of the date of the Exercise Notice. Such determination of fair market value
shall be final and binding on all parties. Each Member shall pay the fees and
expenses of its own appraiser, except that in the event an Appointee is
required, the fees and expenses of the Appointee shall be paid jointly by the
participating Members. The purchase price for the defaulting Member's Membership
Interest shall be paid, and the closing of such purchase shall take place, in
accordance with this section. If more than one Member exercises such buy-out
rights, each such Member shall be entitled to acquire the portion of the
defaulting Member's Membership Interest which bears the same proportion as the
purchasing Members' Membership Interest bears to the aggregate Membership
Interests of the Members participating in the transaction. The
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payment of the purchase price, and the closing of the purchase, shall be in
accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following events ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
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(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the Nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the greatest consideration for such assets and in a
manner to minimize any losses resulting from liquidation. The proceeds shall be
distributed in the order set forth below:
First, to the payment of all matured debts, obligations and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company), including all costs of sale of the Premises, in the
order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by the
liquidating trustee to fund any unmatured or contingent liabilities of the
Company, which reserve shall, after the passage of a reasonable period of time,
be distributed in accordance with the provisions of this Section 12.3;
Third, to the repayment of any loans made by any Member to the Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership Interests.
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(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with, violate or result in the breach of
any law, regulation, order or rule of any governmental department, agency or
instrumentality applicable to it, him or them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by
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facsimile with a confirmation copy delivered on the second business day by
recognized overnight courier, to each party's respective address set forth on
the first page of this Agreement, with a copy given in like manner to Mandel and
Resnik, P.C., 220 East 42nd Street, New York, New York 10017, Attention:
Nicholas J. Kaiser, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such amendment would cause a breach of any agreement to which the Company
is a party, or if any such amendment would cause a breach of any Company
obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so
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stricken out or otherwise eliminated had never appeared in this Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
17th day of April, 1997.
/s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
/s/ Victoria Elghanayan
----------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
----------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- ------------ --------
Nourollah Elghanayan 4/17/97 16.67%
Victoria
Elghanayan 4/17/97 16.67%
Jeffrey Elghanayan 4/17/97 16.66%
Mehdi Gabayzadeh 4/17/97 26.0%
Mehdi Gabayzadeh 4/17/97 8.0%
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust
Mehdi Gabayzadeh 4/17/97 8.0%
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust
Mehdi Gabayzadeh 4/17/97 8.0%
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust
-27-
<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
SARATOGA REALTY LLC
The Limited Liability Company Operating Agreement of SARATOGA REALTY LLC is
hereby amended as follows (all capitalized terms not defined herein shall have
the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
" 6.9 Officers. The Managers may designate one or more individuals as
officers of the Company, who shall have such titles and exercise and
perform such powers and duties as shall be assigned to them from time
to time by the Managers. Any officer may be removed by the Managers at
any time, with or without cause. Each officer shall hold office until
his or her successor is elected and qualified. Any number of offices
may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
SARATOGA REALTY LLC
----------
The Limited Liability Company Operating Agreement of SARATOGA REALTY LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh, President
CERTIFICATE OF AMENDMENT
OF
TALAN PAPER CORP.
(Under Section 805 of the Business Corporation Law)
The undersigned, Nourollah Elghanayan (President) and Mehdi Gabayzadeh
(Secretary) of Talan Paper Corp. certify and set forth:
1. The name of the Corporation is Talan Paper Corp.
2. The date that the Certificate of Incorporation of Talan Paper Corp. was
filed by the Department of State is the 18th day of April, 1994.
3. The Certificate of Incorporation is hereby changed, pursuant to Section
801(b)(1) of the Business Corporation Law, to effect a change in the name of the
corporation.
4. Paragraph First of the Certificate of Incorporation of Talan Paper Corp.
is hereby amended to read as follows:
"The name of the corporation is Tagsons Papers, Inc."
5. This amendment to the Certificate of Incorporation of Talan Paper Corp.
was authorized by the resolution of the Board of Directors of the Corporation,
dated December 2, 1994 and the written consent of all of the shareholders of the
Corporation, dated December 2, 1994.
1
<PAGE>
In witness whereof, the undersigned, who affirm that the statements made
herein are true under the penalties of perjury, have executed this certificate
this 2nd day of December, 1994.
/s/ Nourollah Elghanayan
--------------------------------
Nourollah Elghanayan,
President
/s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh,
Secretary
2
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT
OF
TALEN PAPER CORP.
Under Section 805 of the Business Corporation Law
- --------------------------------------------------------------------------------
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED DEC 07 1994
TAX$________
BY: INIT.
FILED BY: Stanley R. Howie
Corporation Service Company
4 Central Avenue
Albany, NY 12210
3
<PAGE>
CERTIFICATE OF INCORPORATION
OF
TALAN PAPER CORP.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
------------------------------------------
The undersigned, a natural person of the age of eighteen years or over,
desiring to form a corporation puruant to the provisions of Section 402 of the
Business Corporation Law of the State of New York, hereby certifies as follows:
FIRST: The name of the corporation is:
TALAN PAPER CORP.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Business Corporation
Law of the State of New York, exclusive of any act or activity requiring the
consent or approval of any state official, department, board, agency or other
body without such consent or approval first being obtained.
THIRD: The office of the corporation in the State of New York is to be
located in the County of Suffolk.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is:
Two Hundred (200) Shares Without Par Value
1
<PAGE>
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against the corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
corporation served upon him is:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
IN WITNESS WHEREOF, I have duly executed and subscribed this certificate
and do affirm the foregoing as true under the penalties of perjury this
fifteenth of April 1994.
/s/ Tracey Ann Mccormick
-----------------------------
Tracey Ann Mccormick
Incorporator
Corporation Service Company
4 Central Avenue
Albany, NY 12210
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
TALAN PAPER CORP.
----------------------------------
Section 402 of the Business Corporation Law
Filer: Tracey Ann Mccormick
Corrpoation Service Company
4 Central Avenue
Albany, NY 12210
ICC
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED APR 18 1994
TAX$10
BY: INIT.
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TAGSONS PAPERS, INC.
(Under Section 805 of the Business Corporation Law)
It is hereby certified that:
FIRST: The name of the Corporation is Tagsons Papers, Inc. The original
name under which it was formed was Talan Paper Corp.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 18th day of April 1994.
THIRD: The amendment of the Certificate of Incorporation effected by this
Certificate of Amendment is as follows: to limit the liability of directors of
the Corporation.
FOURTH: To accomplish the foregoing amendment, the following new Article
Sixth is hereby added to the Certificate of Incorporation:
SIXTH: No director shall be personally liable to the Corporation or
its shareholders for damages for any breach of duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be
liable (i) if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) if he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, or (iii) if his acts violated section 719 of the New York
Business Corporation Law. This provision shall not eliminate or limit the
liability of any director for any act or omission prior to the adoption of
such provision.
FIFTH: The foregoing amendment was authorized by the Board of Directors
followed by a vote of the holders of all outstanding shares entitled to vote
thereon.
Dated: July 30, 1999
/s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TAGSONS PAPERS, INC.
Under Section 805 of the Business Corporation Law
[STAMP]
FILER:
Mandel and Resnik, P.C.
220 East 42nd Street
New York, NY 10017
<PAGE>
State of New York }
Department of State}
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on Sep 13 1999
[SEAL] /s/ [ILLEGIBLE]
Special Deputy Secretary of State
BY-LAWS
OF
TAGSONS PAPERS, INC.
(Formed under the laws of the State of New York)
<PAGE>
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. A meeting of the shareholders shall be held
annually for the election of directors and the transaction of other business on
such date in each year as may be determined by the Board of Directors, but in no
event later than 180 days following the end of the fiscal year of the
Corporation.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or, subject to the control of the Board, by the
President and shall be called by the Board upon the written request of the
holders of record of a majority of the outstanding shares of the Corporation
entitled to vote at the meeting requested to be called. Such request shall state
the purpose or purposes of the proposed meeting. At such meetings the only
business which may be transacted is that relating to the purpose or purposes set
forth in the notice thereof.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed by the
Board of Directors. If no place is so fixed, such meetings shall be held at the
office of the Corporation in the State of New York.
Section 4. Notice of Meetings. Notice of each meeting of shareholders shall
be given in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle objecting shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
-2-
<PAGE>
shareholder entitled to vote thereat shall, appoint two inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum,and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
Section 7. List of Shareholders at Meetings. A list of shareholders as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 8. Qualification of Voters. Unless otherwise provided in the
certificate of incorporation, every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share standing in his name
on the record of shareholders.
Treasury shares as of the record date and shares held as of the record date
by another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of
-3-
<PAGE>
such shares into his name. Shares held by a trustee may be voted by him, either
in person or by proxy, only after the shares have been transferred into his name
as trustee or into the name of his nominee.
Shares standing in the name of another domestic or foreign corporation of
any type or kind may be voted by such officer, agent or proxy as the by-laws of
such corporation may provide, or, in the absence of such provision, as the board
of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders who are present in person or by proxy and who are entitled
to vote may, by a majority of votes cast, adjourn the meeting despite the
absence of a quorum.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law or by written agreement among the shareholders, be
elected by a plurality of the votes cast at a meeting of shareholders by the
holders of shares entitled to
-4-
<PAGE>
vote in the election.
Whenever any corporate action, other than the election of directors, is to
be taken by vote of the shareholders, it shall, except as otherwise required by
law or by written agreement among the shareholders, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon. Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a unanimous vote of
shareholders.
Section 12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty (50) nor less than ten (10) days before the date of such
meeting, nor more then fifty (50) days prior to any other action.
When a determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The business of
the Corporation shall be managed by the Board of Directors. Each director shall
be at least eighteen (18) years of age.
Section 2. Number of Directors. The number of directors constituting the
entire Board of Directors shall be the number, not less than one (1) nor more
than five (5), fixed from time to time by a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies, provided, however, that no decrease shall shorten
the term of an incumbent director, and provided further, however, that if all of
the shares of the Corporation are owned
-5-
<PAGE>
beneficially and of record by less than three (3) shareholders, the number of
directors may be less than three (3) but not less than the number of
shareholders. Until otherwise fixed by the directors, the number of directors
constituting the entire Board shall be two (2).
Section 3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and, except where otherwise provided by these by-laws or by written
agreement among the shareholders, the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board.
Any action required or permitted to be taken by the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consent thereto by the members of the
Board or committee shall be filed with the minutes of the proceedings of the
Board or committee.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
shareholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the President or any two (2) directors.
Meetings of the Board of Directors shall be held at such places as may be
fixed by the Board for annual and regular meetings and in the notice of meeting
for special meetings. If no place is so fixed, meetings of the Board shall be
held at the principal office of the Corporation. Any one (1) or more members of
the Board of Directors may participate in meetings by means of a conference
telephone or similar communications equipment.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, New York time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that
-6-
<PAGE>
purpose, or, if none has been so designated, at his last known residence or
business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any meeting
of the Board of Directors.
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 6. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the President or
to the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any and all of the
directors may be removed with or without cause by vote of the shareholders.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders may be filled by vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
agreed upon by the Corporation or its shareholders. Vacancies occurring as a
result of the removal of directors by shareholders shall be filled by the
shareholders, unless otherwise agreed upon by the Corporation or its
shareholders. A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
Section 9. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees
each consisting of three (3) or more directors and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that
-7-
<PAGE>
no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' approval;
(2) The filling of vacancies in the Board or in any committee;
(3) The fixing of compensation of the directors for serving on the
Board or on any committee;
(4) The amendment or repeal of the by-laws, or the adoption of new
by-laws;
(5) The amendment or repeal of any resolution of the Board which, by
its term, shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
The Board of Directors may designate one or more directors as alternate
members of any such committee, who may replace any absent member or members at
any meeting of such committee.
Unless a greater proportion is required by the resolution designating a
committee, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at the time of such vote,
if a quorum is then present, shall be the act of such committee.
Each such committee shall serve at the pleasure of the Board of Directors.
Section 10. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 11. Interest of Directors in a Transaction. Unless shown to be
unfair and unreasonable as to the Corporation, no contract or other transaction
between the Corporation and one (1) or more of its directors, or between the
Corporation and any other corporation, firm, association or other entity in
which one (1) or more of the directors are directors or officers, or are
financially interested shall be either void or voidable, irrespective of whether
such interested director or directors are present at a meeting of the Board of
Directors, or of a committee thereof, which authorizes such contract or
transaction and irrespective of whether his or their votes are counted for such
purpose. In the absence of fraud, any such contract or transaction may be
conclusively authorized or approved as fair and reasonable by:
-8-
<PAGE>
(1) The Board of Directors or a duly empowered committee thereof, by a
vote sufficient for such purpose without counting the vote or votes of such
interested director or directors (although he or they may be counted in
determining the presence of a quorum at the meeting which authorizes such
contract or transaction), if the fact of such common directorship,
officership or financial interest is disclosed or known to the Board or
committee (as the case may be); or
(2) The shareholders entitled to vote for the election of directors,
if such common directorship, officership or financial interest is disclosed
or known to such shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders without counting any shares of the
director who would be the borrower.
ARTICLE III
OFFICERS
Section 1. Officers. The Board of Directors, as soon as may be practicable
after the annual election of directors, shall elect a President and a Secretary
and from time to time may elect or appoint one (1) or more Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, a Treasurer and such other
officers as it may determine. Any two (2) or more offices may be held by the
same person, except that the same person may not hold the offices of President
and Secretary unless there be only (1) shareholder. The Board of Directors may
also elect one (1) or more Assistant Secretaries and Assistant Treasurers.
Section 2. Other Officers. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 3. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Any payments made to an
officer of the Corporation such as a salary, commission, bonus, interest or
rent, or entertainment expenses incurred by him or her, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer of the Corporation to the full
extent of such disallowance. It shall be the duty of the directors, as a Board,
to enforce payment of each such amount disallowed. In lieu of payment by the
officer, subject to the determination of the directors, proportionate amounts
may be withheld from future compensation payments until the amount owed to
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<PAGE>
the Corporation has been recovered.
Section 4. Term of Office and Removal. Each officer shall hold office for
the term for which he is elected or appointed, and until his successor has been
elected or appointed and qualified. Unless otherwise provided in the resolution
of the Board of Directors electing or appointing an officer, his or her term of
office shall extend to and expire at the meeting of the Board following the next
annual meeting of shareholders. Any officer may be removed by the Board, with or
without cause, at any time. Removal of an officer without cause shall be without
prejudice to his or her contract rights, if any, and the election or appointment
of an officer shall not of itself create contract rights.
Section 5. Powers and Duties.
(a) President: The President shall be the chief executive officer of the
Corporation, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall also preside at all meetings of the
shareholders and the Board of Directors.
He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
(b) Vice-Presidents: The Vice-Presidents, in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election, during the absence or disability of or refusal to act by the
President, shall perform the duties and exercise the powers of the President,
and shall perform such other duties as the Board of Directors shall prescribe.
(c) Secretary and Assistant Secretaries: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation
and he or she, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the
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<PAGE>
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his or her signature.
The Assistant Secretary or, if there be more than one, the Assistant
Secretaries in the order designated by the Board of Directors (or in the absence
of any designation, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
(d) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
The Assistant Treasurer or, if there shall be more than one (1), the
Assistant Treasurers in the order designated by the Board of Directors (or in
the absence of any designation, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 6. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes
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<PAGE>
of the proceedings of the shareholders, Board of Directors and any committees of
directors, and (c) a current list of the directors and officers and their
residence addresses. The Corporation shall also keep at its office in the State
of New York or at the office of its transfer agent or registrar in the State of
New York, if any, a record containing the names and addresses of all
shareholders, the number and class of shares held by each and the dates when
they respectively became the owners of the record thereof.
The Board of Directors may determine whether and to what extent and at what
times and places and under what conditions and regulations any accounts, books,
records or other documents of the Corporation shall be open to inspection, and
no creditor, security holder or other person shall have any right to inspect any
accounts, books, records or other documents of the Corporation except as
conferred by statute or as so authorized by the Board.
Section 7. Checks, Notes, etc. All checks and drafts on, and withdrawals
from the Corporation's accounts with banks or other financial institutions, and
all bills of exchange, notes and other instruments for the payment of money,
drawn, made, indorsed, or accepted by the Corporation, shall be signed on its
behalf by the person or persons thereunto authorized by, or pursuant to
resolution of, the Board of Directors.
ARTICLE IV
FORMS OF CERTIFICATES AND LOSS AND
TRANSFER OF SHARES
Section 1. Forms of Share Certificates. The shares of the Corporation shall
be represented by certificates, in such forms as the Board of Directors may
prescribe, signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer at the date
of issue.
Each certificate representing shares issued by the Corporation shall set
forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each
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<PAGE>
class of shares, if more than one (1), authorized to be issued and the
designation, relative rights, preferences and limitations of each series of any
class of preferred shares authorized to be issued so far as the same have been
fixed, and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of New
York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Shares. Shares of the Corporation shall be
transferable on the record of shareholders
upon presentment to the Corporation or a transfer agent of a certificate or
certificates representing the shares requested to be transferred, with proper
indorsement on the certificate or on a separate accompanying document, together
with such evidence of the payment of transfer taxes and compliance with other
provisions of law as the Corporation or its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Share Certificates. No certificate for
shares of the Corporation shall be issued in place of any certificate alleged to
have been lost, destroyed or wrongfully taken, except, if and to the extent
required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account of the
alleged loss, destruction or wrongful taking of the replaced certificate or
the issuance of the new certificate;
(3) Payment of the expense of the Corporation and its agents incurred
in connection with the issuance of the new certificate; and
(4) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE V
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<PAGE>
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a corporate
seal, alter such seal at pleasure, and authorize it to be used by causing it or
a facsimile to be affixed or impressed or reproduced in any other manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be the
year ending September 30.
Section 3. Amendments. By-laws of the Corporation may be adopted, amended
or repealed by vote of the holders of the shares at the time entitled to vote in
the election of directors. By-laws may also be adopted, amended or repealed by
the Board of Directors, but any by-law adopted by the Board may be amended or
repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of the
changes made.
Section 4. Indemnification. The Corporation shall, to the extent legally
permissible, indemnify any person serving or who has served as a director or
officer of the Corporation, or at its request as a director, officer, trustee,
employee or other agent of any organization in which the Corporation owns shares
or of which it is a creditor, against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he or she may be involved or with which he or she
may be threatened, while serving, or thereafter, by reason of his or her being
or having been such a director, officer, trustee, employee or agent, except with
respect to any matter as to which he or she shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Corporation; provided, however, that
as to any matter disposed of by a compromise payment by such director, officer,
trustee, employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless:
(a) such compromise shall be approved as in the best interests of the
Corporation, after notice that it involves such indemnification:
(i) by a disinterested majority of the directors, then in office;
or
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<PAGE>
(ii) by the holders of a majority of the outstanding stock of the
Corporation at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested director
or officer; or
(b) in the absence of action by disinterested directors or
shareholders, there has been obtained at the request of a majority of the
directors then in office an opinion in writing of independent legal counsel
to the effect that such director, officer, trustee, employee or agent
appears to have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Corporation.
Expenses, including counsel fees, reasonably incurred by any such director,
officer, trustee, employee or agent in connection with the defense or
disposition of any such action, suit or other proceeding may be paid from time
to time by the Corporation in advance of the final disposition thereof upon
receipt of an undertaking by such individual to repay the amounts so paid by the
Corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any such director, officer, trustee, employee or agent may be entitled. Nothing
contained in this Article shall affect any rights to indemnification to which
corporate personnel other than directors, officers, trustees, employees or
agents may be entitled by contract or otherwise under law. As used in this
section, the terms "director", "officer", "trustees", "employee" and "agent"
include their respective heirs, executors and administrators, and an
"interested" director, officer, trustee, employee or agent is one against whom
in such capacity the proceedings in question, or other proceedings on the same
or similar grounds, are then pending.
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ARTICLES OF ORGANIZATION OF
UNIQUE LLC
-------------------------------------------------
Section 203 of the Limited Liability Company Law.
Filer: David A. Nadel, Esq
Mandel And Resnik, P.c.
220 East 42nd Street
New York, NY 10017
[STAMP]
State of New York
Department of State
Filed JUL 16 1996
<PAGE>
ARTICLES OF ORGANIZATION
OF
UNIQUE LLC
Under Section 203 of the Limited Liability Company Law
FIRST: The name of the limited liability company is Unique LLC.
SECOND: The county within this state in which the office of the limited
liability company is to be located is Suffolk.
THIRD: In addition to the events of dissolution set forth in ss 701 of
the LLCL, the latest date on which the Company may dissolve is
December 31, 2026.
FOURTH: The secretary of state is designated as agent of the limited
liability company upon whom process against it may be served. The
post office address within this state to which the secretary of
state shall mail a copy of any process against the limited
liability company served upon him or her is c/o Mandel and
Resnik, P.C., 220 East 42nd Street, New York, New York 10017,
Attention: Barry H. Mandel, Esq.
FIFTH: The limited liability company is to be managed by one or more
members.
IN WITNESS WHEREOF, this certificate has been subscribed this 5th day of July,
1996, by the undersigned who affirms that the statements made herein are true
under the penalties of perjury.
/s/ Mehdi Gabayzadeh
----------------------------
Mehdi Gabayzadeh, Member
and Sole Organizer
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF ORGANIZATION
OF
UNIQUE LLC
----------------------------------------------------------------
(Under Section 211 of the Limited Liability Company Law)
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED AUG 07 1996
Filer: Mandel and Resnick, P.C.
220 East 42nd Street
New York, New York 10017
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF ORGANIZATION
OF
UNIQUE LLC
(Under Section 211 of the Limited Liability Company Law)
FIRST: The name under which the limited liability company
was formed is Unique LLC.
SECOND: The date of filing of the Articles of Organization is
July 16, l996.
THIRD: The amendment effected by this Certificate of
Amendment is as follows:
Paragraph FIRST of the Articles of Organization dealing with the name
of the 1imited liability company is hereby amended to read as follows:
"The name of the limited liability company is Unique Financing LLC."
IN WITNESS WHEREOF, this certificate has been subscribed this 1st day of
August, 1996, by the undersigned who affirms that the statements made herein are
true under the penalties of perjury.
/s/ Mehdi Gabayzadeh
---------------------
Mehdi Gabayzadeh,
Manager and Member
1
<PAGE>
State of New York,
Banking Department
I, Edmund P. Rogers III, Deputy Superintendent of Banks of the State of New
York, hereby approve, pursuant to the New York Limited Liability Company Law
Section 204(f) as amended, the use of the word or a derivative of the word
"finance" in the name of UNIQUE FINANCING LLC.
- --------------------------------------------------------------------------------
Witness, my hand and official seal of the Banking Department at the City of New
York,
this 31st day of July in the Year of our Lord
one thousand nine hundred and ninety-six.
/s/ Illegible
--------------------------------
2
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
UNIQUE LLC
This Limited Liability Company Operating Agreement ("Agreement") is made as of
the ____ day of July 1996, by and among Nourollah Elghanayan, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Victoria Elghanayan, having an
address at 135 Engineers Road, Hauppauge, NY 11788, Jeffrey Elghanayan, having
an address at 2481 Monaco Drive, Laguna Beach, CA 92651-1006, Mehdi Gabayzadeh,
having an address at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh
and Joseph Neissany, as trustees of the John Gabayzadeh Trust, having an address
at 135 Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph
Neissany, as trustees of the Diane Gabayzadeh Trust, having an address at 135
Engineers Road, Hauppauge, NY 11788, Mehdi Gabayzadeh and Joseph Neissany, as
trustees of the Deborah Gabayzadeh Trust, having an address at 135 Engineers
Road, Hauppauge, NY 11788.
W I T N E S S E T H:
Whereas, the parties hereto propose to form a limited liability company for the
purposes of owning manufacturing equipment (the "Equipment"); and
Whereas, the limited liability company will own the Equipment and will hold,
manage and maintain the Equipment as hereinafter provided.
Now, therefore, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE 1 - COMPANY FORMATION
1.1 Formation. The parties hereby form a limited liability company (the
"Company") pursuant to the provisions of the New York Limited Liability Company
Act as currently in effect (the
<PAGE>
"Act") and upon the terms and conditions set forth in this Agreement. The name
of the Company shall be Unique LLC and all business of the Company shall be
conducted in that name. One or more Persons has acted or will act as an
organizer or organizers to form the Company and shall cause the Articles of
Organization ("Articles") to be filed or recorded in the appropriate public
office(s) as may be required by the Act and shall thereafter do and continue to
do all other things as may be required to perfect and maintain the Company as a
limited liability company under the State of New York. "Person" shall mean any
person, corporation, governmental authority, limited liability company,
partnership, trust, unincorporated association or other entity.
1.2 Purposes. The purpose of the Company is to (i) own, hold, manage and
maintain the Equipment, (ii) engage in any and all business activities and
transactions reasonably necessary and incidental to the purposes of the Company;
and (iii) engage in any other lawful act or activity for which a limited
liability company may be formed under the Act.
1.3 Title. Title to, and all rights and interests of the Company in and to, its
assets including, without limitation, the Equipment and all contracts, leases,
rights, insurance policies and other documents relating thereto, shall be in the
name of and owned by the Company and no Member shall have any ownership interest
in such property in such Member's individual name or right and each Member's
interest in the Company shall be personal property for all purposes. The
Company's credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be transferred or encumbered for or in payment
of any individual obligation of any Member.
1.4 Principal Offices. The principal place of business of the Company shall be
located at 135 Engineers Road, Hauppauge, New York or at such other location as
may be determined by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Company shall commence from the date of the filing of
the Articles with the Secretary of State and shall continue until December 31,
2026, unless sooner terminated in accordance with the provisions of this
Agreement or the Act.
1.6 Agent. The Secretary of State of New York is hereby designated as the agent
of the Company. The registered agent for service of process on the Company shall
be Corporation Service Company or any successor appointed by the Managers, in
accordance with the Act. The registered office of the Company in the State of
New York is located at Corporation Service Company, 500 Central Avenue, Albany,
New York 12206.
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<PAGE>
ARTICLE 2 - CAPITAL CONTRIBUTIONS
2.1 Members. The names, addresses, initial Capital Contributions, date of
admission to the Company and Membership Interests allocated to each of the
Members are set forth on Exhibit "A" hereto and are incorporated by reference
herein. For purposes of this Agreement: (i) "Member" shall mean each Person who
or which executes a counterpart of this Agreement as a Member and each Person
who or which may hereafter become a party to this Agreement; (ii) "Capital
Contribution" shall mean, with respect to any Member, any contribution by a
Member to the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services; and (iii) "Membership Interest" shall mean with respect to the
Company, the value of all Capital Contributions and with respect to any Member,
the ratio of the value of the Capital Contribution of such Member to the
aggregate value of all Capital Contributions.
2.2 Capital Accounts. There shall be established for each Member, as of the date
hereof, a capital account to which will be credited an amount equal to such
Member's Capital Contributions to the Company. The capital account of any Member
whose interest in the Company is increased by means of a transfer to such Member
of all or part of the interest of another Member, shall be appropriately
adjusted to reflect such transfer. From time to time, each Member's share of
gain, income, losses and distributions shall be credited or charged, as the case
may be, to such Member's capital account. Each Member's capital account will be
created and maintained consistent with tax accounting and other principles set
forth in Section 704(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its counterpart in any subsequently enacted code and Treasury
Regulation Section 1.704-1(b) promulgated thereunder and shall be interpreted
and applied in a manner consistent with such Regulation. If, at any time, the
Company shall suffer a loss as a result of which the capital account of any
Member shall be a negative amount, such loss shall be carried as a charge
against that Member's capital account, and that Member's share of subsequent
profits of the Partnership shall be applied to restore such capital account
deficit. Immediately following the transfer of any interest in the Company, the
capital account of the transferee Member shall be equal to the capital account
of the transferor Member attributable to the transferred interest. For purposes
of computing the amount of any item of income, gain, deduction or loss to be
reflected in the Members' capital accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes taking into
account any adjustments required pursuant to Code Section 704(b) and the
applicable regulations promulgated thereunder. If, in the opinion of the
Managers, the manner in which Capital Accounts are to be maintained pursuant to
this Agreement should be modified to comply with Code Section 704(b), then the
method in
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<PAGE>
which capital accounts are maintained shall be so modified; provided, however,
that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between or among the Members. Except as
otherwise required in the Act or this Agreement, no Member shall have any
liability to restore all or any portion of a deficit balance in a capital
account.
2.3 Additional Capital Contributions. Additional capital contributions shall be
made by the Members in proportion to their Membership Interests as agreed to by
the Members from time to time.
2.4 Loans. If any Member shall, with the approval of the Managers, provide funds
to the Company other than as a contribution to the capital of the Company, such
funds shall be treated as a loan, and shall not enlarge such lending Member's
Membership interest in the Company, but shall be a debt due from the Company to
such Member. No Member shall be obligated to lend any funds to the Company.
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no Member shall demand
or receive a return of his, her or its Capital Contributions or withdraw from
the Company without the consent of all Members. Under circumstances requiring a
return of any Capital Contributions, no Member shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Member shall have priority over any other Member, whether for the
return of a Capital Contribution or for profits, losses or distributions;
however, the provisions hereof shall not apply to loan or other indebtedness (as
distinguished from a Capital Contribution) made by a Member to the Company.
(c) No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its capital account or for services rendered on
behalf of the Company or otherwise in its capacity as Member, except as
otherwise provided in this Agreement.
(d) Except as otherwise provided in this Agreement, no Person shall be
admitted to the Company as a Member without the unanimous written consent of the
Members.
ARTICLE 3 - ALLOCATIONS
3.1 Definitions. The following terms shall have the following meanings for
purposes of this Article 3:
-4-
<PAGE>
"Profits" and "Losses" as used herein shall mean the amount of the Company's
profits and losses, for each fiscal year of the Company, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments: (i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Article 3 shall be added to such taxable income or loss; (ii)
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this Article 3 shall be subtracted from such
taxable income or loss; (iii) to the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining capital accounts as a result of a distribution
other than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and (iv) notwithstanding any other
provision of this Article 3, any items which are specially allocated pursuant to
Article 3 hereof shall not be taken into account in computing Profits or Losses.
3.2 Allocations. After giving effect to the special allocations set forth in
Section 3.3 below, Profits and Losses of the Company, including gains and losses
attributable to the sale or other disposition of all or any portion of the
Company property, shall be allocated or borne, as the case may be, by the
Members in accordance with their Membership Interests.
3.3 Special Allocations. Notwithstanding any provision of this Agreement to the
contrary, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Partnership Minimum
Gain as defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) during any
fiscal year, each Member shall be specially allocated items of Company income
and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is
-5-
<PAGE>
intended to comply with the minimum gain chargeback requirement in Section
1.704-1(f) of the Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-1(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain determined in accordance with Regulation Section
1.704-2(i)(3) attributable to a Partner Nonrecourse Debt as defined in
Regulation Section 1.704-2(b)(4) during any fiscal year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions as defined in Regulation
Section 1.704-2(b)(1) for any fiscal year shall be specially allocated among the
Members in proportion to their Membership Interests.
(d) Member Nonrecourse Deductions. Any Partner Nonrecourse Deductions as
defined in Regulation Sections 1.704- 2(i)(1) and 1.704-2(i)(2) for any fiscal
year shall be specially allocated to the Member who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining capital accounts as the result of a
distribution to a Member in complete liquidation of his interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Regulations Section 1.704-1(b)(2)(iv) (m)(2) applies, or to the
Members to whom such distribution was
-6-
<PAGE>
made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Membership Interests. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of an interest in the Company to a Member (the "Issuance Items") shall
be allocated among the Members so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
3.4 Curative Allocations. The allocations set forth in Sections 3.3(a), 3.3(b),
3.3(c), 3.3(d) and 3.3(e) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss, or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Article 3 (other than the
Regulatory Allocations), the Managers shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
determine appropriate so that, after such offsetting allocations are made, each
Member's capital account balance is, to the extent possible, equal to the
capital account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 3.1. In exercising their discretion under this Section 3.4, the Managers
shall take into account future Regulatory Allocations under Section 3.3(a) and
Section 3.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(c) and Section 3.3(d).
3.5 Other Allocation Rules.
(a) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Membership Interests.
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(d) To the extent permitted by Section 1.704-2(b)(3) of the Regulations,
the Managers shall endeavor not to treat distributions of Cash Flow (as
hereinafter defined) as having been made from the proceeds of a Nonrecourse
Liability as defined in Regulation Section 1.704-2(b)(3) or a Partner
Nonrecourse Debt.
3.6 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial value pursuant to Section 2.1 hereof.
ARTICLE 4 - DISTRIBUTIONS
4.1 Definitions. The term "Cash Flow" as used herein shall mean, for any period,
an amount equal to the total cash receipts received by the Company (other than
funds received as capital contributions of the Members under the terms of this
Agreement) including, without limitation, net proceeds from the sale, exchange
or other disposition of Company property and from any other extraordinary event,
such as an insured casualty or condemnation, for that period, less the sum of
(i) principal and interest payments made during that period on any indebtedness
of the Company (other than loans by the Members) (except to the extent that the
amounts thereof were reserved against and funded from such reserves), (ii) any
net additions to the reserves of the Company that the Managers may deem
necessary for any contingent or contested liabilities of the Company and any
liquidated liabilities of the Company which are not yet due and payable;
provided, however, that (x) any funds so reserved shall be deposited in a
segregated account (bearing interest, if feasible) with a bank or trust company
designated by the Managers or otherwise invested in a manner to be designated by
the Managers and (y) at the expiration of such period as the Managers shall deem
advisable, any such funds not so disbursed shall be distributed among the
Members as provided below, and (iii) any other cash payments (except
distributions to the Members and payments taken out of the aforementioned
reserves) made or escrows established during that period which are required in
connection with the Equipment (except escrows funded by borrowings).
4.2 Distribution of Cash Flow. Cash Flow for each fiscal year shall be
distributed among the Members in accordance with their respective Membership
Interests.
4.3 Payment of Cash Flow. Cash Flow shall be paid in cash on a monthly basis,
within 10 days after the end of each calendar month, provided, however, that
notwithstanding the provision for
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monthly payments, all distributions of Cash Flow ultimately shall be determined
on an annual basis and any over-distribution of Cash Flow to a Member shall be
repaid by that Member promptly after receipt of a written notice from the
Managers requesting repayment and setting forth the calculation of the repayment
due.
4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from distributions, or with respect to
allocations, to the Member and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law and shall allocate such
amounts to the Members with respect to which such amount was withheld. The
Company may offset all amounts owing to the Company by a Member against any
distribution to be made to such Member. No distribution shall be declared and
paid unless after such distribution is made the assets of the Company are in
excess of the liabilities of the Company.
ARTICLE 5 - ACCOUNTING
5.1 Accounting Period. All Company books and records shall be kept on a fiscal
basis, except that the final accounting period shall end on the date of the sale
of the Equipment. All references herein to "fiscal year" or "taxable year" shall
be considered references to the annual accounting period ending each September
30, except that the first and last of such periods may consist of less than
twelve (12) months.
5.2 Books of Account. The Managers shall keep and maintain complete and accurate
books, records and accounts of the Company. Such books shall be kept on a fiscal
year basis using the accrual method of accounting, and shall be closed and
balanced at the end of each fiscal year. Books and records shall be kept in
accordance with generally accepted accounting principles, consistently applied.
An accounting of all items of receipts, income, gains, credits, costs, expenses
and losses arising out of or resulting from the ownership and leasing and the
operation of the Company's assets shall be made by the Managers annually as of
September 30th of each year and upon termination of this Agreement.
5.3 Inspections. All books, records and accounts of the Company, together with
executed copies of this Agreement, all instruments governing any indebtedness of
the Company and any amendments to any of those documents, shall be kept at all
times at the principal office of the Managers. The Managers shall maintain such
books and records and collect all Company income and (solely from such income
and the proceeds of any financing
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thereof) pay the expenses thereof, and make distributions to the Members as
provided herein. The Members and their respective duly authorized
representatives shall have the right to examine such books, records, accounts
and documents at any and all reasonable times and to make copies or extracts
therefrom.
5.4 Bank Accounts. The Managers shall maintain one or more accounts in such
banks which shall be designated by the Managers, which accounts shall be used
for the payment of the disbursements properly chargeable to the Company and in
which shall be deposited all cash receipts of the Company. All amounts required
by this Article 5 to be deposited in those accounts shall be and remain the
property of the Company and shall be received, held and disbursed by the
Managers only for the purposes herein specified. There shall not be deposited
into those accounts any funds other than Company funds. Withdrawals shall be
made from those accounts only for the purpose of making payment of Company
expenditures and distributions herein authorized, and only by the Managers.
5.5 Reports. The Managers shall be responsible for the preparation of financial
reports of the Company and the coordination of financial matters of the Company
with the Company's accountants. Annual statements shall be reviewed by the
Company's accountants. The Members shall be provided by the Managers with the
following:
(i) within sixty (60) days after the end of each calendar year, a copy of
the proposed United States federal information tax return for the Company
and each such Member's Form K-1, which proposed return and form shall be
subject to the approval of the Members; and
(ii) within ninety (90) days after the end of each calendar year, a copy of
any United States federal, state and local income tax returns required to
be filed by the Company.
The Managers shall cause the Company's accountants to prepare all income and
other tax returns of the Company and shall cause the same to be filed in a
timely manner. The Managers shall furnish to each Member a copy of each such
return, together with any schedules or other information which each Member may
reasonably require in connection with such Member's own tax affairs. Each Member
shall furnish to the Managers all pertinent information relating to the Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed. The Company shall make the following elections on the
appropriate tax returns:
(i) To adopt September 30 as the Fiscal Year;
(ii) To adopt the accrual method of accounting and keep the Company's books
and records on the basis of such method;
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(iii) To elect to amortize the organizational expenses of the Company and
the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty months as permitted by Section 709(b) of the
Code; and
(iv) Any other election that the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
5.6 Special Basis Adjustment. In connection with any permitted transfer of a
Membership Interest, the Managers shall cause the Company, at the written
request of the transferor or the transferee, on behalf of the Company and at the
time and in the manner provided in Regulations Section 1.754(b), to make an
election to adjust the transferee's basis of the Company's property in the
manner provided in Sections 734(b) and 743(b) of the Code, and such transferee
shall pay all costs incurred by the Company in connection therewith, including,
without limitation, reasonable attorneys' and accountants' fees. In addition, if
a distribution as described in Section 734 of the Code occurs, upon the request
of any Member, the Managers shall cause the Company to elect to adjust the basis
of the Company's property pursuant to Section 754 of the Code.
5.7 Tax Matters Member. __________________ is hereby designated to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.
ARTICLE 6 - MANAGEMENT
6.1 Management. The overall management and control of the business and affairs
of the Company shall be vested in the Managers, elected by the vote or written
consent of at least a majority of all Membership Interests. During the term of
this Agreement, each Member shall vote his, her or its Membership Interest to
provide for the election and maintenance of Nourollah Elghanayan and Mehdi
Gabayzadeh as the Managers. The Managers shall have full responsibility and
exclusive discretion in the management and control of the business and affairs
of the Company and shall make all decisions relating thereto. Except as
otherwise expressly set forth in this Agreement, the Managers (acting for and on
behalf of the Company), in extension and not in limitation of the rights and
powers given by this Article or by the other provisions of this Agreement shall,
in their sole discretion, have the full and absolute right, power and authority
in the management of the Company business to do any and all things necessary to
effectuate the purposes of the
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Company including, without limitation, the right, power and authority to:
(i) execute any agreement, contract, document, certifications and other
instruments which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company and/or the management,
maintenance and operation of the Equipment;
(ii) employ and dismiss from employment consultants, managers and
accountants;
(iii) acquire by purchase, lease or otherwise any property which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Company;
(iv) sell, lease or otherwise dispose of Company property;
(v) open bank accounts and otherwise invest the funds of the Company;
(vi) purchase insurance on the business and assets of the Company;
(vii) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action or otherwise adjust claims or demands of or against the Company;
(viii) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Company and secure the same by mortgage, pledge or other lien on Company
property;
(ix) establish reasonable reserves from income derived from the Company's
operation;
(x) perform or cause to be performed all of the Company's obligations under
any agreement to which the Company is a party;
(xi) engage engineers and contractors, mechanics or materialmen to effect
repairs and improvements to the Equipment;
(xii) maintain the books of account of the Company; and
(xiii) take, or refrain from taking, all actions not proscribed or limited
by this Agreement as may be necessary or appropriate to accomplish the
purposes of the Company.
Unless authorized to do so by the Managers, no Person shall have any power or
authority to bind the Company.
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6.2 Restrictions on Powers. Notwithstanding anything to the contrary contained
herein, the Managers shall not, without the unanimous written consent of the
Members take any action which under the Act or this Agreement is prohibited or
requires the consent of the Members.
6.3 Duties. The Managers shall manage the affairs of the Company in good faith
and in a prudent and businesslike manner and shall be under a fiduciary duty to
conduct the affairs of the Company in the best interests of the Company and the
Members, and shall have a fiduciary responsibility for the safekeeping and use
of all funds and assets of the Company. All decisions made for and on behalf of
the Company by the Managers shall be binding upon the Company. The Managers
shall devote such time, effort and personnel to the Company affairs as is
necessary for the conduct thereof; provided, however, it is understood and
agreed that the Managers and/or their affiliates may be interested, directly or
indirectly, in various other businesses and undertakings and, subject to the
fulfillment of their obligations under this Agreement, the Managers shall not be
required to devote their entire time to the business of the Company and shall
not be restricted in any manner from participating in other businesses or
activities. In carrying out their obligations, the Managers shall:
(i) render periodic reports to the Members with respect to the operations
of the Company on at least a semi-annual basis;
(ii) on or before March 1st of every year, mail to all persons who were
Members at any time during the Company's prior fiscal year an annual
certified report of the Company, including all necessary tax information, a
report of a firm of independent certified public accountants containing
certified financial statements, and any other information regarding the
Company and its operations during the prior fiscal year reasonably deemed
by the Managers to be material;
(iii) obtain and maintain such casualty insurance and such public liability
and other insurance as may be available and as they deem necessary or
appropriate; and
(iv) perform all such other acts required to be performed pursuant to the
Act and the terms of this Agreement.
6.4 Liabilities of Managers. In carrying out their duties hereunder, the
Managers shall not be liable to the Company or to any other Member for any
actions taken in good faith and reasonably believed to be in the best interests
of the Company, or for errors of judgment, but shall be liable for any damage or
loss sustained by the Company or any Member due to the willful misconduct, gross
negligence, breach of the Managers' fiduciary duties and/or breach of this
Agreement. The Managers do not in any way guaranty the return of any Capital
Contribution to a
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Member or a profit for the Members from the operations of the Company.
6.5 Compensation/Reimbursement of Managers. The Managers, as such, shall not
receive any compensation for services rendered by them to the Company except as
may be expressly agreed to in writing by the Members, but shall be reimbursed
for their out-of-pocket expenses reasonably incurred on behalf of and for the
benefit of the Company, including legal, audit, accounting, brokerage and other
fees, insurance costs and the costs of preparation and dissemination of reports
required to be furnished to the Members for investor tax reporting or other
purposes, or which reports the Managers deem the furnishing thereof to be in the
best interests of the Company.
6.6 Reliance on Act of Managers. No financial institution or any other person,
firm or corporation dealing with the Managers or the Company shall be required
to ascertain whether the Managers are acting in accordance with this Agreement,
but such financial institution or such other persons, firm or corporation shall
be protected in relying solely upon the deed, transfer or assurance of and the
execution of such instrument or instruments by the Managers.
6.7 Delegation of Duties of the Managers. The Managers shall have the right at
any time, and from time to time, to delegate all or a portion of their duties as
Managers of the Company to any person, firm or entity; provided, however, that
the Company shall in no event incur any additional expense as a result of such
delegation, and further provided that the Managers shall at all times be and
remain liable to the Company for the performance of their duties as Managers of
the Company. In that regard, the Managers shall not enter into any transaction
or agreement with any affiliate of the Managers in connection with which any
such person or entity shall receive, directly or indirectly, a fee or other form
of compensation from the Company, except as may be specifically authorized by
the Members.
6.8 Resignation; Removal; Vacancies. Any Manager may resign at any time by
giving written notice to the Company. The resignation of any Manager shall take
effect upon receipt of such notice or at any later time specified in such
notice. Unless otherwise specified in such notice, the acceptance of the
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a withdrawal of a Member. Any Manager may be removed or
replaced with or without cause by the vote or written consent of a majority of
Membership Interests. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of
such Member. Any vacancy occurring for any reason in the number of Managers may
be filled by the vote or written consent of a majority of the remaining Managers
then in office; provided, however, that if there are no remaining Managers, each
vacancy shall be filled by
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the vote or written consent of a majority of the Membership Interests. A Manager
elected to fill a vacancy shall be elected for the unexpired term of the
Manager's predecessor in office and shall hold office until the expiration of
such term and until the Manager's successor has been elected and qualified. A
Manager chosen to fill a position resulting from an increase in the number of
Managers shall hold office until the next annual meeting of Members and until a
successor has been elected and qualified.
6.9 Officers. The Managers may designate one or more individuals as officers of
the Company, who shall have such titles and exercise and perform such powers and
duties as shall be assigned to them from time to time by the Managers. Any
officer may be removed by the Managers at any time, with or without cause. Each
officer shall hold office until his or her successor is elected and qualified.
Any number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Managers. The Managers and
Members hereby designate that the drawing, endorsing and making of all checks
and other commercial paper of the Company, and the transaction of all business
of the Company with its banks, shall be by Nourollah Elghanayan, Mehdi
Gabayzadeh, James Mehdizadeh or Robert Medizadeh, any two signing jointly.
ARTICLE 7 - MEETING OF MEMBERS
7.1 Annual Meeting of Members. A meeting of the Members shall be held annually,
for the purpose of the transaction of any business as may come before such
meeting, on such date in each year as may be determined by the vote or written
consent of the Membership Interests.
7.2 Special Meetings of Members. Special meetings of the Members may be called
by the Managers or by any Member holding not less than twenty-five (25%) percent
of the Membership Interests. Such request shall state the purpose or purposes of
the proposed meeting. At such meetings the only business which may be transacted
is that relating to the purpose or purposes set forth in the notice thereof.
7.3 Place of Meetings. Meetings of Members shall be held at such place, within
or without the State of New York, as may be designated in any notice of such
meeting. If no place is so designated, such meetings shall be held at the office
of the Company in the State of New York.
7.4 Notice of Meetings. Notice of each meeting of Members shall be given in
writing no less than ten and no more than sixty days prior to the date of the
meeting and shall state the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called. Notice of a special meeting shall
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indicate that it is being issued by or at the direction of the person or persons
calling or requesting the meeting.
7.5 Waiver of Notice. Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
7.6 Qualification of Voters. Unless otherwise provided in the Articles every
Member of record shall be entitled at every meeting of Members to vote the
Membership Interest standing in his name on the record of Members. Membership
Interests held by an administrator, executor, guardian, conservator, committee,
or other fiduciary, except a trustee, may be voted by him, either in person or
by proxy, without transfer of such interests into his name. Membership Interests
held by a trustee may be voted by him, either in person or by proxy, only after
the Membership Interests have been transferred into his name as trustee or into
the name of his nominee. Membership Interests standing in the name of a domestic
or foreign corporation of any type or kind may be voted by such officer, agent
or proxy as the by-laws of such corporation may provide, or, in the absence of
such provision, as the board of directors of such corporation may determine. A
Member shall not sell his vote or issue a proxy to vote to any person for any
sum of money or anything of value except as permitted by law.
7.7 Quorum of Members. The holders of a majority of the Membership Interests
entitled to vote thereat shall constitute a quorum at a meeting of Members for
the transaction of any business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Members. The
Members who are present in person or by proxy and who are entitled to vote may,
by a majority of votes cast, adjourn the meeting despite the absence of a
quorum. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
7.8 Proxies. Every Member entitled to vote at a meeting of Members or to express
consent or dissent without a meeting may authorize another person or persons to
act for him by proxy. Every proxy must be signed by the Member or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Member executing it, except as otherwise
provided by law. The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy unless
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Managers.
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7.9 Vote or Consent of Members. Whenever Members are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding Membership Interests entitled to vote thereon. Written consent thus
given by the holders of all outstanding Membership Interests entitled to vote
shall have the same effect as a unanimous vote of Members.
7.10 Fixing Record Date. For the purpose of determining the Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining Members entitled to receive payment of any distribution
or the allotment of any rights, or for the purpose of any other action, the
Managers may fix, in advance, a date as the record date for any such
determination of Members. Such date shall not be more than fifty (50) nor less
than ten (10) days before the date of such meeting, nor more then fifty (50)
days prior to any other action. When a determination of Members of record
entitled to notice of or to vote at any meeting of Members has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the Managers fix a new record date for the adjourned meeting. A
list of Members as of the record date shall be produced at any meeting of
Members upon the request thereat or prior thereto of any Member.
7.11 Restrictions on Members and Managers. Notwithstanding anything to the
contrary in this Agreement, neither the Managers nor any Member shall have the
authority to, and covenants and agrees that he, she or it shall not, perform or
authorize any of the following acts on behalf of the Company without the
unanimous approval of the Members:
(i) Admit a new Member to the Company except as provided in this Agreement;
(ii) Perform any act in contravention of this Agreement or which would make
it impossible or unreasonably burdensome to carry on the business of the
Company;
(iii) Confess a judgment against the Company;
(iv) Possess any property of the Company, or assign the rights of the
Company in any of its property for other than the exclusive benefit of the
Company or commingle the funds of the Company with the funds of any other
Person; or
(v) Cause the Company to take any action that would cause a Bankruptcy (as
such term is hereinafter defined) of the Company. "Bankruptcy" shall mean
the inability of the Company generally to pay its debts as such debts
become due, or an admission in writing by the Company of its inability to
pay its debts generally or a general
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assignment by the Company for the benefit of creditors; the filing of any
petition or answer by the Company seeking to adjudicate it a bankrupt or
insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of the Company or its debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking, consenting
to, or acquiescing in the entry of an order for relief or the appointment
of a receiver, trustee, custodian, or other similar official for the
Company or for any substantial part of its property; or action taken by the
Company to authorize any of the actions set forth above.
7.12 Liability of Members. The liability of the Members shall be limited as
provided under the laws of the Act. Members that are not Managers shall take no
part whatever in the control, management, direction or operation of the
Company's affairs and shall have no power to bind the Company. The Managers may
from time to time seek advice from the Members, but need not accept such advice,
and at all times the Managers shall have the exclusive right to control and
manage the Company. No Member shall be an agent of any other Member of the
Company solely by reason of being a Member.
ARTICLE 8 - INDEMNIFICATION
8.1 Indemnification. The Company, its receiver or its trustee (in the case of
its receiver or trustee, to the extent of the Company's property) shall
indemnify, save harmless, and pay all judgments and claims against each Member
and each Manager, and any officers, directors or partners of any such Member or
Manager relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such Member or Manager, officer,
director or partner in connection with the business of the Company, including
reasonable attorneys' fees, court costs and disbursements incurred by such
Member or Manager, officer, director or partner in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, and otherwise to the maximum extent permitted by the Act.
8.2 Limitations. Notwithstanding anything to the contrary in Section 8.1 above,
no Member or Manager shall be indemnified from any liability for fraud, bad
faith, willful misconduct, or gross negligence. If any provision of this Article
8 is judicially determined to be invalid in whole or in part, then such
provision shall be deemed deleted and the balance of the Article shall be
enforced to the maximum extent permitted by law.
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ARTICLE 9 - TRANSFERS OF INTERESTS
9.1 Restrictions on Transfers. No Member shall, directly or indirectly,
transfer, sell, assign, pledge, hypothecate, encumber or dispose of all or any
portion of his, her or its Membership Interest or any rights therein without the
unanimous written consent of the Members, other than the transferring Member,
and any attempted disposition shall be ineffective to transfer such interest.
Each Member hereby acknowledges the reasonableness of the restrictions on
transfer imposed by this Agreement in view of the Company purposes and the
relationship of the Members. Accordingly, the restrictions on transfer contained
herein shall be specifically enforceable. If a Membership Interest of a Member
shall, with the consent of the Members, be transferred pursuant to this Section,
the transferee shall become the assignee of the Member's Membership Interest in
the Company, provided such assignment shall be by instrument in form and
substance reasonably satisfactory to the Members (which instrument shall contain
a statement by the assignee of his, her or its adoption and assumption of all of
the applicable terms of this Agreement, as same may be amended); provided,
however, nothing contained in this Article 9 shall prevent any Member from
transferring all or part of his, her or its Membership Interest in the Company
(x) by way of will or intestacy, or inter vivos gift or trust, to or for the
benefit of members of the Member's immediate family, or (y) to a partnership,
corporation or other entity, all of the outstanding interests of which entity
are owned (of record and beneficially) by such Member and/or a permitted
transferee, (each of (x) and (y) being referred to as a "Permitted Transfer").
9.2 Transfers. As of the effective date of any permitted transfer, such
transferor Member's rights and obligations hereunder shall terminate except as
to items accrued as of such date. Any person or entity who acquires, in any
manner whatsoever, any Membership Interest in the Company from a Member shall
not thereby become a Member unless all of the following conditions shall have
been complied with:
(i) such person or entity shall expressly assume and agree to be bound by
all of the applicable terms and conditions of this Agreement;
(ii) the transfer of a Membership Interest in the Company to such person or
entity shall not violate any provisions of any indebtedness of the Company,
or of any other agreement which affects the Company;
(iii) such person or entity shall have the legal right, power and capacity
to hold the Membership Interest in the Company;
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(iv) the Managers shall receive such evidence and confirmation with respect
to the foregoing as it shall reasonably request; and
(v) the transfer shall be permitted by this Article.
Upon compliance with all of the conditions and provisions hereof, the Managers
shall execute and deliver such amendments and certificates as shall be necessary
to constitute such person or entity a Member hereunder.
9.3 Distribution Among Members. If a transfer of a Membership Interest in the
Company occurs pursuant to this Article 9 during any Fiscal Year, then Profits,
Losses, each item thereof and all other items attributable to such Membership
Interest for such Fiscal Year shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Managers. All distributions on
or before the date of a transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Solely for purposes of
making such allocations and distributions, the Company shall recognize a
transfer not later than the end of the calendar month during which it is given
notice stating the date such Membership Interest was transferred and such other
information as the Managers may reasonably require. Without waiving the
Company's or nontransferring Members' remedies hereunder, if a transfer is not a
transfer permitted pursuant to this Agreement, then all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the Fiscal Year during
which the transfer occurs, was the owner of the Membership Interest. The Company
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Article, whether or not the Company has knowledge of
any transfer of ownership of any Membership Interest in the Company.
ARTICLE 10 - WITHDRAWALS; ACTION FOR
PARTITION; BILL FOR COMPANY ACCOUNTING
10.1 Waiver of Partition. No Member shall, either directly or indirectly, take
any action to require partition or appraisal of the Company or of any of its
assets or cause the sale of any Company property, and notwithstanding any
provisions of applicable law to the contrary, each Member (and its legal
representatives, successors or assigns) hereby irrevocably waives any and all
right to maintain any action for partition or to compel any sale with respect to
his, her or its Membership Interest, or with respect to any assets or properties
of the Company, except as expressly provided in this Agreement.
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10.2 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the
Act, each Member hereby acknowledges that the Members have entered into this
Agreement based on their mutual expectation that the Members will continue as
Members. Except as otherwise expressly required or permitted by or pursuant to
this Agreement, each Member hereby covenants that he, she or it shall not,
without the unanimous consent of the Members, (a) take any action that would
cause a Bankruptcy of such Member, (b) withdraw or attempt to withdraw from the
Company, (c) exercise any power under the Act to dissolve the Company, (d)
transfer all or any portion of his, her or its Membership Interest in the
Company, (e) petition for judicial dissolution of the Company, (g) demand a
return of such Member's contributions or profits (or a bond or other security
for the return of such contributions or profits) or (h) take any action to file
a certificate of dissolution or its equivalent with respect to itself.
ARTICLE 11 - EVENTS OF DEFAULT
11.1 Events of Default. Each of the following events shall constitute an "Event
of Default" hereunder:
(a) any Member shall default in the performance of any material term or
provision of this Agreement applicable to him, her or it and such default shall
continue for more than thirty (30) days after written notice thereof from any
other Member, or if such default cannot reasonably be cured within thirty (30)
days, such Member shall fail to commence to cure within such period and
diligently pursue same to completion; or
(b) any Member shall fail to satisfy any material condition of this
Agreement applicable to him, her or it, and such failure shall continue for more
than thirty (30) days after written notice thereof from any other Member, or if
such condition cannot reasonably be satisfied within thirty (30) days, such
Member shall fail to commence to cure within such period and diligently pursue
same to completion.
11.2 If an Event of Default has occurred and is continuing, in addition to all
other remedies available at law, in equity and hereunder, the Members who shall
not be in default (the "nondefaulting Members") shall have the right,
exercisable by notice to the defaulting Member, to purchase their pro-rata share
of the defaulting Member's Membership Interest in the Company. The purchase
price shall be the fair market value of the defaulting Member's Membership
Interest as of the date of the notice of election to purchase such interest,
taking into account the existence of such default and the actual damages
suffered by the nondefaulting Members, the status of the Company at such time,
and any losses incurred as a result of the default. As soon as is practicable,
the fair market value of the defaulting Member's Membership Interest shall be
determined by agreement of the participating Members, provided, however, if
agreement is not
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reached within twenty (20) days of the giving of the Exercise Notice, the fair
market value of the defaulting Member's Membership Interest shall be determined
by three appraisers, all of whom shall be Members of the American Institute of
Real Estate Appraisers. Within ten (10) days after the expiration of the
aforesaid 20-day period, the participating Members shall give notice to the
other(s) specifying the name and address of an appraiser. If only two appraisers
are so chosen, the two appraisers shall meet within ten (10) days after their
designation and shall together appoint a third appraiser ("Appointee") within
such ten day period. A majority of the appraisers shall determine the fair
market value of the defaulting Member's Membership Interest as of the date of
the Exercise Notice. Such determination of fair market value shall be final and
binding on all parties. Each Member shall pay the fees and expenses of its own
appraiser, except that in the event an Appointee is required, the fees and
expenses of the Appointee shall be paid jointly by the participating Members.
The purchase price for the defaulting Member's Membership Interest shall be
paid, and the closing of such purchase shall take place, in accordance with this
section. If more than one Member exercises such buy-out rights, each such Member
shall be entitled to acquire the portion of the defaulting Member's Membership
Interest which bears the same proportion as the purchasing Members' Membership
Interest bears to the aggregate Membership Interests of the Members
participating in the transaction. The payment of the purchase price, and the
closing of the purchase, shall be in accordance with the following provisions.
The purchase price shall be payable by the purchasing Member(s) to the
defaulting Member as follows: ten (10%) percent of the purchase price in cash or
by official bank check or certified check of the purchaser delivered at closing,
and the balance shall be paid in twenty (20) equal, consecutive quarterly
installments, commencing on the first day of the calendar quarter immediately
following the actual date of closing, evidenced by a non-negotiable promissory
note made by the purchaser payable to defaulting Member. The closing of the sale
shall be held at the office of the Company, unless otherwise mutually agreed, on
a mutually acceptable date not more than sixty (60) days after the receipt by
the defaulting Member of the Notice. The defaulting Member shall transfer the
Membership Interest free and clear of any liens, encumbrances or any interests
of any third party and shall execute or cause to be executed any and all
documents reasonably required to fully transfer such interest to the purchasing
Members. Any monetary default by the defaulting Member under this Agreement must
be cured out of the proceeds from such sale at the closing and any interest and
principal owing on any outstanding loans made by the defaulting Member must be
paid in full. Following the date of closing, the defaulting Member shall have no
further rights to any distributions of Cash Flow or other distributions
attributable and allocable to the period from and after the closing, and all
such rights shall vest in the purchasing Members.
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ARTICLE 12 - DISSOLUTION AND WINDING UP
12.1 Liquidating Events. The Company shall be terminated and dissolved and shall
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(i) upon the expiration of the term of the Company on December 31, 2026;
(ii) the happening of any event that makes it unlawful or impossible to
carry on the business of the Company;
(iii) upon the sale, disposition or condemnation of all or substantially
all of the assets of the Company and the collection and distribution of any
proceeds thereof;
(iv) the Bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that
terminates the continued membership of any Member, unless within one
hundred eighty (180) days after such event the Company is continued by the
vote or written consent of a majority in interest of all of the remaining
Members;
(v) upon written demand of the Members owning at least 66 2/3% of the
Membership Interests, provided, however, that no demand for termination and
dissolution may be made by the Members if such demand would cause a default
of any mortgage obligation of the Company or a breach of any agreement to
which the Company is a party, or if such demand would cause a breach of any
Company obligation;
(vi) upon the occurrence of an Event of Default, upon the unanimous
election of the nondefaulting Members; or
(vii) the occurrence of any event which makes it unlawful for the Company
business to be continued or causes dissolution of the Company under the
Act.
12.2 Final Accounting. Upon the termination of this Agreement and the
dissolution of the Company, a full and general accounting of the Company's
assets, liabilities, capital, income and expenses shall be taken by the
Company's accountant and a copy of such accounting shall be provided to each
Member within one hundred twenty (120) days after dissolution. The Managers
shall designate a third-party who shall act as liquidating trustee, and who
shall immediately proceed to wind up and terminate the business and affairs of
the Company.
12.3 Liquidation and Distribution.
(a) Upon the occurrence of a Liquidating Event, the affairs of the Company
shall be wound up and its assets hereunder liquidated as promptly as is
consistent with obtaining the
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greatest consideration for such assets and in a manner to minimize any losses
resulting from liquidation. The proceeds shall be distributed in the order set
forth below:
First, to the payment of all matured debts, obligations and
liabilities of the Company (other than any loans or advances that may have
been made by the Members to the Company), including all costs of sale of
the Equipment, in the order of priority as provided by law;
Second, to the creation of any reserve deemed reasonably necessary by
the liquidating trustee to fund any unmatured or contingent liabilities of
the Company, which reserve shall, after the passage of a reasonable period
of time, be distributed in accordance with the provisions of this Section
12.3;
Third, to the repayment of any loans made by any Member to the
Company;
Fourth, to the Members to the extent of their positive capital account
balances; and
Thereafter, to the Members in accordance with their Membership
Interests.
(b) The liquidating trustee shall be indemnified and held harmless by the
Company from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the liquidating trustee's taking of any action authorized under or
within the scope of this Article 12.
(c) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the discharge of liabilities to creditors so as to
minimize the normal losses attendant upon a liquidation; provided, however, the
liquidation of the assets of the Company, the payment of creditors and the
distribution of Company assets to the Members shall be effected so as to comply
with the timing requirements in the Regulations promulgated under Section 704(b)
of the Code. Each of the Members shall be furnished with a statement prepared by
the Company's accountants, which shall set forth the assets and liabilities of
the Company as of the date of complete liquidation. The Managers shall cause to
be filed with the appropriate governmental or municipal office a Certificate of
Cancellation of the Company.
ARTICLE 13 - REPRESENTATIONS
The Members each represent and warrant, for themselves where applicable to them
or it, as follows:
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(a) each Member has full power and authority to enter into this Agreement
and, in the case of the Managers, to perform all of their obligations hereunder,
and has taken all action required by law or otherwise in connection with or as a
condition precedent to the foregoing.
(b) Neither the execution or delivery of this Agreement nor the
consummation of the transactions herein contemplated will: (i) conflict with,
result in a breach of, constitute (with or without the giving of notice or the
passage of time or both) a default under or otherwise materially adversely
affect any contract, agreement, instrument, license or undertaking to which any
Member is a party or by which any Member or its or their properties or assets
are or may be bound; or (ii) conflict with, violate or result in the breach of
any law, regulation, order or rule of any governmental department, agency or
instrumentality applicable to it, him or them.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices. Except as otherwise expressly provided herein, all notices,
requests, demands, documents and other communications given or due hereunder
shall hereafter be made in writing and shall be deemed to have been duly given:
(i) when delivered, if delivered by hand against receipt therefor, (ii) three
(3) days after being deposited in the United States mail, if mailed, by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) upon transmission if by facsimile with a confirmation copy delivered on
the second business day by recognized overnight courier, to each party's
respective address set forth on the first page of this Agreement, with a copy
given in like manner to Mandel and Resnik, P.C., 220 East 42nd Street, New York,
New York 10017, Attention: Barry H. Mandel, Esq.
14.2 Further Assurances. The Members shall execute and deliver such further
instruments as may be required to carry out or confirm the intent and purposes
of this Agreement.
14.3 Captions. Article and section titles and captions contained in this
Agreement are inserted as a matter of convenience and for reference and in no
way define, limit, extend or describe the scope of this Agreement or the intent
of any provisions hereof.
14.4 Pronouns. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context shall
require.
14.5 Amendment. This Agreement may be amended only with the written approval of
all of the Members; provided, however, that no such amendment may be made if
such amendment would cause a default of any mortgage obligation of the Company
or if such
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amendment would cause a breach of any agreement to which the Company is a party,
or if any such amendment would cause a breach of any Company obligation.
14.6 Counterparts. This Agreement may be executed in two or more counterparts
and all counterparts so executed shall for all purposes constitute one
agreement, binding on all the parties hereto, notwithstanding that all parties
shall not have executed the same counterpart.
14.7 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14.8 Benefit. Except as herein otherwise provided, this Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
14.9 Waiver. No waiver of any of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, whether of similar or different nature, unless so expressly
stated in writing.
14.10 Stricken Words or Phrases. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated had never appeared in this
Agreement.
14.11 Entire Agreement. This Agreement, including all other documents referred
to herein which form a part hereof, contains the entire understanding of the
parties with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings, if any, between or
among the parties with respect to such subject matter.
14.12 Future Cooperation. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of the
____ day of July, 1996.
/s/ Nourollah Elghanayan
----------------------------------
Nourollah Elghanayan
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/s/ Victoria Elghanayan
----------------------------------
Victoria Elghanayan
/s/ Jeffrey Elghanayan
----------------------------------
Jeffrey Elghanayan
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the John Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Diane Gabayzadeh Trust
/s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh, as trustee of
the Deborah Gabayzadeh Trust
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EXHIBIT A
The name, date of admission, initial capital contribution and percentage
interest of each of the Members ("Membership Interest") are as follows:
Date of Initial Capital Membership
Name Admission Contribution Interest
- ---- --------- --------------- ----------
Nourollah Elghanayan 7/__/96 16.67%
Victoria Elghanayan 7/__/96 16.67%
Jeffrey Elghanayan 7/__/96 16.66%
Mehdi Gabayzadeh 7/__/96 26.0%
Mehdi Gabayzadeh
and Joseph Neissany,
as trustees of the
John Gabayzadeh Trust 7/__/96 8.0%
Mehdi Gabayzadeh
and Joseph Neissany,
as trustees of the
Diane Gabayzadeh Trust 7/__/96 8.0%
Mehdi Gabayzadeh
and Joseph Neissany,
as trustees of the
Deborah Gabayzadeh Trust 7/__/96 8.0%
<PAGE>
AMENDED AND RESTATED EXHIBIT A
The name, date of admission and percentage interest of the Sole Member
("Membership Interest") is as follows:
Date of Membership
Name Admission Interest
- ---- --------- --------
American Tissue Holdings Inc. 10/01/98 100%
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
UNIQUE FINANCING LLC
The Limited Liability Company Operating Agreement of Unique Financing LLC is
hereby amended as follows (all capitalized terms not defined herein shall have
the meanings set forth in the Operating Agreement):
Section 6.9 is hereby deleted in its entirety and replaced with the
following:
"Section 6.9 Officers. The Managers may designate one or more
individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to
them from time to time by the Managers. Any officer may be removed by
the Managers at any time, with or without cause. Each officer shall
hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and
other compensation of the officers shall be fixed by the Managers. The
Managers and Members hereby designate that the drawing, endorsing and
making of all checks and other commercial paper of the Company, and
the transaction of all business of the Company with its banks, shall
be by Nourollah Elghanayan and Mehdi Gabayzadeh, signing jointly."
In witness whereof, the sole member has executed this Amendment as of the 31st
day of August, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
-------------------------------------
Mehdi Gabayzadeh, President
<PAGE>
AMENDMENT TO THE
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
UNIQUE FINANCING LLC
----------
The Limited Liability Company Operating Agreement of UNIQUE FINANCING LLC (the
"Company") is hereby amended to provide that the membership interests of the
Company may be certificated and that each of such certificates is a "Security"
governed by Article 8 of the Uniform Commercial Code of the State of New York.
In witness whereof, the sole member has executed this Amendment as of the 9th
day of July, 1999.
American Tissue Inc.,
member
By: /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, President
American Tissue Inc.
as Issuer
and
The Subsidiary Guarantors
Named Herein
$165,000,000
12 1/2% Senior Secured Notes
due July 15, 2006
-------------
INDENTURE
Dated as of July 9, 1999
-------------
The Chase Manhattan Bank
as Trustee
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions.............................................................................1
SECTION 1.02. Other Definitions......................................................................27
SECTION 1.03. Incorporation by Reference of Trust Indenture Act......................................28
SECTION 1.04. Rules of Construction..................................................................28
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating........................................................................29
SECTION 2.02. Execution and Authentication...........................................................30
SECTION 2.03. Registrar and Paying Agent.............................................................30
SECTION 2.04. Paying Agent to Hold Money in Trust....................................................30
SECTION 2.05. Holder Lists...........................................................................31
SECTION 2.06. Transfer and Exchange..................................................................31
SECTION 2.07. Replacement Notes......................................................................42
SECTION 2.08. Outstanding Notes......................................................................43
SECTION 2.09. Treasury Notes.........................................................................43
SECTION 2.10. Temporary Notes........................................................................43
SECTION 2.11. Cancellation...........................................................................44
SECTION 2.12. Defaulted Interest.....................................................................44
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee.....................................................................44
SECTION 3.02. Selection of Notes to Be Redeemed......................................................44
SECTION 3.03. Notice of Redemption...................................................................45
SECTION 3.04. Effect of Notice of Redemption.........................................................46
SECTION 3.05. Deposit of Redemption Price............................................................46
SECTION 3.06. Notes Redeemed in Part.................................................................46
SECTION 3.07. Optional Redemption....................................................................46
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SECTION 3.08. No Mandatory Redemption................................................................47
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes.......................................................................47
SECTION 4.02. Maintenance of Office or Agency........................................................48
SECTION 4.03. Change of Control......................................................................48
SECTION 4.04. Asset Sales............................................................................50
SECTION 4.05. Restricted Payments....................................................................53
SECTION 4.06. Incurrence of Indebtedness and Issuance of Preferred Stock.............................57
SECTION 4.07. Liens..................................................................................60
SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.........................60
SECTION 4.09. Transactions with Affiliates...........................................................61
SECTION 4.10. Additional Subsidiary Guarantees.......................................................62
SECTION 4.11. Impairment of Security Interests.......................................................62
SECTION 4.12. Line of Business.......................................................................63
SECTION 4.13. Payments for Consent...................................................................63
SECTION 4.14. Reports................................................................................63
SECTION 4.15. Taxes..................................................................................63
SECTION 4.16. Maintenance of Properties; Insurance, Books and Records................................64
SECTION 4.17. Statement as to Compliance.............................................................64
ARTICLE 5
SUCCESSORS
SECTION 5.01. Merger, Consolidation or Sale of Assets................................................65
SECTION 5.02. Successor Corporation Substituted......................................................66
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default......................................................................66
SECTION 6.02. Acceleration...........................................................................68
SECTION 6.03. Other Remedies.........................................................................69
SECTION 6.04. Waiver of Past Defaults................................................................69
SECTION 6.05. Control by Majority....................................................................69
SECTION 6.06. Limitation on Suits....................................................................70
SECTION 6.07. Rights of Holders of Notes to Receive Payment..........................................70
SECTION 6.08. Collection Suit by Trustee.............................................................70
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SECTION 6.09. Trustee May File Proofs of Claim.......................................................71
SECTION 6.10. Priorities.............................................................................71
SECTION 6.11. Undertaking for Costs..................................................................72
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee......................................................................72
SECTION 7.02. Rights of Trustee......................................................................73
SECTION 7.03. Individual Rights of Trustee...........................................................74
SECTION 7.04. Trustee's Disclaimer...................................................................74
SECTION 7.05. Notice of Defaults.....................................................................74
SECTION 7.06. Reports by Trustee to Holders of the Notes.............................................75
SECTION 7.07. Compensation and Indemnity.............................................................75
SECTION 7.08. Replacement of Trustee.................................................................76
SECTION 7.09. Successor Trustee by Merger, etc.......................................................77
SECTION 7.10. Eligibility; Disqualification..........................................................77
SECTION 7.11. Preferential Collection of Claims Against Company......................................77
SECTION 7.12. Intercreditor Agreements...............................................................77
ARTICLE 8
DISCHARGE OF INDENTURE; LEGAL DEFEASANCE
AND COVENANT DEFEASANCE
SECTION 8.01. Satisfaction and Discharge.............................................................78
SECTION 8.02. Option to Effect Legal Defeasance or Covenant Defeasance...............................78
SECTION 8.03. Legal Defeasance and Discharge.........................................................79
SECTION 8.04. Covenant Defeasance....................................................................79
SECTION 8.05. Conditions to Legal or Covenant Defeasance.............................................79
SECTION 8.06. Deposited Money and Government Securities to Be Held in Trust; Other
Miscellaneous Provisions...........................................................81
SECTION 8.07. Repayment to Company...................................................................81
SECTION 8.08. Reinstatement..........................................................................82
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes....................................................82
SECTION 9.02. With Consent of Holders of Notes.......................................................83
SECTION 9.03. Compliance with Trust Indenture Act....................................................84
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SECTION 9.04. Revocation and Effect of Consents......................................................84
SECTION 9.05. Notation on or Exchange of Notes.......................................................84
SECTION 9.06. Trustee to Sign Amendments, etc........................................................85
ARTICLE 10
COLLATERAL
SECTION 10.01. Collateral Documents; Additional Collateral; Substitute Collateral.....................85
SECTION 10.02. Recording, Registration and Opinions...................................................88
SECTION 10.03. Release of Collateral..................................................................90
SECTION 10.04. Possession and Use of Collateral.......................................................90
SECTION 10.05. Specified Releases of Collateral.......................................................91
SECTION 10.06. Disposition of Collateral Without Release..............................................93
SECTION 10.07. Form and Sufficiency of Release........................................................95
SECTION 10.08. Purchaser Protected....................................................................96
SECTION 10.09. Authorization of Actions to Be Taken by the Trustee Under the Collateral
Documents..........................................................................96
SECTION 10.10. Authorization of Receipt of Funds by the Trustee Under the Collateral
Documents..........................................................................96
SECTION 10.11. Powers Exercisable by Receiver or Trustee..............................................97
ARTICLE 11
APPLICATION OF TRUST MONIES
SECTION 11.01. Collateral Account.....................................................................97
SECTION 11.02. Withdrawal of Insurance Proceeds and Condemnation Awards...............................97
SECTION 11.03. Withdrawal of Net Cash Proceeds to Fund an Asset Sale Offer...........................100
SECTION 11.04. Withdrawal of Trust Monies for Investment in Replacement Assets.......................101
SECTION 11.05. Investment of Trust Monies............................................................103
ARTICLE 12
SUBSIDIARY GUARANTEES
SECTION 12.01. Subsidiary Guarantees.................................................................103
SECTION 12.02. Execution and Delivery of Subsidiary Guarantees.......................................105
SECTION 12.03. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.........................105
SECTION 12.04. Releases Following Sale of Assets.....................................................106
SECTION 12.05. Limitation of Subsidiary Guarantor's Liability........................................107
SECTION 12.06. Application of Certain Terms and Provisions to the Subsidiary Guarantors..............107
</TABLE>
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ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls..........................................................108
SECTION 13.02. Notices...............................................................................108
SECTION 13.03. Communication by Holders of Notes with Other Holders of Notes.........................109
SECTION 13.04. Certificate and Opinion as to Conditions Precedent....................................109
SECTION 13.05. Statements Required in Certificate or Opinion.........................................110
SECTION 13.06. Rules by Trustee and Agents...........................................................110
SECTION 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders..............110
SECTION 13.08. Governing Law.........................................................................110
SECTION 13.09. No Adverse Interpretation of Other Agreements.........................................110
SECTION 13.10. Successors............................................................................111
SECTION 13.11. Severability..........................................................................111
SECTION 13.12. Counterpart Originals.................................................................111
SECTION 13.13. Table of Contents, Headings, etc......................................................111
SECTION 13.14. Intercreditor Agreements..............................................................111
EXHIBITS
EXHIBIT A FORM OF NOTE AND SUBSIDIARY GUARANTEE
EXHIBIT B FORM OF CERTIFICATE OF TRANSFER
EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT D FORM OF SECURITY AGREEMENT
EXHIBIT E-1 FORM OF MORTGAGE
EXHIBIT E-2 FORM OF LEASEHOLD MORTGAGE
EXHIBIT E-3 FORM OF DEED OF TRUST
EXHIBIT E-4 FORM OF LEASEHOLD DEED OF TRUST
EXHIBIT F FORM OF EXISTING LIEN INTERCREDITOR AGREEMENT
EXHIBIT G FORM OF BOISE INTERCREDITOR AGREEMENT
EXHIBIT H FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
</TABLE>
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INDENTURE, dated as of June 9, 1999, among American Tissue Inc., a Delaware
corporation (the "Company"), the Subsidiary Guarantors (as defined) and The
Chase Manhattan Bank, as trustee (the "Trustee").
Each party agrees as follows for the benefit of each other and for the
equal and ratable benefit of the Holders of the 12 1/2% Series A Senior Secured
Notes due 2006 (the "Series A Notes") and the 12 1/2% Series B Senior Secured
Notes due 2006 (the "Series B Notes" and, together with the Series A Notes, the
"Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. Definitions.
"144A Global Note" means a Global Note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with, or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Series A Notes sold in reliance on Rule 144A.
"Account Debtor" means any Person who is or who may become obligated to the
Company or any Subsidiary under, with respect to, or on account of, an Account.
"Accounts" shall have the meaning given to such term in the Security
Agreement.
"Accrued Bankruptcy Interest" means, with respect to any Indebtedness, all
interest accruing thereon after the filing of a petition by or against the
Company or any of the Subsidiary Guarantors under any Bankruptcy Law, in
accordance with and at the rate (including any rate applicable upon any default
or event of default, to the extent lawful) specified in the documents evidencing
or governing such Indebtedness, whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under such Bankruptcy
Law.
"Acquired Indebtedness" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms
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"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, will mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a Person will be deemed to be control. Notwithstanding the
foregoing, no Person (other than the Company or any Subsidiary of the Company)
in which a Receivables Subsidiary makes an Investment in connection with a
Qualified Receivables Transaction will be deemed to be an Affiliate of the
Company or any of its Subsidiaries solely by reason of such Investment.
"After-Acquired Property" means any and all assets or property acquired
after the Issue Date including any assets or property acquired by the Company or
any Subsidiary Guarantor from a transfer from the Company or a Wholly Owned
Subsidiary that is a Subsidiary Guarantor.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Purchase Agreement" means the asset purchase agreement, dated as of
March 24, 1999, for the purchase and sale of the Berlin-Gorham Mills, by and
among Crown Paper Co., Crown Vantage-New Hampshire Electric, Inc., Berlin Mills
Railway, Inc., American Tissue Inc. (f/k/a American Tissue Holdings Inc.) and
Pulp & Paper of America LLC, including any instrument or agreement executed in
connection therewith, as such agreements or instruments are in effect on the
Issue Date.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any non-cash
assets (including, without limitation, by way of a sale and leaseback and
including the issuance, sale or other transfer of any of the capital stock
of any Subsidiary of such Person) other than to the Company or to any of
its Wholly Owned Subsidiaries that is a Subsidiary Guarantor and other than
directors' qualifying shares, in each case, in excess of $250,000;
(2) the issuance of Equity Interests in any Subsidiaries or the sale
of any Equity Interests in any Subsidiaries, in each case, in one or a
series of related transactions (x) that have a fair market value in excess
of $250,000 or (y) with respect to which the Company shall have received
net proceeds in excess of $250,000; and
(3) the damage or destruction of all or any portion of the Collateral
or the taking of all or any portion of the Collateral by eminent domain;
provided, that notwithstanding the foregoing, the term "Asset Sale" will not
include:
(a) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company or any of its
Subsidiaries, as permitted pursuant to Section 5.01;
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(b) the sale or lease of Equipment, inventory, accounts receivable or
other assets in the ordinary course of business consistent with past
practice and to the extent that such sales or leases are not part of a sale
of the business in which such Equipment was used or in which such inventory
or accounts receivable arose;
(c) a transfer of assets by the Company to a Wholly Owned Subsidiary
that is a Subsidiary Guarantor or by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary that is a Subsidiary
Guarantor;
(d) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary that is a Subsidiary
Guarantor;
(e) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind;
(f) the grant in the ordinary course of business of any non-exclusive
license of patents, trademarks, registrations therefor and other similar
intellectual property;
(g) sales or transfers of accounts receivable and related assets
pursuant to a Qualified Receivables Transaction to a Receivables Subsidiary
for the fair market value thereof, including cash in an amount at least
equal to 75% of the book value thereof as determined in accordance with
GAAP; provided that such sales shall not exceed the lesser of $25.0 million
or the outstanding balance under the Revolving Credit Facility; and
provided further that the entire proceeds of any such sale are used to
repay outstanding indebtedness under the Revolving Credit Facility and
permanently reduce commitments thereunder;
(h) Permitted Investments; or
(i) a Restricted Payment that is permitted by Section 4.05.
For the purposes of clause (g), notes received in exchange for the transfer of
accounts receivable and related assets will be deemed cash if the Receivables
Subsidiary or other payor is required to repay said notes as soon as practicable
from available cash collections less amounts required to be established as
reserves pursuant to contractual agreements with entities that are not
Affiliates of the Company entered into as part of a Qualified Receivables
Transaction.
"Berlin-Gorham Mills" means the pulp and paper mills located in Berlin and
Gorham, New Hampshire and certain related assets to be acquired by the Company
on the Issue Date pursuant to the Asset Purchase Agreement.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors of the Company.
"Board Resolution" means a resolution duly adopted by the Board of
Directors and certified by an Officer.
"Boise Agreement" means that certain agreement dated November 23, 1992,
among Boise Cascade, American Tissue Mills of Oregon, Inc. and American Tissue
Corporation, as amended
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on January 1, 1999 and as the same may be further amended, modified, extended,
renewed, amended and restated or supplemented from time to time.
"Boise Cascade" means the Boise Cascade Corporation.
"Boise Collateral" shall have the meaning given to such term in the
Security Agreement.
"Boise Intercreditor Agreement" means the intercreditor agreement with
Boise Cascade substantially in the form of Exhibit G attached hereto.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association, limited liability company or other
business entity, any and all shares, membership interests or other
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership, partnership interests (whether
general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) securities issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities not more than 12 months from the date of
acquisition;
(2) U.S. dollar denominated (or foreign currency fully hedged) (a)
time deposits, money-market deposits or accounts, certificates of deposit,
Eurodollar time deposits or Eurodollar certificates of deposit and bankers'
acceptances of (i) any domestic commercial bank of recognized standing
having capital and surplus in excess of $500.0 million or (ii) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than 12 months from the date of acquisition, and (b)
overnight bank deposits and federal funds transactions with a bank meeting
the qualifications specified in clauses (a)(i) or (a)(ii) above;
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(3) commercial paper and variable or fixed rate notes issued by any
Approved Lender (or by the parent company thereof) or any variable rate
notes issued by, or guaranteed by, any domestic corporation rated A-2 (or
the equivalent thereof) or better by S&P or P-2 (or the equivalent thereof)
or better by Moody's and maturing within 12 months of the date of
acquisition;
(4) repurchase agreements with a term of not more than 60 days with a
bank or trust company or recognized securities dealer having capital and
surplus in excess of $500.0 million for underlying securities of the types
described in subparagraphs (1), (2), or (3) above, in which the Company
will have a perfected first priority security interest (subject to no other
Liens) and having, on the date of purchase thereof, a fair market value of
at least 100% of the amount of repurchase obligations;
(5) investments in securities with maturities of 12 months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof; and
(6) interests in money market mutual funds which invest solely in
assets or securities of the types described in subparagraphs (1) through
(5) hereof, inclusive.
"Cedel" means Cedel Bank, SA.
"Change of Control" means such time as:
(1) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, a "Group"), other than any of the Permitted Holders, has become,
directly or indirectly, the "beneficial owner" of 35% or more of the voting
power of the voting Capital Stock of the Company and the Permitted Holders
beneficially own, directly or indirectly, a lesser percentage of the voting
power of the voting Capital Stock of the Company than the percentage
beneficially owned by such person or Group; or
(2) the sale, lease or transfer of all or substantially all of the
assets of the Company and its Subsidiaries to any person or Group (other
than a Subsidiary Guarantor or any of the Permitted Holders); or
(3) during any period of two consecutive calendar years, individuals
who at the beginning of such period constituted the Board of Directors of
the Company (together with any new directors whose election by the Board of
Directors of the Company or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who either were directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason (other than as a result of death) to
constitute a majority of the directors of the Company, as the case may be,
then in office.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
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<PAGE>
"Collateral" means, collectively, all of the property and assets
(including, without limitation, Primary Collateral, Boise Collateral and
Secondary Collateral) that are from time to time subject to the Lien of the
Collateral Documents, including the Liens, if any, required to be granted
pursuant to Section 10.01 and otherwise required pursuant to the other
provisions of this Indenture.
"Collateral Account" means the collateral account established pursuant to
this Indenture.
"Collateral Documents" means, collectively, the Intercreditor Agreements,
the Mortgages, the Security Agreement and all other mortgages, deeds of trust,
pledge agreements, collateral assignments or other instruments evidencing or
creating any security interests in favor of the Trustee in all or any portion of
the Collateral including, without limitation, financing statements, in each
case, as amended, amended and restated, extended, renewed, supplemented or
otherwise modified from time to time, in accordance with the terms hereof and
thereof.
"Consolidated EBITDA" means, with respect to the Company and its
Subsidiaries for any period, the sum of, without duplication:
(1) the Consolidated Net Income for such period; plus
(2) the Fixed Charges for such period; plus
(3) provision for consolidated taxes based on income or profits for
such period (to the extent such income or profits were included in
computing Consolidated Net Income for such period); plus
(4) consolidated depreciation, amortization and other non-cash charges
of the Company and its Subsidiaries required to be reflected as expenses on
the books and records of the Company; minus
(5) cash payments with respect to any non-recurring, non-cash charges
previously added back pursuant to clause (4); and
(6) excluding the impact of foreign currency translations.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of a Person will be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in the same proportion) that the Net
Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended or distributed, directly or
indirectly, to the Company by such Subsidiary without prior approval pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that:
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<PAGE>
(1) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting will
be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof
that is a Subsidiary Guarantor;
(2) the Net Income of any Subsidiary will be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded;
(4) the cumulative effect of a change in accounting principles will be
excluded; and
(5) all other extraordinary gains and extraordinary losses will be
excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date, plus
(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock, less (x) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of tangible assets of a
going concern business made within 12 months after the acquisition of such
business) subsequent to the Issue Date in the book value of any asset owned
by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries of such Person
and in other Persons that are not Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense
and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, in the form of
Exhibit A hereto except that
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<PAGE>
such Note shall not bear the Global Note Legend and shall not have the "Schedule
of Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in this Indenture as the
Depositary with respect to the Notes, until a successor will have been appointed
and become such Depositary pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" will mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to 91 days
after the final maturity date of the Notes. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock if the terms of such Capital Stock are
not more favorable to the holders of such Capital Stock than the provisions
described under Sections 4.03 and 4.04; provided that the Company may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with Section 4.05.
"Domestic Subsidiary" means any Subsidiary that is organized and existing
under the laws of the United States, any state thereof or the District of
Columbia.
"Equipment" shall have the meaning given to such term in the Security
Agreement.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten public offering pursuant to a
registration statement filed with the SEC in accordance with the Securities Act
of (1) Equity Interests (other than Disqualified Stock) of the Company or (2)
Equity Interests (other than Disqualified Stock) of the Company's parent or
indirect parent corporation to the extent that the cash proceeds therefrom are
contributed to the equity capital of the Company or are used to purchase Equity
Interests (other than Disqualified Stock) of the Company.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means Series B Notes received by a Holder in the Exchange
Offer.
"Exchange Offer" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to exchange Series B Notes for Series A
Notes.
"Exchange Offer Registration Statement" has the meaning given to such term
in the Registration Rights Agreement.
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"Existing Indebtedness" means the Indebtedness of the Company and its
Subsidiaries in existence on the Issue Date, until such amounts are repaid.
"Existing Lien Intercreditor Agreement" means the existing lien
intercreditor agreement substantially in the form of Exhibit F attached hereto.
"Existing Mortgage Collateral" shall have the meaning given to such term in
the Existing Lien Intercreditor Agreement.
"Existing Mortgage Lender" shall have the meaning given to such term in the
Existing Lien Intercreditor Agreement.
"Existing Mortgage Loans" means the documents or instruments, including any
related notes, guarantees, collateral documents and agreements executed in
connection therewith, and in each case as amended, amended and restated,
supplemented, renewed, extended, replaced, restated or refinanced from time to
time, which create (1) an obligation of the Company or a Subsidiary Guarantor
and (2) a security interest in any Existing Mortgage Collateral, in each case,
in favor of an Existing Mortgage Lender.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by the Board of Directors acting in good faith and shall be evidenced
by a resolution of the Board of Directors delivered to the Trustee except (a)
any determination of Fair Market Value made with respect to any parcel of real
property and related fixtures shall be made by an Independent Appraiser and (b)
as otherwise indicated in this Indenture, the Collateral Documents or the
Intercreditor Agreements.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Subsidiaries
for such period to the Fixed Charges of such Person and its Subsidiaries for
such period. In the event that the Company or any of its Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness or issues preferred stock
subsequent to the commencement of the four-quarter reference period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above:
(1) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
will be deemed to have occurred on the first day of the four-quarter
reference period;
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(2) the Consolidated EBITDA attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Subsidiaries following the
Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest incurred by such Person and its
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations);
(2) the consolidated interest incurred by such Person and its
Subsidiaries that was capitalized during such period;
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Subsidiaries or secured by a Lien
on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon); and
(4) the product of (a) all cash dividend payments (and non-cash
dividend payments in the case of a Person that is a Subsidiary) on any
series of preferred stock of such Person payable to a party other than the
Company or a Wholly Owned Subsidiary, times (b) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, on a consolidated basis and in accordance with
GAAP.
"Foreign Subsidiary" means any Subsidiary that is organized and existing
under the laws of a jurisdiction other than the United States, any state thereof
or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
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"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto,
issued in accordance with Article 2 hereof.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business and
indemnity obligations arising in favor of officers, directors or employees of
the guarantor under corporation statutes, charter and bylaw provisions or by
contract or under contracts entered into with suppliers and customers in the
ordinary course of business of the guarantor), direct or indirect, in any manner
(including, without limitation, letters of credit and reimbursement agreements
in respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (2) other agreements or
arrangements, in each case designed to protect such Person against fluctuations
in interest rates, currency rates or the prices of commodities actually at that
time used in the ordinary course of business of such Person.
"Holdco" means Middle American Tissue Inc., a Delaware corporation, and the
direct parent of the Company.
"Holdco Notes" means the senior secured discount notes in an aggregate
principal amount of $20.0 million issued on the Issue Date to DLJ Merchant
Banking Partners II, L.P. and certain of its affiliates.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"IAI Global Note" means the Global Note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its nominee
that will be issued in a denomination equal to the outstanding principal amount
of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property (except any such balance that constitutes an
accrued expense or trade payable) or representing any Hedging Obligations if and
to the extent any of the foregoing indebtedness (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
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"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Independent Appraiser" means a person who in the course of its business
appraises property and (1) where real property is involved, who is a member in
good standing of the American Institute of Real Estate Appraisers, recognized
and licensed to do business in the jurisdiction where the applicable real
property is situated, (2) who does not have a direct or indirect financial
interest in the Company and (3) who, in the judgment of the Board of Directors,
is otherwise independent and qualified to perform the tasks for which it is
engaged.
"Independent Financial Advisor" means a firm (1) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company (it being understood that securities
of the Company acquired in the ordinary course of trading operations shall not
be deemed to give rise to such direct or indirect financial interest in the
Company) and (2) which, in the judgment of the Board of Directors, is otherwise
independent and qualified to perform the task for which it is to be engaged.
"Indirect Participant" means entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchaser of the Series A Notes.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is not also a QIB.
"Intellectual Property" means "Intellectual Property Collateral" as defined
in the Security Agreement.
"Intercreditor Agreements" means the Existing Lien Intercreditor Agreement
and the Boise Intercreditor Agreement.
"Interest Payment Date" means each January 15 and July 15, commencing
January 15, 2000.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business) or capital contributions, purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Issue Date" means the date on which Notes are first issued under this
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at
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that place on the next succeeding day that is not a Legal Holiday, and no
interest will accrue for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Mortgage" means each mortgage, leasehold mortgage, deed of trust or
leasehold deed of trust, as applicable, substantially in the form of Exhibit
F-1, F-2, F-3 or F-4, respectively, attached hereto (including such changes to
such form as may be necessary or desirable to conform to applicable local laws
or customs regarding property in the jurisdiction where such instrument is to be
recorded) as the same may be amended, amended and restated, extended, renewed,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and thereof.
"Mortgaged Property" means each Real Property encumbered by a Mortgage.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any
Asset Sale (including, without limitation, dispositions pursuant to sale
and leaseback transactions) or (b) the disposition of any securities by
such Person or any of its Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Subsidiaries; and
(2) any extraordinary or non-recurring gain (but not loss), together
with any related provision for taxes on such extraordinary or non-recurring
gain (but not loss).
"Net Insurance Proceeds" means collectively (i) all insurance proceeds
(excluding liability insurance proceeds payable to the Trustee for any loss,
liability or expense incurred by it) actually received by the Trustee or the
Company or any of its Subsidiaries as a result of damage to, or the loss or
destruction of, all or any portion of the Collateral, less collection costs,
including fees and expenses of attorneys and insurance adjusters paid or
incurred by the Company or any of its Subsidiaries and (ii) all proceeds, awards
or payments for any Collateral which is taken by eminent domain, expropriation
or similar governmental actions or sold pursuant to the exercise by the United
States of America or any state, municipality, province or other governmental
authority of any right
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which it may have to purchase, or to designate a purchaser or to order a sale
of, all or any part of the Collateral, in each case less collection costs,
including fees and expenses of attorneys paid or incurred by the Company or any
of its Subsidiaries.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees and expenses, and sales and brokerage commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable by the
Company or any of its Subsidiaries as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than the Notes or the Subsidiary Guarantees) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement
or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable (as a guarantor or otherwise), or (c) constitutes the
lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any of its Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person, as defined in
Regulation S.
"Note Custodian" means The Chase Manhattan Bank, as custodian with respect
to the Global Notes, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Series A Notes by the Company on the
Issue Date.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
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"Officers' Certificate" means a certificate signed on behalf of the Company
or any Subsidiary by two Officers of the Company or such Subsidiary, as
applicable, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the
Company or such Subsidiary, as applicable, that meets the requirements of
Section 13.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee that meets the requirements of Section 13.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Parent" means Super American Tissue Inc., a Delaware corporation, the
indirect parent of the Company and the direct parent of Holdco.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to The Depository Trust Company, shall include Euroclear and
Cedel).
"Permitted Collateral Liens" means the Liens expressly permitted by the
applicable Collateral Documents.
"Permitted Holders" means Nourollah Elghanayan, Mehdi Gabayzadeh and their
respective spouses, lineal descendants and adopted children and spouses of their
respective lineal descendants and adopted children, siblings and lineal
descendants of such siblings and spouses of such Persons, any foundation
controlled by any of the foregoing persons, any trusts for the benefit of any of
the foregoing persons and any Affiliates of the foregoing persons.
"Permitted Investments" means:
(1) any Investments in the Company or in a Wholly Owned Subsidiary of
the Company that is a Subsidiary Guarantor and that is engaged in the same
or a similar, complementary, ancillary or related line of business as the
Company and its Subsidiaries were engaged in on the Issue Date and
reasonable extensions or expansions thereof;
(2) any Investment by the Company or a Wholly Owned Subsidiary of the
Company in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person in connection with a Qualified Receivables
Transaction; provided, that the foregoing Investment is in the form of a
note that the Receivables Subsidiary or other Person is required to repay
as soon as practicable from available cash collections less amounts
required to be established as reserves pursuant to contractual agreements
with entities that are not Affiliates of the Company entered into as part
of a Qualified Receivables Transaction;
(3) any Investments in cash and Cash Equivalents;
(4) Investments by the Company or any Subsidiary of the Company in a
Person if as a result of such Investment (a) such Person becomes a Wholly
Owned Subsidiary of the Company that is engaged in the same or a similar,
complementary, ancillary or related line of business as the Company and its
Subsidiaries were engaged in on the Issue Date and reasonable extensions or
expansions thereof or (b) such Person is merged, consolidated or
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amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary
of the Company that is a Subsidiary Guarantor and that is engaged in the
same or a similar, complementary, ancillary or related line of business as
the Company and its Subsidiaries were engaged in on the Issue Date and
reasonable extensions or expansions thereof;
(5) Investments made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.04;
(6) Investments outstanding as of the Issue Date;
(7) Investments which constitute Existing Indebtedness of the Company
or of any of its Subsidiaries;
(8) any payments made in connection with the acquisition of the
Berlin-Gorham Mills pursuant to the Asset Purchase Agreement;
(9) Investments, the payment for which consist exclusively of Equity
Interests (other than Disqualified Stock) of the Company;
(10) loans or advances to officers and employees of the Company or any
Subsidiary in an aggregate amount not exceeding $1.5 million at any one
time outstanding;
(11) Investments in the form of intercompany Indebtedness to the
extent permitted under Section 4.06;
(12) Hedging Obligations;
(13) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, suppliers and customers, in each
case arising in the ordinary course of business; and
(14) other Investments in any Person that do not exceed $10.0 million
at any time outstanding.
"Permitted Liens" means:
(1) Liens securing obligations under this Indenture, the Notes, the
Subsidiary Guarantees and the Collateral Documents;
(2) Liens securing the obligations under the Boise Agreement, the
Existing Mortgage Loans and the Revolving Credit Facility in an aggregate
principal amount at any time outstanding not to exceed applicable amounts
permitted under Section 4.06;
(3) Liens in favor of the Company or any Subsidiary Guarantor;
(4) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the
Company in accordance with the
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provisions of this Indenture; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with the Company;
(5) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company; provided that such Liens were
in existence prior to the contemplation of such acquisition;
(6) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(7) Liens existing on the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
(8) Liens for Taxes or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; provided that any reserve or other
appropriate provision as will be required in conformity with GAAP will have
been made therefor;
(9) Liens imposed by law or arising by operation of law, including
carriers', warehousemen's, mechanics', materialmen's, vendors',
repairmen's, landlord's or other similar Liens arising or incurred in the
ordinary course of business and with respect to amounts that either (a) are
not yet delinquent or (b) are being contested in good faith by appropriate
proceedings and as to which appropriate reserves or other provisions have
been made in accordance with GAAP;
(10) Liens of landlords or of mortgagees of landlords arising by
operation of law; provided that the rental payments secured thereby are not
yet due and payable;
(11) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Subsidiary;
(12) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security or public utility obligations;
(13) Purchase Money Liens (including extensions and renewals thereof);
(14) Liens securing reimbursement obligations with respect to letters
of credit which encumber only documents and other property relating to such
letters of credit and the products and proceeds thereof;
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(15) judgment and attachment Liens not giving rise to an Event of
Default;
(16) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements;
(17) Liens arising out of consignment or similar arrangements for the
sale of goods;
(18) any interest or title of a lessor in property subject to any
Capital Lease Obligation or operating lease;
(19) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(20) Liens securing Acquired Indebtedness (and any Permitted
Refinancing Indebtedness which refinances such Acquired Indebtedness)
incurred in accordance with Section 4.06; provided that (a) such Liens
secured the Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of
the Company and were not granted in connection with, or in anticipation of
the incurrence of such Acquired Indebtedness by the Company or a Subsidiary
of the Company and (b) such Liens do not extend to or cover any property or
assets of the Company or of any of the Subsidiaries other than the property
or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Subsidiary;
(21) Liens on assets of a Receivables Subsidiary incurred in
connection with a Qualified Receivables Transaction;
(22) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property and defects,
irregularities and deficiencies in title to real property that do not,
individually or in the aggregate, materially affect the ability of the
Company or any Subsidiary of the Company to conduct its business or the
value of the property affected thereby and are incurred in the ordinary
course of business;
(23) Liens securing obligations of the Company under Hedging
Obligations permitted to be incurred under Section 4.06 or any collateral
for the Indebtedness to which such Hedging Obligations relate;
(24) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptance issued or credited for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(25) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Subsidiaries and do not materially affect the value of the property subject
thereto;
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(26) Liens encumbering property or other assets under construction
arising from progress or partial payments by a customer or the Company or
its Subsidiaries relating to such property or other assets;
(27) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(28) Liens securing other Indebtedness not exceeding $10.0 million at
any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund, Indebtedness
of the Company or any of its Subsidiaries incurred pursuant to the Fixed Charge
Coverage Ratio test in the first paragraph of, or pursuant to clause (2) or (3)
of the second paragraph of, Section 4.06; provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Permitted Tax Payments" means, for so long as the Company remains a
"qualified Subchapter S subsidiary" (as defined in Section 1361(b)(3)(B) of the
Code), distributions to Holdco to reimburse the shareholders of Holdco:
(1) for tax liabilities, in an amount (not to exceed $2.0 million)
equal to the product of (i) the previously unpaid interest on the Related
Party Debt that will become taxable to the holder of such debt on the Issue
Date as a result of the assumption of or transfer of such debt by or to
Parent on the Issue Date, (ii) the percentage of Parent's stock not owned
on the Issue Date by the holder of the Related Party Debt, his spouse or a
grantor trust of which either of them is grantor (a "Related Trust") and
(iii) the maximum combined individual federal, state and local income tax
rates in effect on the Issue Date;
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(2) for tax liabilities in respect of each taxable year of the Company
(or portion of a taxable year) beginning on or after the Issue Date, in an
amount equal to (i) (A) the amount of original issue discount on the
Related Party Debt accrued during such year minus (B) the product of (I)
the percentage of Parent's stock owned during such time by the holder of
the Related Party Debt, his spouse or a Related Trust and (II) the amount
of original issue discount specified in clause (A), plus the amount of
original issue discount incurred with respect to the Holdco Notes for such
year (the "Annual Intermediate OID"), plus the Company's taxable loss, if
any, for such year, minus the Company's taxable income (to the extent such
income does not exceed the sum of the amount of original issue discount
described in clause (A) and the Annual Intermediate OID for such year), if
any, for such year, multiplied by (ii) the maximum combined individual
federal, state and local income tax rate for such year; and
(3) for tax liabilities, in an amount equal to the product of (i) (A)
the excess, if any, of (I) the cumulative net taxable income since April 1,
1999 of the Company over (II) the cumulative interest expense incurred by
Holdco with respect to the Holdco Notes, plus the cumulative interest
expense incurred by Parent with respect to the Related Party Debt since
April 1, 1999 and a percentage of any such unpaid interest expense incurred
prior to April 1, 1999 equal to the percentage of Parent's stock not owned
on the Issue Date by the holder of the Related Party Debt, his spouse or a
Related Trust, increased by (B) the cumulative amounts included in clause
(2)(i)(B) that actually reduce a distribution under clause (2) and (ii) the
maximum combined individual federal, state and local income tax rates in
effect from time to time (excluding any state or locality that treats the
Company, Holdco or Parent as a "C" corporation), minus (iii) all prior
distributions made under this clause (3) and any tax payments in respect of
any taxable period (or portion thereof) beginning on or after April 1, 1999
that were made prior to the Issue Date by the Company or Parent to or on
behalf of any of their shareholders.
If the Company becomes taxable as a "C" corporation (as defined in
Section 1361(a)(2) of the Code) and becomes a member (for income tax
purposes) of an affiliated, consolidated, combined or unitary group of
which Parent is the common parent (a "Group Member"), "Permitted Tax
Payments" shall mean distributions to the Parent for income tax liabilities
imposed on the Company as a Group Member, in an amount equal to (a) the
cumulative net taxable income of the Company from the date on which the
Company becomes a C corporation and a Group Member, multiplied by the
maximum marginal federal, state and/or local corporate income tax rates in
effect from time to time (excluding any jurisdiction that does not treat
the Company as a Group Member), minus (b) all prior distributions made
pursuant to this sentence and any such taxes paid directly by the Company.
Any combined federal, state and/or local tax rate referred to in this
definition shall be determined taking into account the deductibility of
state and local income taxes for federal income tax purposes.
Notwithstanding the foregoing, no distribution shall qualify as a
Permitted Tax Payment if a Default or Event of Default exists or would
result therefrom. Any combined federal, state and/or local tax rate
referred to in this definition shall be determined taking into account the
deductibility of state and local income taxes for federal income tax
purposes.
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"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof or any
other entity (including any subdivision or ongoing business of any such entity
or substantially all of the assets of any such entity, subdivision or business).
"Pledged Collateral" means the personal property encumbered by the Security
Agreement.
"Primary Collateral" means the "Noteholder Collateral" as defined in the
Existing Lien Intercreditor Agreement.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"Purchase Money Lien" means a Lien granted on an asset or property to
secure a Purchase Money Obligation permitted to be incurred under this Indenture
and incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or property; provided, however, that such Lien
encumbers only such asset or property and is granted within 90 days of such
acquisition.
"Purchase Money Obligations" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such Person or any of its Subsidiaries in
an amount that is not more than 100% of the cost, or fair market value, as
appropriate, of such property, and incurred within 90 days after the date of
such acquisition (excluding accounts payable to trade creditors incurred in the
ordinary course of business).
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (i) a Receivables Subsidiary (in the case of a transfer by
the Company or any of its Subsidiaries) and (ii) any other Person (in the case
of a transfer by a Receivables Subsidiary), or may grant a security interest in,
any accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Real Property" shall have the meaning given to such term in the Existing
Lien Intercreditor Agreement.
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"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company
which engages in no activities other than in connection with the financing of
accounts receivable and which is designated by the Board of Directors (as
provided below) as a Receivables Subsidiary (1) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which (a) is guaranteed by
the Company or any Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction), (b) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction or (c) subjects any property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction, (2) with which neither the Company nor any Subsidiary of the
Company has any material contract, agreement, arrangement or understanding other
than on terms no less favorable to the Company or such Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable and (3) with which neither the
Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such Subsidiary's financial condition or cause such Subsidiary to
achieve certain levels of operating results. Any such designation by the Board
of Directors will be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, by and among the Company and the other parties named
on the signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Global Note bearing the Global Note
Legend and the Private Placement Legend and deposited with or on behalf of the
Depositary and registered in the name of the Depositary or its nominee, issued
in a denomination equal to the outstanding principal amount of the Notes
initially sold in reliance on Rule 903 of Regulation S.
"Related Party Debt" means (x) the debt of the Company that is assumed by
or otherwise transferred to the direct parent of the Company on the Issue Date
in an aggregate amount not in excess of $28.0 million and (y) the debt of Parent
incurred on the Issue Date in an aggregate amount not in excess of $5.0 million,
in each case accruing interest at not more than 10% per annum.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
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"Restricted Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Revolving Credit Collateral" shall mean the "LaSalle Collateral" as
defined in the Existing Lien Intercreditor Agreement.
"Revolving Credit Facility" means the credit agreement among the Company,
certain of the Subsidiary Guarantors, certain lenders and LaSalle Bank National
Association, as lender and agent, for the other lenders, providing for working
capital and other financing, as the same may be amended, amended and restated,
supplemented or otherwise modified, including any refinancing, refunding,
replacement or extension thereof by the same or any other lender or group of
lenders.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, or any successor thereto.
"SEC" means the Securities and Exchange Commission.
"Secondary Collateral" means, subject to the Existing Lien Intercreditor
Agreement:
(1) the Existing Mortgage Collateral; and
(2) the Revolving Credit Collateral.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means each security agreement substantially in the
form of Exhibit D attached hereto, as the same may be amended, amended and
restated, extended, renewed, supplemented or otherwise modified from time to
time in accordance with the terms hereof and thereof.
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X, promulgated pursuant to
the Securities Act, as such Regulation is in effect on the date hereof.
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"Subsidiary" means, with respect to any Person, (1) any corporation,
limited liability company, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (2) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
Unrestricted Subsidiaries will not be included in the definition of "Subsidiary"
for any purposes of this Indenture (except, as the context may otherwise
require, for purposes of the definition of "Unrestricted Subsidiary"). Unless
the context otherwise requires, reference to a Subsidiary in any provision of
this Indenture shall be deemed to mean a Subsidiary of the Company.
"Subsidiary Guarantors" means each of (1) American Tissue Corporation,
American Cellulose Mill Corp., Gilpin Realty Corp., American Tissue Mills of
Oregon, Inc., American Tissue Mills of Wisconsin, Inc., Tagsons Papers, Inc.,
American Tissue Mills of New York, Inc., American Tissue Mills of New Hampshire,
Inc., Engineers Road, LLC, Markwood LLC, Grand LLC, American Tissue Mills of
Greenwich LLC, Unique Financing LLC, American Tissue Mills of Neenah LLC, Coram
Realty LLC, Calexico Tissue Company LLC, 100 Realty Management LLC, Saratoga
Realty LLC, Pulp & Paper of America LLC, Pulp of America LLC, Paper of America
LLC, Hydro of America LLC, Landfill of America LLC and their respective
successors and assigns and (2) any other Subsidiary of the Company that executes
a Subsidiary Guarantee in accordance with the provisions of this Indenture, and
their respective successors and assigns.
"Survey" means a survey of any parcel of real property (and all
improvements thereon):
(1) prepared by a surveyor or engineer licensed to perform surveys in
the state or province in which such property is located;
(2) dated (or redated) not earlier than six months prior to the date
of delivery thereof (unless there shall have occurred within six months
prior to such date of delivery any exterior construction on the site of
such property, in which event such survey shall be dated (or redated) after
the completion of such construction or if such construction shall not have
been completed as of such date of delivery, not earlier than 20 days prior
to such date of delivery);
(3) certified by the surveyor in a manner reasonably acceptable to the
title company providing title insurance in respect of the Liens granted
under the Mortgages; and
(4) complying in all respects with the minimum detail requirements of
the American Land Title Association, or local or foreign equivalent, as
such requirements are in effect on the date of preparation of such survey,
or that is otherwise reasonably acceptable to the Trustee (giving
consideration to the applicable transaction).
"Tax" or "Taxes" means (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, alternative
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minimum, gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or
other additional amounts imposed by any taxing authority in connection with any
item described in clause (i) and (iii) all transferee, successor, joint and
several or contractual liability (including, without limitation, liability
pursuant to Treas. Reg. ss. 1.1502-6 (or any similar state, local or foreign
provision)) in respect of any items described in clause (i) or (ii).
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as amended and as in effect on the date on which this Indenture is qualified
under the TIA.
"Transfer Restricted Notes" means securities that bear, or that are
required to bear, the Private Placement Legend.
"Trust Monies" means, subject to the Intercreditor Agreements, all cash and
Cash Equivalents received by the Trustee:
(1) upon the release of Collateral from the Lien of this Indenture or
the Collateral Documents, including all Available Amounts and all monies
received in respect of the principal of all purchase money, governmental
and other obligations;
(2) as Net Insurance Proceeds;
(3) pursuant to the Collateral Documents;
(4) as proceeds of any sale or other disposition of all or any part of
the Collateral by or on behalf of the Trustee or any collection, recovery,
receipt, appropriation or other realization of or from all or any part of
the Collateral pursuant to this Indenture or any of the Collateral
Documents or otherwise; or
(5) for application as provided in the relevant provisions of this
Indenture or any Collateral Document for which disposition is not otherwise
specifically provided for in this Indenture or in any Collateral Document;
provided, however, that Trust Monies shall in no event include any property
deposited with the Trustee for any redemption, legal defeasance or covenant
defeasance of Notes, for the satisfaction and discharge of this Indenture or to
pay the purchase price of Notes pursuant to a Change of Control Offer or Asset
Sale Offer.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
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"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear, and are not required to bear, the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note in the form of
Exhibit A attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear, and are not
required to bear, the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels
of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Subsidiaries.
Any such designation by the Board of Directors will be evidenced to the Trustee
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.05. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it will thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary will be deemed to be incurred by a Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.06, the Company will be in default of
such Section). The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Subsidiary; provided that such designation will be deemed to
be an incurrence of Indebtedness by a Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
will only be permitted if (a) such Indebtedness is permitted under Section 4.06,
and (b) no Default or Event of Default would be in existence following such
designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) will at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person. Unrestricted
Subsidiaries will not be included in the definition of "Wholly Owned Subsidiary"
for any purposes of this Indenture (except, as the context may otherwise
require, for purposes of the definition of "Unrestricted Subsidiary").
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- ----------
"Affiliate Transaction" 4.09
"Approved Lender" 1.01
"Asset Sale Offer" 4.04
"Asset Sale Offer Amount" 4.04
"Asset Sale Offer Period" 4.04
"Asset Sale Purchase Date" 4.04
"Authentication Order" 2.02
"Available Amount" 4.04
"Bankruptcy Law" 6.01
"Benefitted Party" 12.01
"Calculation Date" 1.01
"Change of Control Offer" 4.03
"Change of Control Offer Period" 4.03
"Change of Control Payment" 4.03
"Change of Control Purchase Date" 4.03
"Company Obligations" 4.01
"Company Order" 10.05
"Covenant Defeasance" 8.04
"Custodian" 6.01
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.04
"Group" 1.01
"Guarantee Obligations" 12.01
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Defined in
Term Section
---- ----------
"Legal Defeasance" 8.03
"Paying Agent" 2.03
"Payment Default" 6.01
"Registrar" 2.03
"Released Collateral" 10.05
"Released Property" 10.05
"Released Trust Monies" 11.04
"Replacement Assets" 4.04
"Restricted Payments" 4.05
"Surviving Entity" 5.01
"Taken" 10.05
"Taking" 10.05
"Title Policy" 10.02
"Trust Monies Release Notice" 11.04
"Valuation Date" 10.05
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon the
Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement or successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Subsidiary
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in the
form of Exhibit A attached hereto (including the Global Note Legend thereon and
the "Schedule of Exchanges of Interests in the Global Note" attached thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without the Global Note Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Note" attached thereto). Each
Global Note shall represent such of the outstanding Notes as shall be specified
therein and each shall provide that it shall represent the aggregate principal
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the
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"General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel
shall be applicable to transfers of beneficial interests in the Regulation S
Global Notes that are held by Participants through Euroclear or Cedel.
SECTION 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid. A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture. The Trustee shall, upon a written order of
the Company signed by two Officers (an "Authentication Order"), authenticate
Notes for original issue up to the aggregate principal amount stated in
paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at
any time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar. The Company initially
appoints The Depository Trust Company ("DTC") to act as Depositary with respect
to the Global Notes. The Company initially appoints the Trustee to act as the
Registrar and Paying Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money. If the Company or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
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SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 (other
than a Definitive Note) or Section 2.07 or 2.10 hereof, shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global Note may not
be exchanged for another Note other than as provided in this Section 2.06(a).
However, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Regulation S Global Note may not be made to a
U.S. Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global Note
may be transferred to Persons who take delivery thereof in the form of a
beneficial interest in an
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Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (B)(1) above. Upon consummation of an Exchange
Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in
the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture and the Notes or otherwise applicable
under the Securities Act, the Note Custodian shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3)(d) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted
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Global Note may be exchanged by any holder thereof for a beneficial
interest in an Unrestricted Global Note or transferred to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the holder of
such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or (2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and, in each such case set forth
in this subparagraph (D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred pursuant
to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted
Global Note cannot be exchanged for, or transferred to Persons who take
delivery thereof in the form of, a beneficial interest in a Restricted
Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such
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beneficial interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Note Custodian shall cause the aggregate principal amount of the
applicable Restricted Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute and, upon receipt of
an Authentication Order pursuant to Section 2.02, the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Restricted Definitive Note in the appropriate principal amount. Any
Restricted Definitive Note issued in exchange for a beneficial interest in
a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Restricted Definitive
Notes to the Persons in whose names such Notes are so registered. Any
Restricted Definitive Note issued in exchange for a beneficial interest in
a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the
Private Placement Legend and shall be subject to all restrictions on
transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial
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interest for an Unrestricted Definitive Note or may transfer such
beneficial interest to a Person who takes delivery thereof in the form of
an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the holder of
such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive Note that does not
bear the Private Placement Legend, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(1)(b) thereof; or (2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof; and, in each such
case set forth in this subparagraph (D), if the Registrar so requests
or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for
an Unrestricted Definitive Note or to transfer such beneficial interest to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note, then, upon satisfaction of the conditions set forth in
Section 2.06(b)(ii) hereof, the Note Custodian shall cause the aggregate
principal amount of the applicable Unrestricted Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and, upon receipt of an Authentication Order pursuant to Section
2.02, the Trustee shall authenticate and deliver to the Person designated
in the instructions an Unrestricted Definitive Note in the appropriate
principal amount. Any Unrestricted Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Unrestricted
Definitive Notes to the Persons in whose names such Notes are so
registered.
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Any Unrestricted Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof;
(F) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof; or
(G) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)(d) thereof,
if applicable;
the Note Custodian shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate
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Restricted Global Note, in the case of clause (B) above, the 144A Global
Note, in the case of clause (D) above, the Regulation S Global Note, and in
all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the Holder of
such Restricted Definitive Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or (2) if the Holder of such
Restricted Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof; and, in each such case set forth in this
subparagraph (D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act. Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel
the Restricted Definitive Notes so transferred or exchanged and the
Note Custodian shall increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes. If any such exchange or transfer
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from a Definitive Note to a beneficial interest is effected pursuant to
subparagraph (ii)(B) or (ii)(D) above or this subparagraph (iii) at a time
when an Unrestricted Global Note has not yet been issued, the Company shall
issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register
the transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to
the Registrar the Definitive Notes duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by its attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant
to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904
of the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in item
(2) thereof; and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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(C) any such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the Holder of
such Restricted Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item (1)(d)
thereof; or (2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and, in each such case set forth
in this subparagraph (D), if the Registrar so requests, an Opinion of
Counsel in form reasonably acceptable to the Company to the effect
that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section
2.02, the Trustee shall authenticate (i) one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for
acceptance, and accepted for exchange in the Exchange Offer, by Persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of
the Company and (ii) Unrestricted Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Note Custodian shall cause the aggregate
principal amount of the applicable Restricted Global Notes to be reduced
accordingly, and the Company shall execute and, upon receipt of an
Authentication Order pursuant to Section 2.02, the Trustee shall
authenticate and deliver to the Persons designated by the Holders of
Definitive Notes so accepted Definitive Notes in the appropriate principal
amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
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"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT
OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii)
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or (f) of this Section 2.06 (and all Notes issued in exchange therefor
or substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06
OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY."
(iii) Original Issue Discount Legend. Each Global Note shall bear a
legend in substantially the following form:
"FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER,
THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH
$1,000 PRINCIPAL AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $ ;
(2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $ ; (3) THE ISSUE DATE IS
, 1999; AND (4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS
__%."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged
for Definitive Notes or a particular Global Note has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Note
shall be returned to or retained and cancelled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest
in another Global Note or for Definitive Notes, the principal amount of
Notes represented by such Global Note shall be reduced accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Note Custodian to reflect such
reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note
by the Note Custodian or by the Depositary at the direction of the Note
Custodian to reflect such increase.
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(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon receipt of an Authentication Order.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 4.03 and 4.04 hereof.
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration of
transfer or exchange.
(v)The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (c) to register the transfer
of or to exchange a Note between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, the Company shall
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issue and the Trustee, upon receipt of an Authentication Order, shall
authenticate a replacement Note if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect and hold harmless the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note. Every
replacement Note is an additional obligation of the Company, whether or not the
destroyed, lost or stolen Notes shall be at any time enforceable by anyone, and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder. In case any such
mutilated, destroyed, lost or stolen Note has become or is about to become due
and payable, the Company in its discretion may, instead of issuing a new Note,
pay such Note. Upon the issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (included the fees and expenses of the Trustee) connected therewith.
The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Notes.
SECTION 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser. If the principal amount
of any Note is considered paid under Section 4.01 hereof, it ceases to be
outstanding and interest on it ceases to accrue. If the Paying Agent (other than
the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption
date or the maturity date, money sufficient to pay Notes payable on that date,
then on and after that date such Notes shall be deemed to be no longer
outstanding and shall cease to accrue interest.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate
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definitive Notes in exchange for temporary Notes. Holders of temporary Notes
shall be entitled to all of the benefits of this Indenture.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date; provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45
days (unless a shorter period is acceptable to the Trustee) but not more than 60
days before a redemption date, an Officers' Certificate setting forth (i) the
clause of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the
amount of any Liquidated Damages and (v) the redemption price.
SECTION 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so
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listed, on a pro rata basis, by lot or in accordance with any other method the
Trustee considers fair and appropriate. In the event of partial redemption by
lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or integral multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not an integral
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at its registered
address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price and the amount of Liquidated Damages, if any;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the
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Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent immediately available funds sufficient
to pay the redemption price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), the Company shall issue
and, upon receipt of an Authentication Order, the Trustee shall authenticate for
the Holder at the expense of the Company a new Note equal in principal amount to
the unredeemed portion of the Note surrendered.
SECTION 3.07. Optional Redemption.
The Company may redeem the Notes at any time on or after July 15, 2004, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed after July 15 of each of the years
indicated below:
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Date Percentage
- ---- ----------
2004 .................................................... 106.625%
2005 and thereafter ..................................... 100.000%
In addition, on or prior to July 15, 2002, the Company may, at its option
on any one or more occasions, redeem up to 35% of the aggregate principal amount
of Notes originally issued under this Indenture, with the proceeds of one or
more Equity Offerings, at a redemption price equal to 113.25% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption; provided that at least 65% of the aggregate
principal amount of Notes originally issued under this Indenture would remain
outstanding immediately after giving effect to any such redemption. In order to
effect the foregoing redemption with the net cash proceeds of any Equity
Offering, the Company shall make such redemption not more than 90 days after the
consummation of any such Equity Offering.
SECTION 3.08. No Mandatory Redemption.
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes and this Indenture. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement. The
Company's Obligations under the Notes, this Indenture, the Registration Rights
Agreement and the Collateral Documents are referred to herein as the "Company
Obligations."
The Company shall pay interest (including Accrued Bankruptcy Interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 2% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including Accrued Bankruptcy Interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace period) at the
rate equal to 2% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful.
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SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.
SECTION 4.03. Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount of such Notes, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon (the "Change of Control
Payment") to the date of purchase. Within 30 days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the Change of Control Purchase Date pursuant to the
procedures required by this Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following the date of its mailing, except to the extent that a longer
period is required by applicable law (the "Change of Control Offer Period"). No
later than five Business Days after the termination of the Change of Control
Offer Period (the "Change of Control Purchase Date"), the Company will purchase
all Notes tendered in response to the Change of Control Offer. Payment for any
Notes so purchased will be made in the same manner as interest payments are
made.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in
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whose name a Note is registered at the close of business on such record date,
and no additional interest will be payable to Holders who tender Notes pursuant
to the Change of Control Offer.
Upon the commencement of a Change of Control Offer, the Company shall send,
by first class mail, a notice to each of the Holders, with a copy of each such
notice to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Change of
Control Offer. The Change of Control Offer shall be made to all Holders. The
notice, which shall govern the terms of the Change of Control Offer, shall
state:
(a) that the Change of Control Offer is being made pursuant to this
Section and the length of time the Change of Control Offer shall remain
open;
(b) the purchase price and the Change of Control Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Change of Control Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, or transfer by book-entry transfer, to the Company, a
Depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Change of Control
Purchase Date; and
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Change of Control Offer Period,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased.
On the Change of Control Purchase Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each Holder
a new Note equal in principal amount to any
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unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof.
The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Purchase Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Indenture applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.04. Asset Sales.
The Company will not, and will not permit any of its Subsidiaries to,
engage in an Asset Sale unless:
(1) the Company (or a Subsidiary of the Company, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced in each case by a resolution of the board of
directors of such entity set forth in an Officers' Certificate delivered to
the Trustee) of the assets or Equity Interests sold or otherwise disposed
of in such Asset Sale;
(2) at least 80% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash or Cash Equivalents; provided
that each of the following shall be deemed to be cash for purposes of this
provision:
(a) the amount of any liabilities (as shown on the Company's or
such Subsidiary's most recent balance sheet or in the notes thereto,
excluding contingent liabilities and trade payables) of the Company or
any Subsidiary (other than liabilities that are by their terms
subordinated to, or equal in right of payment with, the Notes or any
Subsidiary Guarantee thereof) that are assumed by the transferee of
any such assets; and
(b) any securities, notes or other obligations received by the
Company or any Subsidiary from such transferee that are converted by
the Company or such Subsidiary into cash within 60 days;
(3) subject to the Intercreditor Agreements, if such Asset Sale
involves the disposition of Collateral, the Company or such Subsidiary has
complied with Sections 10.03 and 10.05;
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(4) if such Asset Sale involves the disposition of Collateral (other
than Secondary Collateral), subject to the Intercreditor Agreements, the
cash Net Proceeds thereof remaining after repayment (including a
corresponding commitment reduction, if applicable) of any Indebtedness
secured by a Permitted Collateral Lien on such asset (the "Available
Amount") shall be paid directly by the purchaser of the Collateral to the
Trustee for deposit into the Collateral Account, and, if any property other
than cash or Cash Equivalents is included in such Net Proceeds, such
property shall be made subject to the Lien of this Indenture and the
applicable Collateral Documents;
(5) if such Asset Sale involves the disposition of Secondary
Collateral, subject to the Intercreditor Agreements, the Available Amount
shall be paid directly by the Existing Mortgage Lender who holds a Lien on
the applicable Secondary Collateral to the Trustee for deposit into the
Collateral Account, and, if any property other than cash or Cash
Equivalents is included in the Net Proceeds constituting such Available
Amount, such property shall be made subject to the Lien of this Indenture
and the applicable Collateral Documents; and
(6) the Company or such Subsidiary, as the case may be, applies the
Net Proceeds as provided in the following paragraph.
The Company or the applicable Subsidiary may, at its option, apply any such
Net Proceeds within 360 days of the related Asset Sale as follows:
(a) to the acquisition of another business or the acquisition of other
long-term assets, in each case, in the same or a similar, complementary,
ancillary or related line of business as the Company or any of its
Subsidiaries was engaged in on the Issue Date or any reasonable extensions
or expansions thereof ("Replacement Assets"); provided that any Replacement
Assets acquired with any Available Amount shall be owned by the Company or
by the Subsidiary Guarantor that made the Asset Sale and shall not be
subject to any Liens other than Permitted Collateral Liens (and the Company
or such Subsidiary Guarantor, as the case may be, shall, subject to any
applicable Intercreditor Agreement, execute and deliver to the Trustee such
Collateral Documents or other instruments as shall be reasonably necessary
to cause such Replacement Assets to become subject to a Lien in favor of
the Trustee, for the benefit of the holders of the Notes, securing its
obligations under the Notes or its Subsidiary Guarantee, as the case may
be, and otherwise shall comply with the provisions of this Indenture
applicable to After-Acquired Property); or
(b) to reimburse the Company or its Subsidiaries for expenditures
made, and costs incurred, to repair, rebuild, replace or restore property
subject to loss, damage or taking to the extent that the Net Proceeds
consist of Net Insurance Proceeds received on account of such loss, damage
or taking.
If the Company does not use any portion of the Net Proceeds as described
above within such 360-day period, such unused portion of the Net Proceeds period
shall constitute "Excess Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be purchased
out of the aggregate amount of Excess Proceeds. The offer price of any Asset
Sale Offer will be equal to
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100% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase, and will be payable
in cash in accordance with the procedures set forth in this Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, remaining Excess Proceeds shall be
released to the Company and may be used free and clear of the Lien of the
Collateral Documents for general corporate purposes. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Subject to the Intercreditor Agreements, all Available Amounts shall,
pending their application in accordance with this covenant or the release
thereof in accordance with Section 10.03, be deposited in the Collateral Account
under this Indenture.
The Asset Sale Offer will remain open for a period of 20 Business Days
following the mailing of the Asset Sale Offer, except to the extent that a
longer period is required by applicable law (the "Asset Sale Offer Period"). No
later than five Business Days after the termination of the Asset Sale Offer
Period (the "Asset Sale Purchase Date"), the Company will purchase the principal
amount of Notes required to be purchased pursuant to this covenant (the "Asset
Sale Offer Amount") or, if less than the Asset Sale Offer Amount has been
tendered, all Notes tendered in response to the Asset Sale Offer. Payment for
any Notes so purchased will be made in the same manner as interest payments are
made.
If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this covenant
and the length of time the Asset Sale Offer shall remain open;
(b) the Asset Sale Offer Amount, the purchase price and the Asset Sale
Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Asset Sale Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the
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Company, the Depositary, if appointed by the Company, or a Paying Agent at
the address specified in the notice at least three days before the Asset
Sale Purchase Date;
(f) that Holders shall be entitled to withdraw their election if the
Company, the Trustee or the Paying Agent, as the case may be, receives, not
later than the expiration of the Asset Sale Offer Period, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note Purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Asset Sale Offer Amount, the Company shall select the
Notes to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Asset Sale Purchase Date, the Company will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered,
all Notes tendered, and will deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this covenant. The Company, the
Depositary or the Paying Agent, as the case may be, will promptly (but in any
case not later than five days after the Asset Sale Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company will promptly issue a new Note, and the Trustee, upon delivery of an
Authentication Order from the Company, will authenticate and mail or deliver
such new Note to such Holder, in a principal amount equal to any unpurchased
portion of the Note surrendered. Any Note not so accepted will be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase
Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of an Asset Sale. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this Section 4.04, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.04 by virtue thereof.
SECTION 4.05. Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any distribution on account of
the Company's or any of its Subsidiaries' Equity Interests (including,
without limitation, any
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payment in connection with any merger or consolidation involving the
Company) other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Wholly Owned Subsidiary of the
Company;
(2) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent of the
Company or Subsidiary of the Company (other than any such Equity Interests
owned by the Company or any Wholly Owned Subsidiary of the Company that is
a Subsidiary Guarantor);
(3) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any Indebtedness
that is subordinated to the Notes, other than through the purchase or
acquisition by the Company of Indebtedness through the issuance in exchange
therefor of Equity Interests (other than Disqualified Stock); or
(4) make any Restricted Investment,
(all such payments and other actions set forth in clauses (1) through (4) above
being collectively referred to as "Restricted Payments") unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default will have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.06; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the
Issue Date (excluding Restricted Payments permitted by clauses (2), (3) and
(4) of the next succeeding paragraph), is less than the sum of:
(i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the Issue Date, to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit); plus
(ii) to the extent not included in the amount described in clause
(i) above, 100% of the aggregate net cash proceeds received after the
Issue Date by the Company from the issue or sale of, or from
additional capital contributions in respect of, Equity Interests of
the Company or of debt securities of the Company or any
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Subsidiary Guarantor that have been converted into, or canceled in
exchange for, Equity Interests of the Company or of any direct or
indirect parent of the Company or from the issue or sale of
convertible or exchangeable Disqualified Stock that has been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), plus the aggregate net cash
proceeds received by the Company upon any such conversion or exchange;
plus
(iii) 100% of the cash proceeds realized upon the sale of any
Unrestricted Subsidiary (less the amount of any reserve established
for purchase price adjustments and less the maximum amount of any
indemnification or similar contingent obligation for the benefit of
the purchaser, any of its Affiliates or any other third party in such
sale, in each case as adjusted for any permanent reduction in any such
amount on or after the date of such sale, other than by virtue of a
payment made to such Person) following the Issue Date not in excess of
the original amount of the Investment in such Unrestricted Subsidiary;
plus
(iv) without duplication of amounts in clause (iii) above, to the
extent that any Restricted Investment that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, the
amount of net cash proceeds received with respect to such Restricted
Investment not in excess of the original amount of such Restricted
Investment.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(2) the making of any Restricted Investment in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of the Company (other
than Disqualified Stock); provided that any net cash proceeds that are
utilized for any such Restricted Investment, and any Net Income resulting
therefrom, will be excluded from clauses (c)(i) and (c)(ii) of the
preceding paragraph;
(3) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company or any direct or indirect parent of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of, or from
substantially concurrent capital contributions in respect of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that
any net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition, and any Net Income resulting
therefrom, will be excluded from clauses (c)(i) and (c)(ii) of the
preceding paragraph;
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(4) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than
to a Subsidiary of the Company) of, or from substantially concurrent
additional capital contributions in respect of, Equity Interests of the
Company (other than Disqualified Stock); provided that any net cash
proceeds that are utilized for any such defeasance, redemption or
repurchase, and any Net Income resulting therefrom, will be excluded from
clauses (c)(i) and (c)(ii) of the preceding paragraph;
(5) Permitted Tax Payments;
(6) the acquisition by a Receivables Subsidiary in connection with a
Qualified Receivables Transaction of Equity Interests of a trust or other
Person established by such Receivables Subsidiary to effect such Qualified
Receivables Transaction;
(7) the repurchase, redemption, retirement for value or other
acquisition of any Equity Interests of the Company or a Subsidiary of the
Company from employees, officers or directors (or their nominees) of the
Company or any of its Subsidiaries or their authorized representatives upon
such Person's cessation of employment with the Company or any such
Subsidiary or death pursuant to the terms of an employee benefit,
employment agreement or similar arrangement in an aggregate amount not to
exceed $500,000 in any fiscal year, plus the aggregate net cash proceeds
from any issuance during such fiscal year of Equity Interests by the
Company to employees, officers or directors of the Company or any of its
Subsidiaries;
(8) pro rata dividends or other distributions made by a Subsidiary of
the Company to minority shareholders (or owners of an equivalent interest
in the case of a Subsidiary that is not a corporation);
(9) the acquisition by the Company or a Wholly Owned Subsidiary of the
Company of any Equity Interest in a Subsidiary of the Company from a
minority shareholder of such Subsidiary of the Company; and
(10) the repurchase of Equity Interests of the Company deemed to occur
upon the exercise of stock options if such Equity Interests represent a
portion of the exercise price thereof.
The Board of Directors may designate any Subsidiary of the Company
(including a newly acquired Subsidiary) to be an Unrestricted Subsidiary if such
designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Subsidiaries
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to
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the Trustee) on the date of the Restricted Payment of the asset(s) proposed to
be transferred by the Company or such Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than the date of making any Restricted
Payment, the Company will deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this covenant were computed, which
calculations may be based upon the Company's latest available financial
statements. The Trustee shall have no duty or obligation to verify the
calculations in such Officers' Certificate or to determine its accuracy, and it
shall be fully protected and shall incur no liability in relying on such
Officers' Certificate with respect to the permissiveness of such Restricted
Payments.
SECTION 4.06. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Indebtedness) and
the Company will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Indebtedness) or issue shares
of preferred stock or Disqualified Stock and the Company's Subsidiaries that are
Subsidiary Guarantors may incur Indebtedness and issue shares of preferred stock
if:
(1) the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred or such preferred stock or Disqualified Stock is
issued would have been at least 2.25 to 1 on or prior to the second
anniversary of the Issue Date and 2.5 to 1 at any time thereafter,
determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the preferred stock or Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period; and
(2) no Default or Event of Default will have occurred and be
continuing or would occur as a consequence thereof;
provided that no Guarantee may be incurred pursuant to this paragraph unless the
guaranteed Indebtedness is incurred by the Company or a Subsidiary in compliance
with this paragraph.
The foregoing provisions of this Section 4.06 will not apply to:
(1) the incurrence by the Company or any of its Subsidiaries of
Indebtedness under the Revolving Credit Facility and reimbursement
obligations in respect of letters of credit (and Guarantees thereof by
Subsidiaries that are Subsidiary Guarantors) in an aggregate principal
amount at any time outstanding (with letter of credit obligations being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Subsidiaries that are Subsidiary Guarantors with
respect thereto) not to exceed an amount equal to $100.0 million less any
mandatory repayments or prepayments of the Revolving Credit Facility with
the proceeds of Asset Sales;
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(2) Existing Indebtedness;
(3) Indebtedness represented by the Notes, the Subsidiary Guarantees
and this Indenture;
(4) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations or Purchase Money
Obligations, in each case incurred for the purpose of financing all or any
part of the purchase price or cost of construction or improvement of
property used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $20.0 million at any one time
outstanding;
(5) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness;
(6) the incurrence by the Company or any of its Wholly Owned
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Subsidiaries or between or among any Wholly Owned
Subsidiaries and the issuance of preferred stock by any of the Company's
Wholly Owned Subsidiaries to the Company or any other Wholly Owned
Subsidiary; provided, however, that (a) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness or preferred
stock being held by a Person other than the Company or a Wholly Owned
Subsidiary and (b) any sale or other transfer of any such Indebtedness or
preferred stock to a Person that is not either the Company or a Wholly
Owned Subsidiary will be deemed, in each case, to constitute an incurrence
of Indebtedness by the Company or such Subsidiary, as the case may be, not
permitted pursuant to this clause (6);
(7) the incurrence by the Company or any of its Subsidiaries that are
Subsidiary Guarantors of Hedging Obligations;
(8) Non-Recourse Debt;
(9) Indebtedness of the Company or any of its Subsidiaries solely in
respect of bankers' acceptances, letters of credit and performance bonds or
similar arrangements, in each case in the ordinary course of business;
(10) Indebtedness arising from agreements of the Company or a
Subsidiary of the Company providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that:
(a) such Indebtedness is not reflected on the balance sheet of
the Company or any Subsidiary of the Company (contingent obligations
referred to in a footnote to financial statements and not otherwise
reflected on the balance sheet will
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not be deemed to be reflected on such balance sheet for purposes of
this clause (a)); and
(b) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including
proceeds other than Cash or Cash Equivalents (the fair market value of
such non-cash proceeds being determined by the Board of Directors and
measured at the time it is received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Subsidiaries in connection with such disposition;
(11) the incurrence by the Company or any of its Subsidiaries that are
Subsidiary Guarantors of Indebtedness (in addition to Indebtedness
permitted by any other clause of this paragraph) in an aggregate principal
amount at any time outstanding not to exceed the sum of $10.0 million; and
(12) the incurrence by a Receivables Subsidiary of Indebtedness in an
amount not to exceed $25.0 million in a Qualified Receivables Transaction
that is without recourse to the Company or to any Subsidiary of the Company
or their assets (other than such Receivables Subsidiary and its assets),
and is not guaranteed by any such Person.
Notwithstanding any other provision of this covenant, a Guarantee of
Indebtedness permitted by the terms of this Indenture at the time such
Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
Indebtedness or preferred stock of any Person which is outstanding at the
time such Person becomes a Subsidiary of the Company or is merged with or into
or consolidated with the Company or a Subsidiary of the Company shall be deemed
to have been incurred at the time such Person becomes such a Subsidiary of the
Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, as applicable.
Notwithstanding any other provisions of this covenant, the maximum amount
of Indebtedness that the Company or a Subsidiary may incur shall not be deemed
to be exceeded solely as a result of fluctuations in the exchange rates of
currencies.
For purposes of determining compliance with this Section 4.06, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (1) through (12) above
or is entitled to be incurred pursuant to the Fixed Charge Coverage Ratio
provisions of this covenant, the Company shall, in its sole discretion, classify
such item of Indebtedness in any manner that complies with this covenant.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock will not be
deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock
for purposes of this Section 4.06.
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SECTION 4.07. Liens.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
except:
(1) with respect to any property or asset constituting Collateral,
Liens created by this Indenture, the Collateral Documents and any Permitted
Collateral Liens, or
(2) with respect to any property or asset (other than Collateral) now
owned or hereafter acquired, Permitted Liens.
SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to:
(1) (a) pay dividends or make any other distributions to the Company
or any of its Subsidiaries (x) on its Capital Stock or (y) with respect to
any other interest or participation in, or measured by, its profits, or (b)
pay any Indebtedness owed to the Company or any of its Subsidiaries;
(2) make loans or advances to the Company or any of its Subsidiaries;
or (3) transfer any of its properties or assets to the Company or any of
its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(a) Existing Indebtedness (including, without limitation, pursuant to
the Boise Agreement and the Existing Mortgage Loans) and any documents
or agreements entered into pursuant thereto or securing obligations
thereunder, all as in effect on the Issue Date;
(b) the Revolving Credit Facility and any documents or agreements
entered into pursuant thereto or securing obligations thereunder, all as in
effect as of the Issue Date, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof; provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive with respect to such dividend and
other payment restrictions than those contained in the agreements governing
the Revolving Credit Facility as in effect on the Issue Date;
(c) this Indenture, the Notes, the Subsidiary Guarantees and the
Collateral Documents;
(d) applicable law;
(e) any instrument governing Acquired Indebtedness or Capital Stock of
a Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition
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(except to the extent such Acquired Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person,
so acquired;
(f) by reason of customary non-assignment or subletting provisions in
leases and licenses entered into in the ordinary course of business and
consistent with past practices;
(g) Purchase Money Obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (3) above on the property so acquired;
(h) agreements relating to the financing of the acquisition of real or
tangible personal property acquired after the Issue Date; provided that
such encumbrance or restriction relates only to the property which is
acquired and in the case of any encumbrance or restriction that constitutes
a Lien, such Lien constitutes a Purchase Money Lien;
(i) Indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables Transaction; provided
that such restrictions apply only to such Receivables Subsidiary;
(j) any restriction or encumbrance contained in contracts for sale or
other conveyance of assets permitted by this Indenture in respect of the
assets being sold or conveyed pursuant to such contract;
(k) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced; or
(l) contracts with customers entered into in the ordinary course of
business in the nature of restrictions on cash, other deposits or net
worth, which restrictions are imposed by such customers.
Nothing contained in this Section 4.08 shall prevent the Company or any
Subsidiary of the Company from creating, incurring, assuming or suffering to
exist any Liens otherwise not prohibited by Section 4.07.
SECTION 4.09. Transactions with Affiliates.
The Company will not, and will not permit any of its Subsidiaries to, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Subsidiary with
an unrelated Person; and
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(2) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction entered into after the Issue Date involving aggregate
consideration in excess of $1.0 million, a Board Resolution set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies
with clause (1) above and that such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of Directors and
(b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to
the Company or such Subsidiary of such Affiliate Transaction from a
financial point of view issued by an independent accounting, appraisal or
investment banking firm of recognized standing;
provided that the following will not be deemed to be Affiliate Transactions:
(a) the provision of administrative or management services by the
Company or any of its Officers or directors to any of its Subsidiaries in
the ordinary course of business consistent with past practice;
(b) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or such Subsidiary;
(c) transactions between or among the Company and/or its Wholly Owned
Subsidiaries or transactions between a Receivables Subsidiary and any
Person in which the Receivables Subsidiary has an Investment;
(d) transactions not restricted by Section 4.05 (including, without
limitation, Permitted Investments);
(e) reasonable fees and compensation paid to, and indemnity provided
on behalf of, Officers, directors, employees, agents or consultants of the
Company or any of its Subsidiaries as determined in good faith by the Board
of Directors of the Company; and
(f) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company.
SECTION 4.10. Additional Subsidiary Guarantees.
All Domestic Subsidiaries of the Company (other than a Receivables
Subsidiary) will be Subsidiary Guarantors. In addition, the Company will not,
and will not permit any of the Subsidiary Guarantors to, make any Investment in
any Subsidiary that is not a Subsidiary Guarantor, unless such Investment is
permitted by Section 4.05 (including any Restricted Payment or Permitted
Investment permitted or not restricted by such covenant).
SECTION 4.11. Impairment of Security Interests.
Neither the Company nor any of its Subsidiaries will take or omit to take
any action which action or omission could reasonably be expected to have the
result of adversely affecting or impairing the Lien in favor of the Trustee for
the benefit of the Holders of the Notes in the Collateral,
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other than as expressly contemplated by this Indenture, the Collateral Documents
or the Intercreditor Agreements.
SECTION 4.12. Line of Business.
The Company will not, and will not permit any of its Subsidiaries to,
engage in any business other than the owning, operating or managing of pulp and
paper manufacturing and converting businesses, the purchase, refurbishment and
sale of pulp, paper and converting Equipment and similar, complementary,
ancillary or related lines of business.
SECTION 4.13. Payments for Consent.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.14. Reports.
Whether or not required by the rules and regulations of the SEC, so long as
any Notes are outstanding, the Company will furnish to the Trustee and all
Holders of Notes (1) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (2) all current reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports, in each case within the time periods specified in the SEC's
rules and regulations.
In addition, following the consummation of the Exchange Offer, whether or
not required by the rules and regulations of the SEC, the Company will file a
copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors in the Notes upon request. In
addition, the Company and the Subsidiary Guarantors agree that, for so long as
any Notes remain outstanding, they will furnish to the Trustee, Holders and to
securities analysts and prospective investors in the Notes, upon their request,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
SECTION 4.15. Taxes.
The Company shall pay or discharge or shall cause each of its Subsidiaries
to pay or discharge, before the same shall become delinquent, (1) all material
Taxes levied or imposed upon the Company or any of the Subsidiaries or upon
their or any of the Subsidiaries' income, profits or property and (2) all lawful
material claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a Lien upon the property of the Company or any of
the Subsidiaries;
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provided, however, that, subject to the terms of the applicable Collateral
Documents, neither the Company nor any of the Subsidiaries shall be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which disputed amounts adequate
reserves have been made in accordance with GAAP. The Company and each of its
Subsidiaries shall prepare and timely file with the appropriate governmental
agencies all Tax Returns required to be filed for any period (or portion
thereof), taking into account any extension of time to file granted to or
obtained on behalf of the Company and/or such Subsidiary, and each such Tax
Return shall be complete and accurate in all material respects.
SECTION 4.16. Maintenance of Properties; Insurance, Books and Records.
(1) Subject to, and in compliance with, the provisions of Article 10 and to
the provisions of the applicable Collateral Documents, the Company shall cause
all properties used or useful in the conduct of its business or the business of
any of the Subsidiary Guarantors to be maintained and kept in operating
condition, repair and working order (ordinary wear and tear and casualty loss
excepted) and supplied with all necessary Equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereto.
(2) The Company shall maintain, and shall cause the Subsidiary Guarantors
to maintain, subject to the provisions of the applicable Collateral Documents,
insurance with responsible carriers against such risks and in such amounts, and
with such deductibles, retentions, self-insured amounts and co-insurance
provisions, as are customarily carried by similar businesses of similar size in
the locations which such business is conducted, including property and casualty
loss, workers' compensation and interruption of business insurance.
(3) The Company shall, and shall cause each of its Subsidiary Guarantors
to, keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions of the Company and each of its
Subsidiary Guarantors, in accordance with GAAP.
SECTION 4.17. Statement as to Compliance.
The Company will deliver to the Trustee within 120 days after the end of
each fiscal year of the Company (which on the date hereof ends on January 31), a
written statement signed by the principal executive officer, principal financial
officer or principal accounting officer stating that (i) a review of the
activities of the Company during such year and of performance under this
Indenture has been made under his supervision and (ii) to the best of his
knowledge, based on such review, the Company has fulfilled all of its
obligations under this Indenture throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to him and the nature and status thereof.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. Merger, Consolidation or Sale of Assets.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into (whether or not the Company is
the surviving entity), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another Person unless:
(1) the Company is the surviving entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made (such surviving corporation, entity or
transferee Person, the "Surviving Entity") is an entity organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the Surviving Entity assumes all the obligations of the Company
under the Notes, this Indenture and the Collateral Documents pursuant to a
supplemental indenture and supplemental Collateral Documents each in a form
reasonably satisfactory to the Trustee;
(3) the Surviving Entity causes such amendments, supplements or other
instruments to be filed and recorded in such jurisdictions as may be
required by applicable law to preserve and protect the Lien of the
Collateral Documents on the Collateral owned by or transferred to the
Surviving Entity, together with such financing statements as may be
required to perfect any security interests in such Collateral which maybe
perfected by the filing of a financing statement under the Uniform
Commercial Code of the relevant states;
(4) the Collateral owned by or transferred to the Surviving Entity
shall:
(a) continue to constitute Collateral under this Indenture and
the Collateral Documents,
(b) shall be subject to the Lien in favor of the Trustee for the
benefit of the holders of the Notes, and
(c) shall not be subject to any Lien other than Permitted
Collateral Liens;
(5) the property and assets of the Person which is merged or
consolidated with or into the Surviving Entity, to the extent that they are
property or assets of the types which would constitute Collateral under the
Collateral Documents, shall be treated as After-Acquired Property and the
Surviving Entity shall take such action as may be reasonably necessary to
cause such property and assets to be made subject to the Lien of the
Collateral Documents in the manner and to the extent required in this
Indenture;
(6) immediately after giving pro forma effect to such transaction, no
Default or Event of Default exists;
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(7) the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, lease, conveyance or other disposition will
have been made (a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (b) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.06; and
(8) the Company will have delivered to the Trustee an Officers'
Certificate and an opinion of counsel addressed to the Trustee, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or disposition and such supplemental indenture, if any, comply
with this Indenture and that such supplemental indenture is enforceable,
and with respect to the opinion of counsel, subject to customary
enforceability exceptions.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor of the Company shall not be relieved from the obligation to pay
the principal of and interest on the Notes except in the case of a sale of all
of the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" wherever used herein means any one of the following
events:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes;
(2) default in payment when due of the principal of or premium, if
any, on the Notes;
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(3) failure by the Company or any of its Subsidiaries to comply with
the provisions described in Section 4.03, 4.04, 4.05 or 4.06;
(4) continuance of a default in the performance, or breach, of any
other covenant or warranty of the Company in this Indenture for a period of
30 days after there has been given to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the outstanding Notes, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(5) default under any mortgage, security agreement, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company or any of
its Significant Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the Issue Date, which default:
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness, after the expiration of any
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(6) failure by the Company or any of its Significant Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by this Indenture, default by the Company or
any of the Subsidiary Guarantors in the performance or breach of any
covenant or warranty in the Collateral Documents which adversely affects
the enforceability or the validity of the Trustee's Lien on the Collateral
or which adversely affects the condition or value of the Collateral, taken
as a whole, in any material respect, repudiation or disaffirmation by the
Company or any such Subsidiary of its obligations under the Collateral
Documents or the determination in a judicial proceeding that the Collateral
Documents are unenforceable or invalid against the Company or any of its
Subsidiaries for any reason;
(8) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or ceases
for any reason to be in full force and effect or any Subsidiary Guarantor,
or any duly authorized person acting on behalf of any Subsidiary Guarantor,
denies or disaffirms its obligations under its Subsidiary Guarantee;
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(9) the Company, any of its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; and
(10) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(b) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of the
Company or any Significant Subsidiary, or
(c) orders the liquidation of the Company or any Significant
Subsidiary,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under clause (3),
(5) or (6) until the Trustee shall have received written notice from the Company
or any of the Holders or unless a Responsible Officer shall have knowledge of
such Event of Default. The Trustee may withhold from Holders of the Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in clauses
(9) and (10) of Section 6.01 relating to the Company or any Significant
Subsidiary) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least 25% in principal amount of the then outstanding Notes by
written notice to the Company and the Trustee may declare the unpaid principal
of and any accrued interest on all the Notes to be due and payable. Upon such
declaration the
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principal and interest shall be due and payable immediately (together with the
premium referred to in Section 6.01, if applicable). If an Event of Default
specified in clause (9) or (10) of Section 6.01 relating to the Company or any
Significant Subsidiary occurs, such unpaid principal of and any accrued interest
(together with the premium referred to in Section 6.01(2), if applicable) on the
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then outstanding Notes by written
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree, the Company has paid
or deposited with the Trustee a sum sufficient to pay all sums paid or advanced
by the Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and if all
existing Events of Default (except nonpayment of principal or interest that has
become due solely because of the acceleration) have been cured or waived.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may, subject
to the Intercreditor Agreements, pursue any available remedy to collect the
payment of principal, premium, if any, and interest on the Notes or to enforce
the performance of any provision of the Notes, this Indenture or the Collateral
Documents.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration) or
in respect of a covenant or provision hereof which under Article 9 cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be
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unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability.
SECTION 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
cost, loss, liability or expense;
(d) the Trustee does not comply with such request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with such request.
A Holder of a Note may not use this Indenture or the Collateral Documents to
prejudice the rights of another Holder of a Note or to obtain a preference or
priority over another Holder of a Note.
SECTION 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for all amounts due
under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for principal, premium and Liquidated Damages, if
any, and interest, respectively; and
Third: subject to the Intercreditor Agreements, to the Company or to
such party as a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Note on or after the respective maturity or payment dates expressed in
such Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10%
in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Collateral Documents and the
Trustee need perform only those duties that are specifically set forth in
this Indenture and the Collateral Documents and no others, and no implied
covenants or obligations shall be read into this Indenture or the
Collateral Documents against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture or the
Collateral Documents. However, the Trustee shall examine such certificates
and opinions to determine whether or not they conform to the requirements
of this Indenture or the Collateral Documents.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof or in exercising any trust
or power conferred upon the Trustee under this Indenture.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to this Section 7.01
and Section 7.02.
(e) No provision of this Indenture or the Collateral Documents shall
require the Trustee to expend or risk its own funds or incur any liability. The
Trustee shall be under no obligation to exercise any of its rights and powers
under this Indenture or the Collateral Documents at the request of any Holders,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
(a) In connection with the Trustee's rights and duties under this Indenture
or the Collateral Documents, the Trustee may conclusively rely upon and shall be
protected from acting or refraining from acting upon any document or instrument
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting under this Indenture or
the Collateral Documents, it may require an Officers' Certificate or an Opinion
of Counsel or both. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or Opinion
of Counsel. The Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or omitted by
it hereunder or pursuant to the Collateral Documents in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture or the Collateral Documents.
(e) Unless otherwise specifically provided in this Indenture or the
Collateral Documents, any demand, request, direction or notice from the Company
shall be sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture or the Collateral Documents at the
request or direction of any of the Holders unless such Holders shall have
offered to the Trustee reasonable security or indemnity against
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the costs, expenses and liabilities that might be incurred by it in compliance
with such request or direction.
(g) Except with respect to Section 4.01 hereof, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections 6.01(1), 6.01(2) and 4.01 or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained actual
knowledge.
(h) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the Trustee
may, in its discretion, make such further inquiry or investigation into such
facts or matters as it may see fit and if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or attorney.
(i) To the extent any provisions of the Collateral Documents conflict with
or are silent with respect to the matters set forth in this Article 7, such
Collateral Document shall be deemed to include such provisions set forth herein
as if stated therein.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest (as defined in the
TIA) it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
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committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA ss. 313(a) (but if no event described in TIA ss.
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA ss. 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and the Collateral Documents
and services rendered by it hereunder and thereunder. The Trustee's compensation
shall not be limited by any law in regard to the law of compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee and its officers, directors,
employees, agents and affiliates against any and all losses, liabilities or
expenses (including reasonable attorneys' fees) incurred by it arising out of or
in connection with the acceptance or administration of its duties under this
Indenture, the Collateral Documents and any landlord waiver or consent,
including the costs and expenses of enforcing this Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other Person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder, under the Collateral Documents or under any landlord
waiver or consent. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its prior written consent, which consent
shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture and the termination of any
Collateral Document.
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To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money and property held or collected
by the Trustee, except money held in trust to pay principal, premium, if any,
and interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture and the termination of any Collateral Documents.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Sections 6.01(1) or 6.01(2) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the
extent applicable.
SECTION 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers, trusts and duties of the retiring
Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trust power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50,000,000
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12. Intercreditor Agreements.
Notwithstanding anything to the contrary contained herein (but subject to
Section 13.01 hereof), the rights, duties and obligations of the Trustee are
subject to the Intercreditor Agreements.
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ARTICLE 8
DISCHARGE OF INDENTURE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Notes)
as to all outstanding Notes when either:
(1) all Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust) have been delivered to the Trustee for
cancellation; or
(2) (a) all Notes not theretofore delivered to the Trustee for
cancellation have or will (upon the mailing of a notice or notices
deposited with the Trustee together with irrevocable instructions to mail
such notice or notices to holders of the Notes) become due and payable and
the Company has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in the trust for the purpose an amount of money
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal,
premium, if any, and accrued interest to the date of such deposit; (b) the
Company has paid all sums payable by it under this Indenture; and (c) the
Company has delivered irrevocable instructions to the Trustee to apply the
deposited money toward the payment of the Notes at maturity or the
redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent to satisfaction and discharge have
been complied with.
Notwithstanding the foregoing paragraphs, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 7.08, 8.07 and 8.08 shall
survive until the Notes are no longer outstanding. After the Notes are no longer
outstanding, the Company's obligations in Sections 7.07, 8.07 and 8.08 shall
survive.
After such delivery or irrevocable deposit the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes, the Guarantees and this Indenture except for those surviving obligations
specified above.
SECTION 8.02. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.03 or 8.04 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
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SECTION 8.03. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.02 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.05 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.06 hereof and the other Sections of this Indenture
referred to in (1) and (2) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (1) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.05 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (2) the Company's obligations with respect to such Notes under Article
2 and Section 4.02 hereof, (3) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (4) this Article 8. Subject to compliance with this Article 8, the Company
may exercise its option under this Section 8.03 notwithstanding the prior
exercise of its option under Section 8.04 hereof.
SECTION 8.04. Covenant Defeasance.
Upon the Company's exercise under Section 8.02 hereof of the option
applicable to this Section 8.04, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.05 hereof, be released from its
obligations under the covenants contained in Section 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12 or 4.13 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.02 hereof of
the option applicable to this Section 8.04 hereof, subject to the satisfaction
of the conditions set forth in Section 8.05 hereof, Sections 6.01(3) through
6.01(8) hereof shall not constitute Events of Default.
SECTION 8.05. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.03 or 8.04 hereof to the outstanding Notes:
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay (without reinvestment) the principal of, premium
and Liquidated Damages, if any, and interest on the outstanding Notes on
the stated date for payment thereof or on the applicable redemption date,
as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date;
(2) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (b) since the Issue Date, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance
had not occurred;
(3) in the case of an election under Section 8.04 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Notes pursuant to this
Article 8 concurrently with such incurrence) or insofar as Sections 6.01(9)
or 6.01(10) hereof is concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture, the Notes, the
Subsidiary Guarantees and the Registration Rights Agreement) to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;
(6) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
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(7) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.06. Deposited Money and Government Securities to Be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.07 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.06, the
"Trustee") pursuant to Section 8.05 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds, except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.05 hereof or the principal and
interest received in respect thereof.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.05 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.05(1) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.07. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any,
Liquidated Damages or interest on any Note and remaining unclaimed for two years
after such principal, and premium, if any, Liquidated Damages, if any, or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Note shall thereafter, as a creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may (but shall
not be obligated to) at the expense of the Company cause to be published once,
in the New York Times and The Wall Street Journal (national edition), notice
that such money remains unclaimed and that, after a date specified
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therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 8.08. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.03 or 8.04
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.03 or 8.04 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.03 or 8.04
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note to:
(a) cure any ambiguity, defect or inconsistency;
(b) provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) provide for the assumption of the Company's or any Subsidiary
Guarantor's obligations to the Holders of the Notes in the case of a merger
or consolidation pursuant to Section 5.01 or Section 12.01 hereof or a sale
of all or substantially all of the Company's or any Subsidiary Guarantor's
assets;
(d) provide for additional Subsidiary Guarantors as set forth in
Section 4.10 or to provide for the release of a Subsidiary Guarantor
pursuant to Section 12.04;
(e) make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
rights hereunder of any Holder of the Notes; or
(f) comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the
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documents described in Section 7.02 hereof, the Trustee shall join with the
Company in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Sections 4.03 and 4.04 hereof)
and the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(1) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver of this Indenture, the Notes, the
Subsidiary Guarantees, the Registration Rights Agreement or the Collateral
Documents;
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(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other
than the covenants described in Sections 4.03 and 4.04);
(3) reduce the rate of or change the time for payment of interest on
any Note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the
Notes;
(6) make any change in the provisions of this Indenture, the Notes,
the Subsidiary Guarantees or the Collateral Documents relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest or Liquidated Damages, if any,
on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described in clause (2) above or
Section 3.07); or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, Collateral may be released with the consent
of the Holders of at least 75% in aggregate principal amount of the then
outstanding Notes in addition to releases of Collateral expressly permitted by
this Indenture and the Collateral Documents.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. Notation on or Exchange of Notes.
The Trustee may (but shall not be obligated to) place an appropriate
notation about an amendment, supplement or waiver on any Note thereafter
authenticated. The Company in exchange
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for all Notes may issue and the Trustee upon receipt of an Authentication Order,
shall authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive indemnity reasonably satisfactory to it and to
receive and (subject to Section 7.01) shall be fully protected in relying upon,
an Officer's Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
ARTICLE 10
COLLATERAL
SECTION 10.01. Collateral Documents; Additional Collateral; Substitute
Collateral.
(a) Collateral Documents. In order to secure the due and punctual payment
of the principal or premium, if any, and interest and Liquidated Damages, if
any, on the Notes when and as the same shall be due and payable, whether on an
Interest Payment Date, at maturity, on any Asset Sale Purchase Date or Change of
Control Purchase Date, or by acceleration, redemption or otherwise, and interest
on the overdue principal of and (to the extent permitted by law) interest, if
any, on the Notes and the performance of all other obligations of the Company
and the Subsidiary Guarantors to the Holders or the Trustee under this
Indenture, the Notes, the Subsidiary Guarantees, and any other documents
contemplated hereby, as the case may be, the Company, the Subsidiary Guarantors
and the Trustee, as applicable, have simultaneously with the execution of this
Indenture entered into the Collateral Documents to create the security interests
and for related matters. The Trustee, the Company and the Subsidiary Guarantors
each hereby agree that the Trustee holds its interest in the Collateral in trust
for its benefit and for the benefit of the Holders pursuant to the terms of the
Collateral Documents. Each of the Company and the Subsidiary Guarantors
covenants and agrees that it will execute, acknowledge and deliver to the
Trustee such further assignments, transfers, assurances or other instruments and
will do or cause to be done all such acts and things as may be necessary or
proper to assure and confirm to the Trustee its interest in the Collateral, or
any part thereof, as from time to time constituted, and the right, title and
interest in and to the Collateral Documents so as to render the same available
for the security and benefit of this Indenture and of the Notes.
(b) Additional Collateral. Promptly upon the acquisition or receipt by the
Company or any of the Subsidiary Guarantors of After-Acquired Property:
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(i) the Company or the applicable Subsidiary Guarantor, as the case
may be, and the Trustee will enter into such amendments or supplements to
the Collateral Documents or such additional Mortgages (in each case in
registerable or recordable form) and other Collateral Documents, and the
Company shall cause such amendments, supplements, mortgages and other
Collateral Documents to be filed and recorded in all such governmental
offices as shall be necessary in order to grant and create a valid first
priority Lien on and security interest in such After-Acquired Property in
favor of the Trustee (subject to no Liens except Permitted Collateral
Liens), the Company shall cause appropriate financing statements to be
filed in such governmental offices as shall be reasonably necessary in
order to perfect any security interest in such After-Acquired Property as
to which a security interest may, under the Uniform Commercial Code of the
applicable jurisdiction, be perfected by the filing of a financing
statement and, if any such After-Acquired Property consists of stock
certificates, promissory notes or other property as to which, under the
relevant Uniform Commercial Code, a security interest may be perfected by
possession, deliver such certificates, promissory notes and other property,
together with stock powers or assignments duly endorsed in blank, to the
Trustee;
(ii) in the case of additional Collateral which constitutes personal
property having a value in excess of $500,000 the Company or the applicable
Subsidiary Guarantor, as the case may be, shall also deliver to the Trustee
the following:
(A) an Opinion of Counsel required pursuant to Section 10.02(b)
below;
(B) an Officers' Certificate of the Company stating that any
specific encumbrances to such Lien are Permitted Collateral Liens; and
(C) evidence of payment or a closing statement indicating
payments to be made of all filing fees, recording charges, transfer
taxes and other costs and expenses, including reasonable legal fees
and disbursements of counsel for the Trustee (and any local counsel)
that may be incurred to validly and effectively subject such personal
property to the Lien of any applicable Collateral Document to perfect
such Liens;
(iii) in the case of additional Collateral which constitutes Real
Property the Company or the applicable Subsidiary Guarantor, as the case
may be, shall also deliver to the Trustee the following:
(A) a title insurance policy or an endorsement to an existing
title insurance policy, in the American Land Title Insurance Loan
Policy Extended Coverage form, or its equivalent, and in an amount at
least equal to the purchase price thereof (or, if such property was
not purchased or such purchase price cannot be determined by the
Company, the fair market value thereof as determined by the Board of
Directors and set forth in an Officers' Certificate delivered to the
Trustee), in favor of the Trustee insuring that the Lien of the
Collateral Documents or any additional Collateral Documents
constitutes a valid and perfected Lien, subject to no Liens except
Permitted Collateral Liens, on such Real Property in an aggregate
amount equal to the purchase price or the fair market value, as
applicable, of the Real Property and containing such endorsements and
other assurances of the type included in the
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title insurance policy delivered to the Trustee on the date of this
Indenture with respect to the real property Collateral, together with
an Officers' Certificate stating that any Liens or such Real Property
are Liens expressly permitted by this Indenture and the applicable
Collateral Documents;
(B) any Opinions of Counsel required pursuant to Section 10.02(b)
below;
(C) a Survey with respect to such Real Property;
(D) a policy or certificate of insurance as required by any
Mortgage relating to such Real Property, which policy or certificate
shall bear mortgagee endorsements of the character required by such
Mortgage; (E) evidence of payment or a closing statement indicating
payments to be made by the applicable Pledgor of all title premiums,
recording charges, transfer taxes and other costs and expenses
including reasonable legal fees and disbursements of counsel for the
Trustee (and any local counsel) that may be incurred to validly and
effectively subject such Real Property to the Lien of any applicable
Security Document to perfect such Lien;
(F) copies of all Leases, all of which Leases shall be in
conformance with any applicable provisions of the Security Documents;
(G) an Officers' Certificate of the Company stating that there
has been issued and is in effect a valid and proper certificate of
occupancy or local or foreign equivalent, if required by the local or
foreign codes or ordinances for the use then being made of such Real
Property and that there is not outstanding any citation, violation or
similar notice indicating that such Real Property contains conditions
which are not in compliance with local or foreign codes or ordinances
relating to building or fire safety or structural soundness; and
(H) such consents, approvals, amendments, supplements, estoppels,
tenant subordination agreements or other instruments as shall be
necessary in order for the owner or holder of the fee interest to
grant the Lien contemplated by the Mortgage with respect to such Real
Property; and
(iv) The Company shall deliver to the Trustee an Opinion of Counsel
and an Officers' Certificate to the effect that the documents that have
been or are therewith delivered to the Trustee pursuant to this Section
10.01(b) (including any amendments, supplements, mortgages or other
Collateral Documents referred to in paragraph (i) above) conform to the
requirements of this Indenture.
(c) Substitute Collateral. The Company or any Subsidiary Guarantor may, at
its option, from time to time, relocate any of the Equipment to Mexico, which
Equipment shall not have a Fair Market Value greater than $15,000,000 in the
aggregate, either by (i) creating a valid and perfected Lien in favor of the
Trustee pursuant to the laws of Mexico or (ii) substituting other
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Equipment related to or used in the principal businesses of the Company and the
Subsidiary Guarantors, if such substitute Equipment has a Fair Market Value
equal to or greater than the Equipment to be relocated (the "Substitute
Collateral"), upon presentation to the Trustee of, among other things, the
following documents:
(1) an application of the Company or the applicable Subsidiary
Guarantor requesting such substitution of Substitute Collateral and
describing the property to be so released and the property to be
substituted therefor;
(2) an Officers' Certificate of the Company or the applicable
Subsidiary Guarantor also signed by an Independent Appraiser;
(3) an instrument or instruments in recordable form sufficient for the
Lien of the Collateral Documents to cover the Substitute Collateral;
(4) an Officers' Certificate of the Company stating that any specific
encumbrances of such Substitute Collateral are Permitted Collateral Liens
of the character which were permitted with respect to the Equipment being
replaced by such Substitute Collateral;
(5) evidence of payment or a closing statement indicating payments to
be made by the Company or the applicable Subsidiary Guarantor of all filing
fees, recording charges, transfer taxes and other costs and expenses,
including reasonable legal fees and disbursements of counsel for the
Trustee (and any local counsel) that may be incurred to validly and
effectively subject such Substitute Collateral to the Lien of any
applicable Collateral Document to perfect such Liens; and
(6) Opinion(s) of Counsel in each jurisdiction in which such
Substitute Collateral is located substantially in the form of the local
counsel opinions delivered on the Issue Date and otherwise in form and
substance satisfactory to the Trustee with respect to the documents
executed and delivered by the Company of the applicable Subsidiary
Guarantor and the Substitute Collateral encumbered thereby stating that the
Lien of the Collateral Documents constitutes a valid and perfected Lien on
such Substitute Collateral.
(d) Each Holder, by accepting a Note, agrees to all the terms and
provisions of the Collateral Documents, including any additional Collateral
Documents described in paragraph (b) of this Section 10.01, as the same may be
amended or supplemented from time to time pursuant to the provisions of the
Collateral Documents (including such additional Collateral Documents) and this
Indenture.
SECTION 10.02. Recording, Registration and Opinions.
(a) The Company and the Subsidiary Guarantors shall take or cause to be
taken all action required to perfect, maintain, preserve and protect the Lien on
and security interest in the Collateral granted by the Collateral Documents
(subject only to Permitted Collateral Liens), including without limitation, the
filing of financing statements, continuation statements, Mortgages and any
instruments of further assurance, in such manner and in such places as may be
required by law fully to
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preserve and protect the rights of the Holders and the Trustee under this
Indenture and the Collateral Documents to all property comprising the Collateral
subject to the Intercreditor Agreements. The Company and the Subsidiary
Guarantors shall from time to time promptly pay all financing, continuation
statement and mortgage recording, registration and/or filing fees, charges and
taxes relating to this Indenture and the Collateral Documents, any amendments
thereto and any other instruments of further assurance required hereunder or
pursuant to the Collateral Documents. The Trustee shall have no obligation to,
nor shall it be responsible for any failure to so register, file or record.
(b) The Company shall furnish to the Trustee, promptly but in no event
later than 30 days after the execution and delivery of this Indenture,
Opinion(s) of Counsel required by TIA ss. 314(b)(1).
(c) The Company or the applicable Subsidiary Guarantor shall furnish to the
Trustee, at the time of execution and delivery of this Indenture, with respect
to each Mortgage, (i) a policy of title insurance (or a commitment to issue such
policy) insuring (or committing to insure) the Lien of such Mortgage as a valid
mortgage Lien, subject only to Liens specified in the applicable Mortgage as
Permitted Collateral Liens on the real property and fixtures described therein
which policy (or commitment) shall (A) be issued by a reputable title company,
(B) include such reinsurance arrangements, if any (with provisions for direct
access), as shall be customary in the same general area and for transactions of
this type and size, (C) have been supplemented by such endorsements as are
customary in the same general area and for transactions of this type and size
(and, in the case of any Mortgage executed after the date of this Indenture,
endorsements substantially identical to those included in the title policies for
the then existing Mortgages) or, where such endorsements are not available at
commercially reasonable premium costs, opinion letters of special counsel or
governmental authorities (including endorsements or opinion letters on matters
relating to usury, zoning, first loss, last dollar, zoning, non-imputation,
public road access, contiguity (where appropriate), cluster, survey, doing
business and so-called comprehensive coverage over covenants and restrictions,
if available) and (D) contain only such exceptions to title as shall be
Permitted Collateral Liens (as defined in the applicable Mortgage) or as shall
not materially and adversely effect the value, use or operation of such real
property (each, a "Title Policy"), (ii) the aggregate amount of all such Title
Policies shall be not less than the principal amount of the Notes and (iii) an
Officers' Certificate stating that such Title Policies comply with the
requirements of this subsection (c).
(d) The Company shall furnish to the Trustee on the anniversary of the
Issue Date in each year, beginning with 2000, an Opinions of Counsel, dated as
of such date, which complies with TIA ss. 314(b)(2), either (i)(x) stating that,
in the opinion of such counsel, such action has been taken with respect to the
recordings, registrations, filings, re-recordings, re-registrations and
refilings of this Indenture and all supplemental indentures, financing
statements, continuation statements and other instruments of further assurance
as are necessary to maintain the perfected Liens of the Collateral Documents
under the UCC or the applicable law in those items of Collateral that can be
perfected by the filing, recordings or registrations and reciting with respect
to such Liens on and security interests in the Collateral the details of such
action or referring to prior Opinions of Counsel in which such details are
given, and (y) stating that, based on relevant laws as in effect on the date of
such Opinion of Counsel, all financing statements, continuation statements,
Mortgage and other documents have been executed and filed that are necessary, as
of such date and during the succeeding 24 months, fully to maintain the
perfection of the security interests of the Holders and the Trustee hereunder
and under
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the Collateral Documents with respect to the Collateral; provided that if there
is a required filing of a continuation statement within such 24 month period and
such continuation statement is not effective if filed at the time of the
opinion, such opinion may so state and in that case the Company shall cause a
continuation statement to be timely filed so as to maintain such Liens and
security interests and shall provide a further Opinion of Counsel to the effect
of this clause (i) upon the filing of the relevant continuation statement; or
(ii) stating that, in the opinion of such counsel, no such action is necessary
to maintain such Liens or security interests.
SECTION 10.03. Release of Collateral.
(a) The Trustee shall not at any time release Collateral from the Liens
created by this Indenture and the Collateral Documents unless such release is in
accordance with the provisions of this Indenture and the Collateral Documents.
(b) Anything herein to the contrary notwithstanding, at any time when an
Event of Default shall have occurred and be continuing, no release of Collateral
pursuant to the provisions of this Indenture or the Collateral Documents shall
be effective as against the Holders.
(c) The release of any Collateral from the Lien of the Collateral Documents
shall not be deemed to impair the security under this Indenture in contravention
of the provisions hereof if and to the extent the Collateral is released
pursuant to this Indenture and the Collateral Documents. To the extent
applicable, the Company shall cause TIA ss. 314(d) relating to the release of
property from the Lien of the Collateral Documents and relating to the
substitution therefor of any property to be subjected to the Lien of the
Collateral Documents to be complied with. Any certificate or opinion required by
TIA ss. 314(d) may be made by an Officer of the Company, except in cases where
TIA ss. 314(d) requires that such certificate or opinion be made by an
independent person, which person shall be an independent engineer, appraiser or
other expert selected by the Company.
SECTION 10.04. Possession and Use of Collateral.
Subject to and in accordance with the provisions of this Indenture and the
Collateral Documents (including the Intercreditor Agreements), so long as the
Trustee has not exercised rights or remedies with respect to the Collateral in
connection with an Event of Default that has occurred and is continuing, the
Company and the Subsidiary Guarantors shall have the right to remain in
possession and retain exclusive control of and to exercise all rights with
respect to the Collateral (other than Trust Monies held by the Trustee, other
than monies or U.S. Government Obligations deposited pursuant to Article 8, and
other than as set forth in the Collateral Documents and this Indenture), to
operate, manage, develop, lease, use, consume and enjoy the Collateral (other
than Trust Monies held by the Trustee, other than monies and U.S. Government
Obligations deposited pursuant to Article 8 and other than as set forth in the
Collateral Documents and this Indenture), to alter or repair any Collateral
consisting of machinery or Equipment so long as such alterations and repairs do
not impair the Lien of the Collateral Documents thereon and to collect, receive,
use, invest and dispose of the reversions, remainders, interest, rents, lease
payments, issues, profits, revenues, proceeds and other income thereof.
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SECTION 10.05. Specified Releases of Collateral.
(a) Satisfaction and Discharge; Defeasance. The Company and the Subsidiary
Guarantors shall be entitled to obtain a full release of all of the Collateral
from the Liens of this Indenture and of the Collateral Documents upon payment in
full of all principal, premium, if any, interest and Liquidated Damages, if any,
on the Notes and of all Obligations for the payment of money due and owing to
the Trustee or the Holders, or upon compliance with the conditions precedent set
forth in Article 8 for Legal Defeasance or Covenant Defeasance. Upon delivery by
the Company to the Trustee of an Officers' Certificate and an Opinion of
Counsel, each to the effect that such conditions precedent have been complied
with (and which may be the same Officers' Certificate and Opinion of Counsel
required by Article 8), together with such documentation, if any, as may be
required by the Trustee or the TIA (including, without limitation, TIA ss.
314(d)) prior to the release of such Collateral, the Trustee shall forthwith
take all necessary action (at the request of and the expense of the Company) to
release and reconvey to the Company and the applicable Subsidiary Guarantors
without recourse all of the Collateral, and shall deliver such Collateral in its
possession to the Company and the applicable Subsidiary Guarantors including,
without limitation, the execution and delivery of releases and satisfactions
wherever required.
(b) Dispositions of Primary Collateral Permitted by Section 4.04 The
Company and each of the Subsidiary Guarantors, as the case may be, shall be
entitled to obtain a release of, and the Trustee shall release, items of Primary
Collateral (other than Trust Monies, excluding Trust Monies constituting Net
Proceeds from an Asset Sale, which Trust Monies are subject to release from the
Lien of the Collateral Documents as provided under Article 11) (the "Released
Collateral") subject to an Asset Sale upon compliance with the conditions
precedent that the Company shall have delivered to the Trustee the following:
(i) An order of the Company requesting release of Released Collateral
(a "Company Order"), such Company Order (A) specifically describing the
proposed Released Collateral, (B) specifying the fair market value of such
Released Collateral on a date within 60 days of the Company Order (the
"Valuation Date"), (C) stating that the consideration to be received is at
least equal to the fair market value of the Released Collateral, (D)
stating that the release of such Released Collateral will not materially
and adversely impair the value of the remaining Collateral, taken as a
whole, or interfere with or impede the Trustee's ability to realize the
value of the remaining Collateral and will not impair the maintenance and
operation of the remaining Collateral, (E) confirming the sale of, or an
agreement to sell, such Released Collateral in a bona fide sale to a Person
that is not an Affiliate of the Company or, in the event that such sale is
to a Person that is such an Affiliate, confirming that such sale is being
made in accordance with Section 4.09, (F) certifying that such Asset Sale
complies with the terms and conditions of this Indenture, including,
without limitation, Section 4.04 hereof, (G) in the event that there is to
be a substitution of property for the Collateral subject to the Asset Sale,
specifying the property intended to be substituted for the Collateral to be
disposed of and (H) accompanied by a counterpart of the instruments
proposed to give effect to the release fully executed and acknowledged (if
applicable) by all parties thereto other than the Trustee;
(ii) An Officers' Certificate certifying that (A) such sale covers
only the Released Collateral and/or property which is not Primary
Collateral and complies with the terms and
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conditions of this Indenture, including, without limitation, Section 4.08
hereof, (B) all Available Amounts from the sale of any of the Released
Collateral will be deposited in the Collateral Account, and all Net
Proceeds from the sale of any of the Released Collateral (and any other
property which is not Primary Collateral) have been applied pursuant to
Section 4.08 and the provisions of the Intercreditor Agreements, (C) to the
extent any Released Collateral is comprised of any Boise Collateral or
Secondary Collateral, Boise Cascade, the Existing Mortgage Lender or the
Revolving Credit Lenders, as applicable, to the extent the Indebtedness
secured by such collateral remains outstanding, shall have authorized the
release of the same, (D) there is not, and will not be, a Default or Event
of Default in effect or continuing on the date thereof, the Valuation Date
or the date of such Asset Sale, (E) the release of the Released Collateral
will not result in a Default or Event of Default hereunder and (F) all
conditions precedent in this Indenture and the Collateral Documents to such
release have been complied with;
(iii) The Net Proceeds and other property (other than cash or
financial instruments) received as consideration from the Asset Sale shall
be delivered to the Trustee, together with such instruments of conveyance,
assignment and transfer, if any, as may be necessary, in the opinion of
counsel, to subject to the Lien of this Indenture and the Collateral
Documents all the right, title and interest of the Company and the
Subsidiary Guarantors in and to such property;
(iv) All documentation required by the TIA (including, without
limitation, TIA ss. 314(d)), if any, prior to the release of Collateral by
the Trustee, and, in the event there is to be a substitution of property
for the Collateral subject to the Asset Sale, all documentation required by
the TIA to effect the substitution of such new Collateral and to subject
such new Collateral to the Lien of the relevant Collateral Documents, and
all documents required by Section 10.01 hereof; and
(v) An Opinion of Counsel stating that the documents that have been or
are therewith delivered to the Trustee in connection with such release
conform to the requirements of this Indenture and that all conditions
precedent herein provided for relating to such release have been complied
with and, in addition, if any Collateral to be released is (A) only a
portion of a discrete parcel of Real Property, an Opinion of Counsel
confirming that after such release, the Lien of the applicable Mortgage
continues unimpaired as a perfected Lien (with the same priority of such
Lien prior to such release) upon the remaining Mortgaged Property subject
only to those Liens permitted by the applicable Mortgage and (B) Mortgaged
Property having a fair market value in excess of $500,000, the Company or
the applicable Subsidiary Guarantor shall have delivered to the Trustee a
Survey depicting the Real Property to be released.
Upon compliance by the Company with the conditions precedent set forth
above, the Trustee shall cause to be released and reconveyed to the Company or
the applicable Subsidiary Guarantor the Released Collateral without recourse by
executing a release in the form provided by the Company or the applicable
Subsidiary Guarantor and reasonably acceptable to the Trustee.
(c) Dispositions of Secondary Collateral Permitted by the Intercreditor
Agreements. The Company and the Subsidiary Guarantors, as the case may be, shall
be entitled to obtain a release
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of, and the Trustee shall release, items of Secondary Collateral upon compliance
with the conditions set forth in the Existing Lien Intercreditor Agreement.
(d) Eminent Domain, Expropriation and Other Governmental Takings. The
Company and the Subsidiary Guarantors, as the case may be, shall be entitled to
obtain a release of, and the Trustee shall release, items of Collateral taken by
eminent domain or expropriation or sold pursuant to the exercise by the United
States of America or any State, municipality, province or other governmental
authority thereof of any right which it may then have to purchase, or to
designate a purchaser or to order a sale of, all or any part of the Collateral
("Taking", including, with a correlative meaning the term "Taken"), upon
compliance with the conditions precedent that the Company shall have delivered
to the Trustee the following:
(i) An Officers' Certificate of the Company certifying that (A) such
Collateral has been Taken and the amount of the proceeds of such sale, and
(B) all conditions precedent to such release have been complied with;
(ii) the award for such property or the proceeds of such sale (net of
the costs of obtaining such award or proceeds), to be held as Trust Monies
subject to the disposition thereof pursuant to Article 11; provided,
however, that, in lieu of all or any part of such award or proceeds, the
applicable Pledgor shall have the right to deliver to the Trustee a
certificate of the trustee, mortgagee or other holder of a Permitted
Collateral Lien on all or any part of the property to be released, stating
that such award or proceeds (net of the costs of obtaining such award or
proceeds), or a specified portion thereof, has been deposited with such
trustee, mortgagee or other holder pursuant to the requirements of such
Permitted Collateral Lien, in which case the balance of the award, if any,
shall be delivered to the Trustee;
(iii) All documentation required by the TIA (including, without
limitation, TIA ss. 314(d)), if any, prior to the release of Collateral by
the Trustee.
In any proceedings for the Taking of any part of the Collateral, the
Trustee may be represented by counsel who may be counsel for the Company or the
applicable Subsidiary Guarantor.
Upon compliance by the Company with the conditions precedent set forth
above, the Trustee shall cause to be released and reconveyed to the Company or
the applicable Subsidiary Guarantor without recourse the aforementioned items of
Collateral by executing a release in the form provided by the Company or the
applicable Subsidiary Guarantor.
SECTION 10.06. Disposition of Collateral Without Release.
Notwithstanding the provisions of Section 10.05 and subject to Sections
10.07 and 13.01 below, so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, the Company or any
Subsidiary Guarantors may, without any prior release or consent by the Trustee:
(i) sell or otherwise dispose in any transaction or series of related
transactions of any property that may be defective or may have become worn
out, defective or obsolete or is not used or useful in the operation of the
Company or any Subsidiary Guarantor and which
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has an aggregate fair market value of such property or such property is
sold or otherwise disposed of in a commercially reasonably manner to an
unaffiliated third party or which is replaced by property of substantially
equivalent or greater value which shall become subject to the Lien of the
Collateral Documents pursuant to Section 10.01 hereof;
(ii) grant rights-of-way and easements over or in respect of any Real
Property; provided, however, that such grant will not in any material
respect, in the reasonable opinion of the Board of Directors of the Company
or the relevant Subsidiary Guarantor, impair the usefulness of such
property in the conduct of the Company's or the relevant Subsidiary
Guarantor's business and will not be prejudicial to the interests of the
Holders;
(iii) alter, repair, replace, change the location or position of and
add to its plants, structures, machinery, systems, Equipment, fixtures and
appurtenances; provided, however, that no change in the location of any
such Collateral subject to the Lien of any of the Collateral Documents
shall be made which (1) removes such property into a jurisdiction in which
any instrument required by law to perfect the Lien of any of the relevant
Collateral Document on such property, including all necessary instruments
of further assurance, has not been recorded, registered or filed in the
manner required by law to continue the perfection of the Lien of any of the
Collateral Documents on such property, (2) does not comply with the terms
of this Indenture and the Collateral Documents or (3) otherwise impairs the
Lien of the Collateral Documents;
(iv) subject to the provisions of the Collateral Documents, abandon,
terminate, cancel, release or make alterations in or substitutions of any
leases, contracts or rights-of-way subject to the Lien of the Collateral
Documents; provided, however, that (i) any altered or substituted leases,
contracts or rights-of-way shall forthwith, without further action, be
subject to the Lien of the Collateral Documents to the same extent as those
previously existing and (ii) if the Company or the relevant Subsidiary
Guarantor shall receive any money or property in excess of the Company's or
the relevant Subsidiary Guarantor's expenses in connection with such
termination, cancellation, release, alteration or substitution as
consideration or compensation for such termination, cancellation, release,
alteration or substitution, such money or property, to the extent it
exceeds $500,000 (in which case all of the money and property so received
and not just the portion in excess of $500,000 shall be subject to this
clause), forthwith upon its receipt by such entity, shall be deposited with
the Trustee (unless otherwise required by a Permitted Collateral Lien
permitted under the applicable Security Documents) as Trust Monies subject
to disposition as provided in Article 11 hereof or otherwise subjected to
the Lien of the Collateral Documents;
(v) grant a non-exclusive license of any Intellectual Property;
(vi) abandon any Intellectual Property where the Company or the
relevant Subsidiary Guarantor, in its reasonable business judgment,
concludes that such Intellectual Property is no longer used or useful in
any material respect in the conduct of the business of Company or the
relevant Subsidiary Guarantor;
(vii) surrender or modify any franchise, license or permit subject to
the Lien of any of the Collateral Documents which it may own or under which
it may be operating if the
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Company or the relevant Subsidiary Guarantor in its reasonable business
judgment concludes that such franchise, license or permit is no longer used
or useful in the conduct of the business of the Company or the relevant
Subsidiary Guarantor and provided, further, that if such entity shall be
entitled to receive any money or property in excess of such entity's
expenses in connection with such surrender or modification as consideration
or compensation for such surrender or modification, such money or property,
to the extent that it exceeds $500,000 (in which case all of the money and
property so received and not just the portion in excess of $500,000 shall
be subject to this clause), forthwith upon its receipt by such entity,
shall be deposited with the Trustee (unless otherwise required by a
Permitted Collateral Lien) as Trust Monies subject to disposition as
provided in Article 11 hereof, or otherwise subjected to the Lien of the
Collateral Documents;
(viii) subject to the provisions of the Collateral Documents, grant
leases or subleases in respect of any Real Property in the event that the
Company or the relevant Subsidiary Guarantor determines, in its reasonable
business judgment, that such Real Property is no longer useful in the
conduct of such entity's business and such leases or subleases do not
materially interfere with the ordinary course of business of the Company
and its Subsidiaries and do not materially affect the value of the property
subject thereto; provided, however, that any such lease or sublease shall
by its terms be subject and subordinate to the Lien, and otherwise comply
with the provisions, of the Mortgage affecting such Real Property;
(ix) subject to the Collateral Documents, sell or otherwise dispose of
Inventory and modify, extend or renew, or compromise or settle any dispute
or claim relating to, or sell any Account, in each case in the ordinary
course of business consistent with prudent business practice; and
(x) in connection with any sale of Collateral (other than Primary
Collateral) in accordance with the provisions of Section 2.1 of the
Existing Lien Intercreditor Agreement, execute and deliver any and all
instruments evidencing the release of the Lien of the Collateral Documents
on the Collateral (other than Primary Collateral) described to be sold,
transferred or otherwise disposed of in accordance with the provisions of
the Intercreditor Agreements.
SECTION 10.07. Form and Sufficiency of Release.
In the event that the Company or any Subsidiary Guarantor has sold,
exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise
dispose of any portion of the Collateral that under the provisions of Section
10.05 or 10.06 may be sold, exchanged or otherwise disposed of by the Company or
any Subsidiary Guarantor, and the Company or such Subsidiary Guarantor requests
the Trustee to furnish a written disclaimer, release or quitclaim of any
interest in such property under this Indenture, the applicable Subsidiary
Guarantee and the Collateral Documents, upon being satisfied that the Company or
such Subsidiary Guarantor is selling, exchanging or otherwise disposing of the
Collateral in accordance with the provisions of Section 10.05 or 10.06 (which,
in the case of Section 10.06, shall include receipt of (i) an Officers'
Certificate by the Company or such Subsidiary Guarantor reciting the sale,
exchange or other disposition made or proposed to be made and describing in
reasonable detail the property affected thereby, and stating that such property
is property which by the provisions of Section 10.06 may be sold, exchanged or
otherwise disposed of or dealt with by the Company or such Subsidiary Guarantor
without any release
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or consent of the Trustee and (ii) an Opinion of Counsel stating that the sale,
exchange or other disposition made or proposed to be made was duly taken by the
Company or such Subsidiary Guarantor in conformity with a designated subsection
of Section 10.06 and that the execution and form of such written disclaimer,
release or quit-claim is appropriate under this Section 10.07), the Trustee
shall execute, acknowledge and deliver to the Company or such Subsidiary
Guarantor such an instrument in the form provided by the Company, and providing
for release without recourse, promptly after satisfaction of the conditions set
forth herein for delivery of any such release and shall take such other action
as the Company or such Subsidiary Guarantor may reasonably request and is
necessary to effect such release. Notwithstanding the preceding sentence, all
purchasers and grantees of any property or rights purporting to be released
shall be entitled to rely upon any release executed by the Trustee hereunder as
sufficient for the purpose of this Indenture and as constituting a good and
valid release of the property therein described from the Lien of this Indenture
and of the Collateral Documents.
SECTION 10.08. Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be released
shall be bound to ascertain the authority of the Trustee to execute the release
or to inquire as to the existence of any conditions herein prescribed for the
exercise of such authority.
SECTION 10.09. Authorization of Actions to Be Taken by the Trustee Under the
Collateral Documents.
Subject to the provisions of the Collateral Documents:
(a) the Trustee may, in its sole discretion and without the consent of
the Holders, take all actions it deems necessary or appropriate in order to
(i) enforce any of the terms of the Collateral Documents and (ii) collect
and receive any and all amounts payable in respect of the Obligations of
the Company and the Subsidiary Guarantors hereunder and under the
Collateral Documents; and
(b) the Trustee shall have power to institute and to maintain such
suits and proceedings as it may deem expedient to prevent any impairment of
the Collateral by any act that may be unlawful or in violation of the
Collateral Documents or this Indenture, and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Collateral (including the power to
institute and maintain suits or proceedings to restrain the enforcement of
or compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement
of, or compliance with, such enactment, rule or order would impair the
security interest thereunder or be prejudicial to the interests of the
Holders or of the Trustee).
SECTION 10.10. Authorization of Receipt of Funds by the Trustee Under the
Collateral Documents.
The Trustee is authorized to receive any funds for the benefit of Holders
distributed under the Collateral Documents, to apply such funds as provided in
this Indenture and the Collateral
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Documents, and to make further distributions of such funds to the Holders in
accordance with the provisions of Article 11 and the other provisions of this
Indenture.
SECTION 10.11. Powers Exercisable by Receiver or Trustee.
In case the Collateral shall be in the possession of a receiver or trustee,
lawfully appointed, the powers conferred in this Article 10 upon the Company or
any Subsidiary Guarantor, as applicable, with respect to the release, sale or
other disposition of such property may be exercised by such receiver or trustee,
and an instrument signed by such receiver or trustee shall be deemed the
equivalent of any similar instrument of the Company or any Subsidiary Guarantor,
as applicable, or of any officer or officers thereof required by the provisions
of this Article 10.
ARTICLE 11
APPLICATION OF TRUST MONIES
SECTION 11.01. Collateral Account.
On the date of this Indenture there shall be established and, at all times
hereafter until this Indenture shall have terminated, there shall be maintained
with the Trustee the Collateral Account. The Collateral Account shall be
established and maintained by the Trustee at its Corporate Trust Office. All
Trust Monies which are received by the Trustee shall be deposited in the
Collateral Account and thereafter shall be held by and under the sole dominion
and control of the Trustee for its benefit and for the benefit of the Holders as
a part of the Collateral and, upon any entry upon or sale or other disposition
of the Collateral or any part thereof pursuant to any of the Collateral
Documents, said Trust Monies shall be applied in accordance with Section 6.10;
but prior to any such entry, sale or other disposition, all or any part of the
Trust Monies may be withdrawn, and shall be released, paid or applied by the
Trustee in accordance with the terms of this Article.
SECTION 11.02. Withdrawal of Insurance Proceeds and Condemnation Awards.
To the extent that any Trust Monies consist of Net Insurance Proceeds, such
Trust Monies, to the extent consistent with the Intercreditor Agreements, may be
withdrawn by the Company and shall be paid by the Trustee upon a Company Request
delivered to the Trustee to reimburse the Company or the applicable Subsidiary
Guarantor for expenditures made, or to pay costs incurred, by the Company or
such Subsidiary Guarantor in connection with the repair, rebuilding or
replacement of the Collateral destroyed, damaged or taken, upon receipt by the
Trustee of the following:
(a) An Officers' Certificate, dated not more then 30 days prior to the
date of the application for the withdrawal and payment of such Trust Monies
setting forth:
(i)that expenditures have been made, or costs incurred by the Company
or such Subsidiary Guarantor, as the case may be, in a specified
amount in connection with certain repairs, rebuildings and
replacements of the Collateral, which shall be briefly described, and
stating the fair market value thereof to the Company or such
Subsidiary
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Guarantor at the date of the acquisition thereof by the Company or
such Subsidiary Guarantor;
(ii)that no part of such expenditures or costs has been or is being
made the basis for the withdrawal of any Trust Monies in any previous
or then pending application pursuant to this Section 11.02;
(iii)that no part of such expenditures or costs has been paid out of
either the proceeds of insurance upon any part of the Collateral not
required to be paid to the Trustee under the Collateral Documents or
any award for or the proceeds from any of the Collateral being taken
not required to be paid to the Trustee under Section 10.05(d), as the
case may be;
(iv)that there is no outstanding Indebtedness, other than costs for
which payment is being requested, known to the Company, after due
inquiry, for the purchase price or construction of such repairs,
rebuildings or replacements, or for labor, wages, materials or
supplies in connection with the making thereof, which, if unpaid,
might become the subject of a vendor's, mechanic's, laborer's,
materialman's, statutory or other similar Lien upon any such repairs,
rebuildings or replacement, which Lien might, in the opinion of the
signers of such Officers' Certificate, materially impair the security
afforded by such repairs, rebuildings or replacements;
(v)that the property to be repaired, rebuilt or replaced is necessary
or desirable in the conduct of the Company's or such Subsidiary
Guarantor's business;
(vi)that the Company or such Subsidiary Guarantor has title to such
repairs, rebuildings and replacements that is substantially similar to
its title to the property destroyed, damaged or taken and that any
Liens upon such repairs, rebuildings and replacements are expressly
permitted by this Indenture and the applicable Collateral Documents;
(vii)that no Default or Event of Default shall have occurred and be
continuing; and
(viii)that all conditions precedent herein provided for relating to
such withdrawal and payment have been complied with;
(b) All documentation required under the TIA (including, without
limitation, TIA ss. 314(d));
(c) (i) In case any part of such repairs, rebuildings (excluding
repairs or rebuildings to any tissue machine located in any Improvements
(as defined in the Mortgage)) or replacements constitutes Real Property:
(A) with respect to any such repairs, rebuildings or replacements
that are not encompassed within or are not erected upon Mortgaged
Property, an instrument or instruments in recordable form sufficient
for the Lien of any applicable Mortgage to cover such repairs,
rebuildings or replacements which, if such repairs, rebuildings or
replacements include leasehold or easement interests, shall include
normal and
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customary provisions with respect thereto and evidence of the filing
of all such documents as may be necessary to perfect such Liens;
(B) in the event such repairs, rebuildings or replacements have a
Fair Market Value in excess of $500,000, a policy of title insurance
(or a commitment to issue title insurance) insuring that the Lien of
any applicable Mortgage constitutes a valid and perfected mortgage
Lien on such repairs, rebuildings or replacements to the extent that
such repairs, rebuildings or replacements extend beyond the exterior
configuration of any Improvement (subject to no Liens other than
Permitted Collateral Liens in an aggregate amount equal to the fair
market value of such repairs, rebuildings or replacements or other
investments, together with such endorsements and other opinions as are
contemplated by Section 10.02(b), or with respect to any such repairs,
rebuildings or replacements that are encompassed within or are erected
upon Real Property subject to the Lien of a Mortgage, an endorsement
to the title insurance policy issued pursuant to Section 10.02(b)
regarding the affected Real Property confirming that such repairs,
rebuildings or replacements are encumbered by the Lien of the
applicable Mortgage (subject to no Liens other than Permitted
Collateral Liens);
(C) in the event such repairs, rebuildings or replacements have a
fair market value in excess of $500,000 and affect the exterior
configuration of an Improvement, a Survey with respect thereto; and
(D) evidence of payment or a closing statement indicating
payments to be made by the Company or the applicable Subsidiary
Guarantor of all title insurance premiums, recording charges, and/or
transfer taxes, if any, and other costs and expenses, including
reasonable legal fees and disbursements of counsel for the Trustee
(and any local counsel), that may be incurred to validly and
effectively subject such repairs, rebuildings or replacements to the
Lien of any applicable Collateral Document to perfect such Lien; and
(ii) in case any part of such repairs, rebuildings or replacements
constitutes personal property interests:
(A) an instrument in recordable form sufficient for the Lien of
any applicable Collateral Document to cover such repairs, rebuildings
or replacements; and
(B) evidence of payment or a closing statement indicating
payments to be made by the Company or the applicable Subsidiary
Guarantor of all filing fees, recording charges and/or transfer taxes,
if any, and other costs and expenses, including reasonable legal fees
and disbursements of counsel for the Trustee (and any local counsel),
that may be incurred to validly and effectively subject such repairs,
rebuildings or replacements to the Lien of any Collateral Document;
and
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(d) An Opinion of Counsel substantially stating:
(i) that the instruments that have been or are therewith delivered to
the Trustee conform to the requirements of this Indenture and the
other Collateral Documents, and that, upon the basis of such Company
Order and the accompanying documents specified in this Section 11.02,
all conditions precedent herein provided for relating to such
withdrawal and payment have been complied with, and the Trust Monies
whose withdrawal is then requested may be paid over under this Section
11.02;
(ii) that, subject to certain customary exceptions, the relevant
Collateral Documents create a valid, binding and enforceable Lien on
and security interest in such repairs, rebuildings and replacements in
favor of the Trustee in favor of the Holders and, to the extent that a
security interest in any such property may be perfected under the
relevant Uniform Commercial Code, a perfected security interest in
such property; and
(iii) that all the Company's or such Subsidiary Guarantor's right,
title and interest in and to said repairs, rebuilding or replacements,
or combination thereof are then subject to the Lien of this Indenture
and the relevant Collateral Documents.
Upon compliance with the foregoing provisions of this Section 11.02 and Section
11.01, the Trustee shall, upon receipt of a Company Order, pay an amount of Net
Insurance Proceeds constituting Trust Monies equal to the amount of the
expenditures or costs stated in the Officers' Certificate required by clause (i)
of paragraph (a) of this Section 11.02, or the fair market value to the Company
or the applicable Subsidiary Guarantor of such repairs, rebuildings and
replacements stated in such Officers' Certificate (or in an Independent
Appraiser's or Independent Financial Advisor's certificate, if required by the
TIA), whichever is less; provided, however, that notwithstanding the above, so
long as no Default or Event of Default shall have occurred and be continuing, in
the event that any Net Insurance Proceeds for such property do not exceed
$25,000 and, in the good faith estimate of the Company, such destruction or
damage resulting in such Net Insurance Proceeds does not detrimentally affect
the value or use of the applicable Collateral in any material respect, upon
delivery to the Trustee of an Officers' Certificate to such effect and
compliance with Section 10.01, the Trustee shall release to the Company or the
applicable Subsidiary Guarantor such Net Insurance Proceeds for such property
free of the Lien hereof and of the Collateral Documents.
SECTION 11.03. Withdrawal of Net Cash Proceeds to Fund an Asset Sale Offer.
To the extent that any Trust Monies consist of Net Proceeds received by the
Trustee pursuant to the provisions of Section 4.04 hereof and an Asset Sale
Offer has been made in accordance therewith, such Trust Monies may be withdrawn
by the Company and shall be paid by the Trustee to the Paying Agent for
application in accordance with Section 4.04 upon a Company Order to the Trustee
and upon receipt by the Trustee of the following:
(a) An Officers' Certificate, dated not more than five days prior to
the Asset Sale Purchase Date stating:
(i) that no Default or Event of Default shall have occurred and be
continuing;
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(ii)(x) that such Trust Monies constitute Net Proceeds, (y) that
pursuant to and in accordance with Section 4.04, the Company has made
an Asset Sale Offer and (z) the Available Amount to be applied to the
repurchase of the Notes pursuant to the Asset Sale Offer;
(iii) the Asset Sale Purchase Date; and
(iv)that all conditions precedent and covenants herein provided for
relating to such application of Trust Monies have been complied with;
and
(b) All documentation, if any, required under TIA ss. 314(d).
Upon compliance with the foregoing provisions of this Section 11.03, the
Trustee shall apply the Trust Monies as directed and specified by such Company
Order, subject to Section 4.04.
SECTION 11.04. Withdrawal of Trust Monies for Investment in Replacement Assets.
In the event the Company intends to reinvest Net Proceeds of an Asset Sale
in Replacement Assets (the "Released Trust Monies"), such Net Proceeds
constituting Trust Monies may be withdrawn by the Company and shall be paid by
the Trustee to the Company upon a Company Order to the Trustee and upon receipt
by the Trustee of the following:
(a) a Notice signed by the Company (each, a "Trust Monies Release
Notice"), which shall (i) refer to this Section 11.04, (ii) contain all
documents referred to below, (iii) describe with particularity the Released
Trust Monies, (iv) describe with particularity the Replacement Assets to be
invested in with respect to the Released Trust Monies and (v) be
accompanied by a counterpart of the instruments proposed to give effect to
the release fully executed and acknowledged (if applicable) by all parties
thereto other than the Trustee;
(b) An Officers' Certificate certifying that (i) such Trust Monies
constitute Net Proceeds, (ii) the release of the Released Trust Monies
complies with the terms and conditions of this Indenture, (iii) there is no
Default or Event of Default (both before and after investing in the
Replacement Asset) in effect or continuing on the date thereof, (iv) the
release of the Released Trust Monies will not result in a Default or Event
of Default hereunder and (v) all conditions precedent herein to such
release have been complied with;
(c) All documentation required under the TIA (including, without
limitation, TIA ss. 314(d));
(d) If the Replacement Asset proposed for investment is Real Property,
the Company or the appropriate Subsidiary Guarantor shall also deliver to
the Trustee:
(i) an instrument or instruments in recordable form sufficient for the
Lien of any applicable Mortgage to cover such Real Property which, if
the Real Property is a leasehold or easement interest, shall include
normal and customary provisions with respect thereto and evidence of
the filing of all such financing statements and other instruments as
may be necessary to perfect such Liens;
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(ii) a policy of title insurance (or a commitment to issue title
insurance) insuring that the Lien of any applicable Mortgage
constitutes a valid and perfected mortgage Lien on such Real Property
(subject to no Liens other than Permitted Collateral Liens which were
permitted with respect to the Collateral which was the subject of the
Asset Sale) in an aggregate amount equal to the Fair Market Value of
the Real Property, together with an Officers' Certificate stating that
any specific exceptions to such title insurance are Permitted
Collateral Liens, together with such endorsements and other opinions
as are contemplated by Section 10.02(b);
(iii) in the event the Fair Market Value of the Real Property is in
excess of $500,000, a Survey with respect thereto; and
(iv)evidence of payment or a closing statement indicating payments to
be made by the Company or the appropriate Subsidiary Guarantor of all
title premiums, recording charges, and/or transfer taxes, if any, and
other costs and expenses, including reasonable legal fees and
disbursements of one counsel for the Trustee (and any local counsel),
that may be incurred to validly and effectively subject the Real
Property to the Lien of any applicable Collateral Document to perfect
such Lien;
(e) If the Replacement Asset is a personal property interest, the
Company or the appropriate Subsidiary Guarantor shall deliver to the
Trustee:
(i) a financing statement and other instruments in form sufficient to
perfect the Lien of any applicable Collateral Document on such
personal property interest; and
(ii) evidence of payment or a closing statement indicating payments to
be made by the Company or the appropriate Subsidiary Guarantor of all
filing fees, recording charges and/or transfer taxes, if any, and
other costs and expenses, including reasonable legal fees and
disbursements of one counsel for the Trustee (and any local counsel),
that may be incurred to validly and effectively subject the
Replacement Asset to the Lien of any Collateral Document; and
(f) An Opinion of Counsel stating:
(i) that the documents that have been or are therewith delivered to
the Trustee in connection with an investment in Replacement Assets
conform to the requirements of this Indenture and that all conditions
precedent herein provided for relating to such application of Trust
Monies have been complied with; and
(ii) to the extent that such Replacement Assets were acquired with Net
Proceeds, the relevant Collateral Documents create a valid, binding
and enforceable Lien, subject to certain customary exceptions, on and
security interest in such Replacement Assets in favor of the Trustee
for the benefit of the Holders and, to the extent that a security
interest in any such Replacement Assets may be perfected under the
relevant Uniform Commercial Code, a perfected security interest in
such property.
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Upon compliance with the foregoing provisions, the Trustee shall apply the
Released Trust Monies as directed and specified by the Company.
SECTION 11.05. Investment of Trust Monies.
So long as no Default or Event of Default shall have occurred and is
continuing, all or any part of any Trust Monies held by the Trustee shall from
time to time be invested or reinvested by the Trustee in any Cash Equivalents
pursuant to a Company Order, which shall specify the Cash Equivalents in which
such Trust Monies shall be invested and shall certify that such investments
constitute Cash Equivalents and the Trustee shall sell any such Cash Equivalent
only upon receipt of a Company Order specifying the particular Cash Equivalent
to be sold. So long as no Default or Event of Default occurs and is continuing,
any interest or dividends accrued, earned or paid on such Cash Equivalents (in
excess of any accrued interest or dividends paid at the time of purchase) that
may be received by the Trustee shall be forthwith paid to the Company. Such Cash
Equivalents shall be held by the Trustee as a part of the Collateral, subject to
the same provisions hereof as the cash used by it to purchase such Cash
Equivalents.
The Trustee shall not be liable or responsible for any loss resulting from
such investments or sales except only for its own negligent action, its own
negligent failure to act or its own willful misconduct in complying with this
Section 11.05.
ARTICLE 12
SUBSIDIARY GUARANTEES
SECTION 12.01. Subsidiary Guarantees.
Subject to the provisions of this Article 12, each Subsidiary Guarantor,
jointly and severally, hereby fully and unconditionally guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, that: (a) the principal of, and premium and
interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on overdue principal, and premium, if any, and (to the
extent permitted by law) interest on any interest, if any, on the Notes and all
other obligations of the Company to the Holders or the Trustee hereunder or
under the Notes or under the Collateral Documents (including fees, expenses or
other) shall be promptly paid in full or performed, all in accordance with the
terms hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, the same shall be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise
(collectively, the "Guarantee Obligations"). Failing payment when due of any
Guarantee Obligation or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Subsidiary Guarantor shall be
obligated to pay, or to perform or to cause the performance of, the same
immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under this Subsidiary Guarantee, and shall
entitle the Trustee or the Holders of Notes to accelerate the Guarantee
Obligations of each Subsidiary Guarantor hereunder in the same manner and to the
same extent as the
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Company Obligations. Each Subsidiary Guarantor hereby agrees that its Guarantee
Obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any thereof, the entry of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Subsidiary Guarantor.
Each Subsidiary Guarantor hereby waives and relinquishes: (a) any right to
require the Trustee, the Holders or the Company (each, a "Benefitted Party") to
proceed against the Company, the Subsidiaries or any other Person or to proceed
against or exhaust any security held by a Benefitted Party at any time or to
pursue any other remedy in any secured party's power before proceeding against
such Subsidiary Guarantor; (b) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person or Persons; (c) demand, protest and notice of any kind (except as
expressly required by this Indenture), including but not limited to notice of
the existence, creation or incurring of any new or additional Indebtedness or
obligation or of any action or non-action on the part of the Subsidiary
Guarantors, the Company, the Subsidiaries, any Benefitted Party, any creditor of
the Subsidiary Guarantors, the Company or the Subsidiaries or on the part of any
other Person whomsoever in connection with any obligations the performance of
which are hereby guaranteed; (d) any defense based upon an election of remedies
by a Benefitted Party, including but not limited to an election to proceed
against the Subsidiary Guarantors for reimbursement; (e) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more burdensome than that of
the principal; (f) any defense arising because of a Benefitted Party's election
in any proceeding instituted under the Bankruptcy Law of the application of
Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code. The Subsidiary Guarantors hereby covenant that the Subsidiary Guarantees
shall not be discharged except by payment in full of all Guarantee Obligations,
including the principal, premium, if any, and interest on the Notes and all
other costs provided for under this Indenture, the Collateral Documents or as
provided in Section 8.01.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or the Subsidiary Guarantors, or any trustee or
similar official acting in relation to either the Company or the Subsidiary
Guarantors, any amount paid by the Company or the Subsidiary Guarantors to the
Trustee or such Holder, the Subsidiary Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each of the Subsidiary
Guarantors agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any Guarantee Obligations hereby until
payment in full of all such obligations. Each Subsidiary Guarantor agrees that,
as between it, on the one hand, and the Holders of Notes and the Trustee, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 hereof for the purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Guarantee Obligations, and (y) in the event of
any acceleration of such obligations as provided in Article 6 hereof, such
Guarantee Obligations (whether or not due and payable) shall forthwith become
due and payable by such Subsidiary Guarantor for the purpose of the Subsidiary
Guarantee.
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SECTION 12.02. Execution and Delivery of Subsidiary Guarantees.
To evidence the Subsidiary Guarantees set forth in Section 12.01 hereof,
each of the Subsidiary Guarantors agrees that a notation of the Subsidiary
Guarantees substantially in the form included in Exhibit A hereto shall be
endorsed on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of the Subsidiary Guarantors by the
President or one of the Vice Presidents of the Subsidiary Guarantors, under a
facsimile of its seal reproduced on this Indenture and attested to by an Officer
other than the Officer executing this Indenture.
Each of the Subsidiary Guarantors agree that the Subsidiary Guarantees set
forth in this Article 12 will remain in full force and effect and apply to all
the Notes notwithstanding any failure to endorse on each Note a notation of the
Subsidiary Guarantees.
If an Officer whose facsimile signature is on a Note no longer holds that
office at the time the Trustee authenticates the Note on which the Subsidiary
Guarantees are endorsed, the Subsidiary Guarantees shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantees set forth
in this Indenture on behalf of the Subsidiary Guarantors.
SECTION 12.03. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
(a) Nothing contained in this Indenture or in the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into the Company or
another Subsidiary Guarantor, or shall prevent the transfer of all or
substantially all of the assets of a Subsidiary Guarantor to the Company or
another Subsidiary Guarantor. Upon any such consolidation, merger, transfer or
sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer have
any force or effect.
(b) Subject to the provisions of Section 12.04, each Subsidiary Guarantor
shall not, in a single transaction or series of related transactions,
consolidate or merge with or into (whether or not such Subsidiary Guarantor is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person, other than the Company or
another Subsidiary Guarantor, unless (i) the Person formed by or surviving any
such consolidation or merger (if other than such Subsidiary Guarantor), or the
Surviving Entity assumes all the Guarantee Obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (ii)
immediately after such transaction no Default or Event of Default exists; (iii)
the Surviving Entity (A) shall have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of such
Subsidiary Guarantor immediately preceding the transaction and (B) the Company
shall, at the time of such transaction and after giving pro forma effect thereto
as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.06; (iv) the Surviving Entity causes such
amendments, supplements or other instruments to be filed and recorded
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in such jurisdictions as may be required by applicable law to continue the
perfection of the Liens of the Collateral Documents in the Collateral owned by
or transferred to the Surviving Entity, together with such financing statements
as may be required by applicable law to preserve and protect the Lien of the
Collateral Documents in the Collateral owned by or transferred to the Surviving
Entity, together with such financing statements as may be required to perfect
any security interests in such Collateral which may be perfected by the filing
of a financing statement under the Uniform Commercial Code of the relevant
states; (v) the Collateral owned by or transferred to the Surviving Entity shall
(1) continue to constitute Collateral under this Indenture and the Collateral
Documents, (2) shall be subject to the Lien in favor of the Trustee for the
benefit of the holders of the Notes and (3) shall not be subject to any Lien
other than Permitted Liens; (vi) the property and assets of the Person which is
merged or consolidated with or into the Surviving Entity, to the extent that
they are property and assets of types which would constitute Collateral under
the Collateral Documents, shall be treated as After-Acquired Property and the
Surviving Entity shall take such actions as may be reasonably necessary to cause
such property and assets to be made subject to the Lien of the Collateral
Documents in the manner and to the extent required in this Indenture; and (vii)
such Subsidiary Guarantor shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel addressed to the Trustee, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or disposition and such supplemental indenture, if any, comply with this
Indenture and that such supplemental indenture is enforceable, and with respect
to the opinion of counsel, subject to customary enforceability exceptions. In
case of any such consolidation, merger or transfer of assets and upon the
assumption by the successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantees endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by such Guarantor, such successor corporation shall succeed to and be
substituted for such Subsidiary Guarantor with the same effect as if it had been
named herein as a Subsidiary Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon
all of the Notes issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
(c) The Trustee, subject to the provisions of Section 12.04 hereof, shall
be entitled to receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale or conveyance, and
any such assumption of Guarantee Obligations, comply with the provisions of this
Section 12.03. Such Officers' Certificate and Opinion of Counsel shall comply
with the provisions of Section 12.05.
SECTION 12.04. Releases Following Sale of Assets.
Notwithstanding Section 12.03 hereof, in the event of a sale or other
disposition of all or substantially all of the assets of any Subsidiary
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all (or substantially all) of the Capital Stock of any Subsidiary
Guarantor, which sale or other disposition otherwise complies with the other
terms of this Indenture, then such Subsidiary Guarantor (in the event of a sale
or other disposition, by way of such a merger, consolidation or otherwise, of
all or substantially all of the Capital Stock of such Subsidiary Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all
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or substantially all of the assets of such Subsidiary Guarantor) shall be
released from and relieved of any Guarantee Obligations under its Subsidiary
Guarantee; provided that the Net Proceeds from such sale or other disposition
are treated in accordance with the provisions of Section 4.04 hereof. Upon
delivery by the Company to the Trustee of an Officer's Certificate and Opinion
of Counsel, to the effect that such sale or other disposition was made by the
Company in accordance with the provisions of this Indenture, including without
limitation Section 4.04 hereof or the applicable provisions of the Collateral
Documents, the Trustee shall execute any documents reasonably required in order
to evidence the release of any such Subsidiary Guarantor from its Guarantee
Obligations under its Subsidiary Guarantee, the Collateral Documents and the
Registration Rights Agreement and release all assets of such Subsidiary
Guarantors from the Liens of the Collateral Documents executed by such
Subsidiary Guarantor. Any Subsidiary Guarantor not released from its Guarantee
Obligations under its Subsidiary Guarantee shall remain liable for the full
amount of principal of and interest on the Notes and for the other Obligations
of any Subsidiary Guarantor under this Indenture as provided in this Article 12.
SECTION 12.05. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the Guarantee by such
Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Holders
and such Subsidiary Guarantor hereby irrevocably agree that the Guarantee
Obligations of such Subsidiary Guarantor under this Article 12 shall be limited
to the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the Guarantee Obligations of such other Subsidiary
Guarantor under this Article 12, result in the Guarantee Obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee of such Subsidiary Guarantor
not constituting a fraudulent transfer or conveyance.
SECTION 12.06. Application of Certain Terms and Provisions to the Subsidiary
Guarantors.
(a) For purposes of any provision of this Indenture which provides for the
delivery by any Subsidiary Guarantor of an Officers' Certificate and/or an
Opinion of Counsel, the definitions of such terms in Section 1.01 shall apply to
such Subsidiary Guarantor as if references therein to the Company were
references to such Subsidiary Guarantor.
(b) Any request, direction, order or demand which by any provision of this
Indenture is to be made by any Subsidiary Guarantor, shall be sufficient if
evidenced as described in Section 13.02 as if references therein to the Company
were references to such Subsidiary Guarantor.
(c) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Notes to or on any Subsidiary Guarantor may be given or served as described in
Section 13.02 as if references therein to the Company were references to such
Subsidiary Guarantor.
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(d) Upon any demand, request or application by any Subsidiary Guarantor to
the Trustee to take any action under this Indenture, such Subsidiary Guarantor
shall furnish to the Trustee such certificates and opinions as are required in
Section 13.04 hereof as if all references therein to the Company were references
to such Subsidiary Guarantor.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss. 318(c), the imposed duties shall control.
SECTION 13.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
American Tissue Inc.
155 Engineers Road
Hauppauge, New York 11788
Attention: Chief Financial Officer
Telephone No.: (516) 435-9000
Telecopier No.: (516) 435-8980
with a copy to:
Mandel & Resnick P.C.
220 East 42nd Street
New York, New York 10017
Attention: Nicholas Kaiser, Esq.
Telephone No.: (212) 573-0093
Telecopier No.: (212) 573-0067
If to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Capital Market Fiduciary Services
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Telephone No.: (212) 946-3083
Telecopier No.: (212) 946-8161/8162
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when answered back, if telexed; when receipt acknowledged, if
telecopied; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 13.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 13.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
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SECTION 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any of its Subsidiaries, as such, will have any
liability for any obligations of the Company under the Notes, the Subsidiary
Guarantees, this Indenture, the Registration Rights Agreement or the Collateral
Documents or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
SECTION 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, WITHOUT REGARD
TO CONFLICTS OF LAW RULES.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
-110-
<PAGE>
SECTION 13.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 13.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.14. Intercreditor Agreements.
Notwithstanding anything to the contrary contained herein (but subject to
Section 13.01 hereof), all of the provisions of Articles 10 and 11 are subject
to the Intercreditor Agreements.
[Signatures on following pages]
-111-
<PAGE>
SIGNATURES
Dated as of July 9, 1999 AMERICAN TISSUE INC.
By: /s/ Nourollah Elghanayan
--------------------------------------
Nourollah Elghanayan
Chairman of the Board
Attest:
By: /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh
President
Dated as of July 9, 1999 AMERICAN CELLULOSE MILL CORP.,
AMERICAN TISSUE CORPORATION
AMERICAN TISSUE MILLS OF
NEW HAMPSHIRE, INC.
AMERICAN TISSUE MILLS OF NEW YORK, INC.
AMERICAN TISSUE MILLS OF OREGON, INC.
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
BERLIN MILLS RAILWAY, INC.
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.
GILPIN REALTY CORP.,
TAGSONS PAPERS, INC.
By: /s/ Nourollah Elghanayan
--------------------------------------
Nourollah Elghanayan
Chairman of the Board
Attest:
By: /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh
President
<PAGE>
Dated as of July 9, 1999 100 REALTY MANAGEMENT LLC,
AMERICAN TISSUE MILLS OF GREENWICH LLC,
AMERICAN TISSUE MILLS OF NEENAH LLC,
CALEXICO TISSUE COMPANY LLC,
CORAM REALTY LLC,
ENGINEERS ROAD, LLC,
GRAND LLC,
HYDRO OF AMERICAN LLC,
LANDFILL OF AMERICA LLC,
MARKWOOD LLC,
PAPER OF AMERICA LLC,
PULP & PAPER OF AMERICA LLC,
PULP OF AMERICA LLC,
RAILWAY OF AMERICA LLC,
SARATOGA REALTY LLC,
UNIQUE FINANCING LLC,
By: /s/ Nourollah Elghanayan
--------------------------------------
Nourollah Elghanayan
Manager
Attest:
By: /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh
Manager
<PAGE>
Dated as of July 9, 1999 THE CHASE MANHATTAN BANK
By: /s/ Kathleen Perry
--------------------------------------
Name: Kathleen Perry
Title: Vice President
/s/ Sheik Wiltshire
- -------------------------------- (SEAL)
Name: Sheik Wiltshire
Title: Second Vice President
(Face of Note)
CUSIP No: [03022AA1 (144A)]
[U03080AA3 (Reg. S)]
[ (IAI)]
12 1/2% Series B Senior Secured Notes due 2006
No. 1 $165,000,000
AMERICAN TISSUE INC.
promises to pay to Cede & Co. or registered assigns,
the principal sum of One Hundred Sixty Five Million Dollars on July 15, 2006.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Dated:
AMERICAN TISSUE INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
(SEAL)
<PAGE>
Certificate of Authentication:
This is one of the [Global] Notes referred to in the within-mentioned Indenture:
THE CHASE MANHATTAN BANK
By:
-------------------------
Authorized Signatory
Dated:
2
<PAGE>
[THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THIS INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.]
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]1
[THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
- ----------
1 To Be included only on Global Notes deposited with DTC as Depositary
3
<PAGE>
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.]
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS SECURITY IS
BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF
THIS SECURITY, (1) THE ISSUE PRICE IS $____; (2) THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT IS $____; (3) THE ISSUE DATE IS _____, 1999; AND (4) THE YIELD TO
MATURITY (COMPOUNDED SEMI-ANNUALLY) IS __%.
4
<PAGE>
(Back of Note)
12 1/2% [Series A] [Series B] Senior Secured Notes due 2006
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. American Tissue Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 12 1/2% per
annum from July 1, 1999 until maturity and shall pay the Liquidated Damages, if
any, payable pursuant to Section 5 of the Registration Rights Agreement referred
to below. The Company will pay interest and Liquidated Damages, if any,
semi-annually on January 15 and July 15 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be January 15, 2000. The Company shall pay
interest (including Accrued Bankruptcy Interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 2% per annum in excess of the rate then in effect; it
shall pay interest (including Accrued Bankruptcy Interest in any proceeding
under any Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the January 1 or July 1 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture (as defined below) with respect to defaulted
interest. The Notes will be payable as to principal, premium, interest and
Liquidated Damages, if any, at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages on all Global Notes and all other Notes the Holders of more
than $1,000 in aggregate principal amount of Notes which shall have provided
wire transfer instructions to the Company or the Paying Agent. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Chase Manhattan Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or
5
<PAGE>
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
July 9, 1999 ("Indenture") among the Company, the Subsidiary Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are secured obligations of the Company limited to
$165,000,000 in aggregate principal amount.
5. Optional Redemption. The Company may redeem the Notes at any time on or
after July 15, 2004, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the applicable redemption date, if redeemed after July 15 of
each of the years indicated below:
Date Percentage
- ---- ----------
2004 .................................................... 106.625%
2005 and thereafter ..................................... 100.000%
In addition, on or prior to July 15, 2002, the Company may, at its option
on any one or more occasions, redeem up to 35% of the aggregate principal amount
of Notes originally issued under the Indenture, with the proceeds of one or more
Equity Offerings, at a redemption price equal to 113.25% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption; provided that at least 65% of the aggregate
principal amount of Notes originally issued under the Indenture would remain
outstanding immediately after giving effect to any such redemption.
6. Mandatory Redemption. The Company shall not be required to make
mandatory redemption payments with respect to the Notes.
7. Repurchase Offers.
(a) Change of Control Offer. Upon the occurrence of a Change of Control,
the Company shall offer to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice. The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities
6
<PAGE>
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
(b) Asset Sale Offer. The Company will not, and will not permit any of its
Subsidiaries to, engage in an Asset Sale unless:
(1) the Company (or the Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value (evidenced in each case by a resolution of the board of
directors of such entity set forth in an Officers' Certificate delivered to
the Trustee) of the assets or Equity Interests sold or otherwise disposed
of in such Asset Sale;
(2) at least 80% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash or Cash Equivalents; provided
that each of the following shall be deemed to be cash for purposes of this
provision:
(a) the amount of any liabilities (as shown on the Company's or
such Subsidiary's most recent balance sheet or in the notes thereto,
excluding contingent liabilities and trade payables) of the Company or
any Subsidiary (other than liabilities that are by their terms
subordinated to, or equal in right of payment with, the Notes or any
Subsidiary Guarantee thereof) that are assumed by the transferee of
any such assets; and
(b) any securities, notes or other obligations received by the
Company or any Subsidiary from such transferee that are converted by
the Company or such Subsidiary into cash within 60 days;
(3) subject to the Intercreditor Agreements, if such Asset Sale
involves the disposition of Collateral, the Company or such Subsidiary has
complied with Article 10 of the Indenture;
(4) if such Asset Sale involves the disposition of Collateral (other
than Secondary Collateral), subject to the Intercreditor Agreements, the
cash Net Proceeds thereof remaining after repayment (including a
corresponding commitment reduction, if applicable) of any Indebtedness
secured by a Permitted Collateral Lien on such asset (the "Available
Amount") shall be paid directly by the purchaser of the Collateral to the
Trustee for deposit into the Collateral Account, and, if any property other
than cash or Cash Equivalents is included in such Net Proceeds, such
property shall be made subject to the Lien of the Indenture and the
applicable Collateral Documents;
(5) if such Asset Sale involves the disposition of Secondary
Collateral, subject to the Intercreditor Agreements, the Available Amount
shall be paid directly by the Lender who holds a Lien on the applicable
Secondary Collateral to the Trustee for deposit into the Collateral
Account, and, if any property other than cash or Cash Equivalents is
included in the Net Proceeds constituting such Available Amount, such
property shall be made subject to the Lien of the Indenture and the
applicable Collateral Documents; and
7
<PAGE>
(6) the Company or such Subsidiary, as the case may be, applies the
Net Proceeds as provided in the following paragraph.
The Company or the applicable Subsidiary may, at its option, apply any such
Net Proceeds within 360 days of the related Asset Sale as follows:
(a) to the acquisition of another business or the acquisition of other
long-term assets, in each case, in the same or a similar, complementary,
ancillary or related line of business as the Company or any of its
Subsidiaries was engaged in on the Issue Date or any reasonable extensions
or expansions thereof ("Replacement Assets"); provided, that any
Replacement Assets acquired with any Available Amount shall be owned by the
Company or by the Subsidiary Guarantor that made the Asset Sale and shall
not be subject to any Liens other than Permitted Collateral Liens (and the
Company or such Subsidiary Guarantor, as the case may be, shall, subject to
any applicable Intercreditor Agreement, execute and deliver to the Trustee
such Collateral Documents or other instruments as shall be reasonably
necessary to cause such Replacement Assets to become subject to a Lien in
favor of the Trustee, for the benefit of the holders of the Notes, securing
its obligations under the Notes or its Subsidiary Guarantee, as the case
may be, and otherwise shall comply with the provisions of the Indenture
applicable to After-Acquired Property); or
(b) to reimburse the Company or its Subsidiaries for expenditures
made, and costs incurred, to repair, rebuild, replace or restore property
subject to loss, damage or taking to the extent that the Net Proceeds
consist of Net Insurance Proceeds received on account of such loss, damage
or taking.
If the Company does not use any portion of the Net Proceeds as described
above within such 360-day period, such unused portion of the Net Proceeds period
shall constitute "Excess Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be purchased
out of the aggregate amount of Excess Proceeds. The offer price of any Asset
Sale Offer will be equal to 100% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase, and will be payable in cash in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
remaining Excess Proceeds shall be released to the Company and may be used free
and clear of the Lien of the Collateral Documents for general corporate
purposes. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
8. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the
8
<PAGE>
Indenture. The Company need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note may be treated as
its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing Default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under this Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA.
Notwithstanding the foregoing, Collateral may be released with the consent
of the Holders of at least 75% in aggregate principal amount of the then
outstanding Notes in addition to releases of Collateral expressly permitted by
the Collateral Documents.
11. Defaults and Remedies. Each of the following constitutes an Event of
Default under the Indenture:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes;
(2) default in payment when due of the principal of or premium, if
any, on the Notes;
(3) failure by the Company or any of its Subsidiaries to comply with
the provisions described in Section 4.03, 4.04, 4.05 or 4.06 of the
Indenture;
(4) continuance of a default in the performance, or breach, of any
other covenant or warranty of the Company in the Indenture for a period of
30 days after there has been given to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the outstanding Notes, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(5) default under any mortgage, security agreement, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any
9
<PAGE>
Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the Issue Date, which default:
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness, after the expiration of any
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(6) failure by the Company or any of its Significant Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, default by the Company or
any of the Subsidiary Guarantors in the performance of the Collateral
Documents which adversely affects the enforceability or the validity of the
Trustee's Lien on the Collateral or which adversely affects the condition
or value of the Collateral, taken as a whole, in any material respect,
repudiation or disaffirmation by the Company or any such Subsidiary of its
obligations under the Collateral Documents or the determination in a
judicial proceeding that the Collateral Documents are unenforceable or
invalid against the Company or any of its Subsidiaries for any reason;
(8) except as permitted by the Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or ceases
for any reason to be in full force and effect or any Subsidiary Guarantor,
or any duly authorized person acting on behalf of any Subsidiary Guarantor,
denies or disaffirms its obligations under its Subsidiary Guarantee; and
(9) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Significant Subsidiary
or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. In addition to acceleration of the Notes, if
an Event of Default occurs and is continuing, the Trustee will have the right,
subject, in the case of the Boise Collateral and the Secondary Collateral, to
the Intercreditor
10
<PAGE>
Agreements, to exercise remedies with respect to the Collateral, such as
foreclosure, as are available under the Indenture, the Collateral Documents and
at law. Holders of the Notes may not enforce the Indenture or the Notes or
exercise remedies with respect to the Collateral except as expressly provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, the Notes, the Subsidiary Guarantees and the Collateral
Documents, except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
12. Ranking and Security. The Notes will be senior obligations of the
Company and will rank equal in right of payment with all existing and future
unsubordinated Indebtedness of the Company and senior in right of payment to any
Indebtedness of the Company that is subordinated to the Notes.
The Company's obligations under the Notes will be fully and unconditionally
guaranteed on a senior basis, jointly and severally, by each of the Subsidiary
Guarantors. All of the Company's Domestic Subsidiaries (other than a Receivables
Subsidiary) will be Subsidiary Guarantors. The Subsidiary Guarantees will be
senior obligations of the Subsidiary Guarantors and will rank equal in right of
payment with all existing and future unsubordinated Indebtedness of the
Subsidiary Guarantors and senior in right of payment to any Indebtedness of the
Subsidiary Guarantors that is subordinated to such Subsidiary Guarantees.
Pursuant to the Collateral Documents, the Notes and the Subsidiary
Guarantees will be secured by a first priority Lien on (1) the Primary
Collateral and (2) the Boise Collateral; provided, however, with respect to the
Boise Collateral such Lien shall be equal in right of payment with Boise
Cascade, as limited by the Boise Intercreditor Agreement. In addition, pursuant
to the Collateral Documents and in accordance with the Existing Lien
Intercreditor Agreement, the Notes and the Subsidiary Guarantees will be secured
by a Lien on the Secondary Collateral that is junior to the Lien thereon
securing certain other Indebtedness. The Company is a holding company and has,
and as of the Issue Date will have, no material assets other than the Capital
Stock of its Subsidiaries, and all of its consolidated operations are conducted
through its Subsidiaries.
11
<PAGE>
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, of the Company, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Notes. In addition
to the rights provided to Holders of Notes under the Indenture, Holders of
Transferred Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, among the
Company, the Subsidiary Guarantors and the Initial Purchasers (the "Registration
Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture, the Collateral Documents and/or the Registration
Rights Agreement. Requests may be made to:
American Tissue Inc.
135 Engineers Road
Hauppauge, New York 11788
Attention: Chief Financial Officer
Telephone No.: (516) 435-9000
12
SUBSIDIARY GUARANTEE
The Subsidiary Guarantors listed below (hereinafter referred to as the
"Subsidiary Guarantors," which term includes any successors or assigns under the
Indenture and any additional Subsidiary Guarantors), have irrevocably and
unconditionally guaranteed the Guarantee Obligations, which include (i) the due
and punctual payment of the principal of, premium, if any, and interest on the
12 1/2% Senior Secured Notes due 2006 (the "Notes") of American Tissue Inc., a
Delaware corporation (the "Company"), whether at stated maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and Liquidated Damages and premium, if any, and (to the extent
permitted by law) interest on any interest, if any, on the Notes, and the due
and punctual performance of all other obligations of the Company, to the Holders
or the Trustee all in accordance with the terms set forth in Article 12 of the
Indenture, (ii) in case of any extension of time of payment or renewal of any
Notes or any such other obligations, that the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise, and (iii) the payment
of any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder in enforcing any rights under this
Subsidiary Guarantee, the Indenture, the Registration Rights Agreement or the
Collateral Documents.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 12 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The obligations
are secured by a pledge of the Primary Collateral and the Secondary Collateral
pursuant to Articles 10 and 11 of the Indenture and the Collateral Documents.
No stockholder, officer, director or incorporator, as such, past, present
or future of each Subsidiary Guarantor shall have any liability under this
Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and effect
and shall be binding upon each Subsidiary Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations under
the Notes and the Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders, and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
<PAGE>
The Obligations of each Subsidiary Guarantor under its Subsidiary Guarantee
shall be limited to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law.
THE TERMS OF ARTICLE 12 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
Dated as of AMERICAN TISSUE INC.
By:/s/ Nourollah Elghanayan
------------------------
Nourollah Elghanayan
Chairman of the Board
Attest:
By:/s/ Mehdi Gabayzadeh
------------------------
Mehdi Gabayzadeh
President
Dated as of AMERICAN CELLULOSE MILL CORP.
AMERICAN TISSUE CORPORATION,
AMERICAN TISSUE MILLS OF
NEW HAMPSHIRE, INC.
AMERICAN TISSUE MILLS OF NEW YORK, INC.
AMERICAN TISSUE MILLS OF OREGON, INC.
AMERICAN TISSUE MILLS OF WISCONSIN, INC.
BERLIN MILLS RAILWAY, INC.
CROWN VANTAGE-NEW HAMPSHIRE
ELECTRIC, INC.
GILPIN REALTY CORP.,
TAGSONS PAPERS, INC.,
By:
------------------------------------
Nourollah Elghanayan
Chairman of the Board
Attest:
By:
-------------------
Mehdi Gabayzadeh
President
2
<PAGE>
Dated as of 100 REALTY MANAGEMENT LLC,
AMERICAN TISSUE MILLS OF GREENWICH LLC,
AMERICAN TISSUE MILLS OF NEENAH LLC,
CALEXICO TISSUE COMPANY LLC
CORAM REALTY LLC,
ENGINEERS ROAD, LLC,
GRAND LLC,
HYDRO OF AMERICA LLC,
LANDFILL OF AMERICA LLC,
MARKWOOD LLC,
PAPER OF AMERICA LLC,
PULP & PAPER OF AMERICA LLC,
PULP OF AMERICA LLC,
SARATOGA REALTY LLC,
UNIQUE FINANCING LLC,
By:
------------------------------------
Nourollah Elghanayan
Chairman of the Board
Attest:
By:
-------------------
Mehdi Gabayzadeh
President
3
================================================================================
AMERICAN TISSUE INC.
AMERICAN TISSUE CORPORATION;
AMERICAN CELLULOSE MILL CORP.;
GILPIN REALTY CORP.;
AMERICAN TISSUE MILLS OF OREGON, INC.;
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.;
AMERICAN TISSUE MILLS OF WISCONSIN, INC.;
TAGSONS PAPERS, INC.;
AMERICAN TISSUE MILLS OF NEW YORK, INC.;
ENGINEERS ROAD, LLC;
GRAND LLC;
MARKWOOD LLC;
AMERICAN TISSUE MILLS OF GREENWICH LLC;
UNIQUE FINANCING LLC;
AMERICAN TISSUE MILLS OF NEENAH LLC;
CORAM REALTY LLC;
CALEXICO TISSUE COMPANY LLC;
SARATOGA REALTY LLC;
100 REALTY MANAGEMENT LLC;
PULP & PAPER OF AMERICA LLC;
HYDRO OF AMERICA LLC;
LANDFILL OF AMERICA LLC;
PAPER OF AMERICA LLC;
PULP OF AMERICA; AND
RAILWAY OF AMERICA LLC
$165,000,000
12 1/2% Series A Senior Secured Notes Due 2006
Purchase Agreement
July 1, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE>
$165,000,000
12 1/2% Series A Senior Secured Notes Due 2006
of AMERICAN TISSUE INC.
PURCHASE AGREEMENT
July 1, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10005
Dear Ladies and Gentlemen:
American Tissue Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser") an aggregate of $165,000,000 in principal amount of its 12
1/2% Series A Senior Secured Notes Due 2006 (the "Series A Notes"), subject to
the terms and conditions set forth herein. The Series A Notes are to be issued
pursuant to the provisions of an indenture (the "Indenture"), to be dated as of
the Closing Date (as defined), among the Company, the Guarantors (as defined)
and The Chase Manhattan Bank, as trustee (the "Trustee"). The Series A Notes and
the Series B Notes (as defined) issuable in exchange therefor are collectively
referred to herein as the "Notes." The Notes will be guaranteed (the "Subsidiary
Guarantees") by each of the entities listed on Schedule A hereto (each, a
"Guarantor" and collectively, the "Guarantors") and each of the entities listed
on Schedule B hereto (the "Additional Guarantors"), which Additional Guarantors
will become subsidiaries of the Company on the Closing Date. Each of the
Additional Guarantors will execute an instrument in substantially the form
attached hereto as Exhibit A (the "Joinder Agreement") pursuant to which each of
such entities will become a party to this Agreement as a Guarantor (it being
understood that upon each such entity executing the Joinder Agreement, such
entity shall be deemed to have acknowledged and agreed to be bound by all
covenants, agreements, representations, warranties and acknowledgments
attributable to a Guarantor as set forth herein and as applied to them and shall
be deemed to have agreed to perform all obligations and duties required of a
Guarantor as set forth herein). Prior to the execution of the Joinder Agreement
by each of the entities listed on Schedule B hereto, the term "Guarantors" as
used herein
<PAGE>
shall refer to all of the subsidiaries listed on Schedule A hereto. Following
the execution of the Joinder Agreement on the Closing Date by each of the
entities listed on Schedules A and B hereto, the term "Guarantors" as used
herein shall include all of the subsidiaries listed on Schedule A hereto.
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. Offering Memorandum. The Series A Notes will be offered and sold to the
Initial Purchaser pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company and the Guarantors have prepared a preliminary offering memorandum,
dated June 8, 1999 (the "Preliminary Offering Memorandum"), and a final offering
memorandum, dated July , 1999 (the "Offering Memorandum"), relating to the
Series A Notes and the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS
IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
TRANSFER THIS NOTE, EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(B) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH
2
<PAGE>
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, the Company agrees to issue and sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, an aggregate principal amount of $165,000,000 of Series A Notes at a
purchase price equal to 96.634% of the principal amount thereof (the "Purchase
Price").
3. Terms of Offering. The Initial Purchaser has advised the Company that
the Initial Purchaser will make offers (the "Exempt Resales") of the Series A
Notes purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believes to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs") and (ii) to persons permitted to purchase the Series
A Notes in offshore transactions in reliance upon Regulation S under the Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchaser will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 96.634% of the principal amount thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit B hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Company's 12 1/2% Series B Senior Secured Notes Due 2006 (the "Series B
Notes"), to be offered in exchange for the Series A Notes (such offer to
exchange being referred to as the "Exchange Offer"), and the Subsidiary
Guarantees thereof and (ii) a shelf registration statement pursuant to Rule 415
under the Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Notes and to use their
commercially reasonable best efforts to cause such Registration Statements to be
declared
3
<PAGE>
and remain effective and usable for the periods specified in the Registration
Rights Agreement and to consummate the Exchange Offer.
The Notes are being offered and sold by the Company in part to finance the
transactions contemplated by that certain Asset Purchase Agreement, dated as of
March 24, 1999 (the "Asset Purchase Agreement"), by and among Crown Paper Co.,
Crown Vantage New Hampshire Electric, Inc. and Berlin Mills Railway, Inc., as
sellers (collectively, "Crown"), Pulp & Paper of America LLC ("PPA") and the
Company, pursuant to which PPA and/or its designees will, upon the terms and
subject to the conditions set forth therein, acquire certain assets of Crown,
including, without limitation, the Burgess Pulp Mill in Berlin, New Hampshire
and the Cascade Paper Mill in Gorham, New Hampshire (together, the
"Berlin-Gorham Mills").
The Initial Purchaser and its direct and indirect transferees of the Notes
will also be entitled to the benefits of the Collateral Documents (as defined in
the Indenture) pursuant to which the Company and the Guarantors have agreed,
among other things, to grant (i) a first priority security interest in their
respective property, plant and equipment as set forth in the Collateral
Documents and (ii) a second priority security interest in their respective
property, accounts receivable and inventory as set forth in the Collateral
Documents, in the case of each of clauses (i) and (ii) subject to certain
exceptions and otherwise in accordance with the terms of the Indenture and the
Collateral Documents. Certain of such liens will be subject to the lien
priorities and other provisions of the Intercreditor Agreements (as defined in
the Indenture) and the Collateral Documents.
This Agreement, the Indenture, the Notes, the Subsidiary Guarantees, the
Registration Rights Agreement and the Collateral Documents are hereinafter
sometimes referred to collectively as the "Operative Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A Notes
shall be made at the offices of Cahill Gordon & Reindel at 80 Pine Street, New
York, New York 10005, or such other location as may be mutually acceptable to
the parties hereto. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on July 9, 1999 or at such other time as shall be agreed upon by
the Initial Purchaser and the Company. The time and date of such delivery and
the payment are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global form, registered
in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Series A Notes (collectively, the "Global Note"), shall be
delivered by the Company to the Initial Purchaser (or as the Initial Purchaser
directs) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchaser of the Purchase Price therefor by wire
transfer in immediately available funds to the order of the Company. The Global
Note shall be made available to the Initial Purchaser for inspection
4
<PAGE>
not later than 9:30 a.m., New York City time, on the business day immediately
preceding the Closing Date.
5. Agreements of the Company and the Guarantors. Each of the Company and
the Guarantors, jointly and severally, hereby agrees with the Initial Purchaser
as follows:
(a) To advise the Initial Purchaser promptly and, if requested by the
Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Series A Notes for
offering or sale in any jurisdiction designated by the Initial Purchaser
pursuant to Section 5(e) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory
authority for such purpose and (ii) of the happening of any event during
the period referred to in Section 5(c) below that makes any statement of a
material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires any additions to or changes in the
Preliminary Offering Memorandum or the Offering Memorandum in order to make
the statements therein not misleading. The Company shall use its
commercially reasonable best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption of any Series A
Notes under any state securities or Blue Sky laws and, if at any time any
state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any
Series A Notes under any state securities or Blue Sky laws, the Company
shall use its commercially reasonable best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to the Company as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchaser may reasonably request.
Subject to the Initial Purchaser's compliance with its representations and
warranties and agreements set forth in Section 7 hereof, the Company
consents to the use of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments and supplements thereto required pursuant
hereto, by the Initial Purchaser in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection
with market-making activities of the Initial Purchaser for so long as any
Series A Notes are outstanding, (i) not to make any amendment or supplement
to the Offering Memorandum which the Initial Purchaser shall not previously
have been advised of and shall have reasonably objected to after being so
advised (except to the extent any such amendment or supplement is
necessary, in the judgment of counsel to the Company, in order to make the
statements in the Offering Memorandum not misleading) and (ii) to prepare
promptly
5
<PAGE>
upon the Initial Purchaser's reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable
in connection with such Exempt Resales (except to the extent any such
amendment or supplement requested would, in the judgment of counsel to the
Company, render the statements made in the Offering Memorandum, as proposed
to be amended or supplemented, misleading).
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchaser, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein,
in the light of the circumstances when such Offering Memorandum is
delivered to an Eligible Purchaser, not misleading, or if, in the opinion
of counsel to the Initial Purchaser, it is necessary to amend or supplement
the Offering Memorandum to comply with any applicable law, forthwith to
prepare an appropriate amendment or supplement to such Offering Memorandum
so that the statements therein, as so amended or supplemented, will not, in
the light of the circumstances when it is so delivered, be misleading, or
so that such Offering Memorandum will comply with applicable law, and to
furnish to the Initial Purchaser and such other persons as the Initial
Purchaser may designate such number of copies thereof as the Initial
Purchaser may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales
as contemplated hereby, to cooperate with the Initial Purchaser and counsel
to the Initial Purchaser in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial
Purchaser and pursuant to Exempt Resales under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchaser may reasonably request
and to continue such qualification in effect so long as required for Exempt
Resales and to file such consents to service of process or other documents
as may be necessary in order to effect such registration or qualification;
provided, however, that none of the Company, any Guarantor, or any parent
of the Company shall be required in connection therewith to register or
qualify as a foreign corporation or limited liability company in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other
than as to matters and transactions relating to the Preliminary Offering
Memorandum, the Offering Memorandum or Exempt Resales, in any jurisdiction
in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal
year to the record holders of the Notes a financial report of the Company
and its subsidiaries on a consolidated basis (and a similar financial
report of all unconsolidated subsidiaries, if any), all such financial
reports to include a consolidated balance sheet, a consolidated statement
of operations, a consolidated statement of cash flows and a consolidated
statement of shareholders' equity as of the end of and for such fiscal
year, together with comparable information as of the end of and for the
preceding year, certified by the Company's independent public accountants
and (ii) to mail and make generally
6
<PAGE>
available as soon as practicable after the end of each quarterly period
(except for the last quarterly period of each fiscal year) to such holders,
a consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) For a period of five years following the date of this Agreement,
to furnish to the Initial Purchaser as soon as available copies of all
reports or other communications furnished by the Company or any of the
Guarantors to its security holders or furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company or any of the Guarantors is listed and such other
publicly available information concerning the Company and/or its
subsidiaries as the Initial Purchaser may reasonably request.
(h) So long as any of the Series A Notes remain outstanding and during
any period in which the Company and the Guarantors are not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder of Series A Notes in
connection with any sale thereof and any prospective purchaser of such
Series A Notes from such holder, the information ("Rule 144A Information")
required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incurred in connection with the performance of the obligations by
the Company and the Guarantors under this Agreement, including: (i) the
fees, disbursements and expenses of counsel to the Company and the
Guarantors and accountants of the Company and the Guarantors in connection
with the sale and delivery of the Series A Notes to the Initial Purchaser
and pursuant to Exempt Resales, and all other fees or expenses (other than
the fees and disbursements of counsel for the Initial Purchaser) in
connection with the preparation, printing, filing, if any, and distribution
of the Preliminary Offering Memorandum, the Offering Memorandum and all
amendments and supplements to any of the foregoing (including financial
statements) specified in Section 5(b), 5(c) and 5(d) prior to or during the
period specified in Section 5(c), including the mailing and delivering of
copies thereof to the Initial Purchaser and persons designated by it in the
quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Series A Notes to the Initial Purchaser and
pursuant to Exempt Resales, including any transfer or other taxes payable
thereon, (iii) all costs, if any, of copying this Agreement, the other
Operative Documents and any other agreements or documents in connection
with the offering, purchase, sale or delivery of the Series A Notes, (iv)
all expenses in connection with the registration or qualification of the
Series A Notes and the Subsidiary Guarantees for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing
or producing any preliminary and supplemental Blue Sky memoranda in
connection therewith (including the filing fees
7
<PAGE>
in connection with such registration or qualification and memoranda
relating thereto but excluding any fees and disbursements of counsel), (v)
the cost of printing certificates representing the Series A Notes and the
Subsidiary Guarantees, (vi) all expenses and listing fees in connection
with the application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System
- PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture, the Notes and the
Subsidiary Guarantees, (viii) the fees and expenses of the Trustee and its
counsel in connection with the Collateral Documents and the Intercreditor
Agreements, (ix) the costs and charges of any transfer agent, registrar
and/or depositary (including DTC), (x) any fees charged by rating agencies
for the rating of the Notes, (xi) all costs and expenses of the Exchange
Offer and any Registration Statement required to be borne by the Company
and the Guarantors, as set forth in the Registration Rights Agreement, and
(xii) all other costs and expenses as set forth in the Engagement Letter
dated as of March 1, 1999 by and between the Initial Purchaser and the
Company. Notwithstanding the foregoing, other than as set forth in the
first sentence of the third paragraph of Section 11, the Company shall not
be obligated to pay any fees or disbursements of counsel for the Initial
Purchaser.
(j) To use its commercially reasonable best efforts to effect the
inclusion of the Series A Notes in PORTAL and to maintain the listing of
the Series A Notes on PORTAL for so long as the Series A Notes are
outstanding.
(k) To use its commercially reasonable best efforts (i) to obtain the
approval of DTC for "book-entry" transfer of the Notes and (ii) to comply
in all material respects with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to
the approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
Guarantor, or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or any Guarantor substantially
similar to the Notes and the Subsidiary Guarantees (other than (i) the
Notes and the Subsidiary Guarantees, (ii) indebtedness under the
$100,000,000 credit facility by and among LaSalle Bank National
Association, the Company and the Subsidiary Guarantors as contemplated in
the Offering Memorandum and (iii) commercial paper issued in the ordinary
course of business), without the prior written consent of the Initial
Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration
of any such sale of the Series A Notes under the Act.
8
<PAGE>
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes and
the related Subsidiary Guarantees.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and guarantees thereof by the Guarantors registered
pursuant to the Act to be offered in exchange for the Series A Notes and
the related Subsidiary Guarantees and to comply with all applicable federal
and state securities laws in connection with the Exchange Offer.
(p) To comply in all material respects with all of its agreements set
forth in the Registration Rights Agreement and the Collateral Documents.
(q) To use the proceeds received from the sale of the Notes in the
manner specified in the Offering Memorandum under the heading "Use of
Proceeds."
(r) Prior to the Closing Date, to furnish to the Initial Purchaser, as
soon as practicable after they have been prepared, a copy of any unaudited
interim consolidated financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Offering Memorandum.
(s) To use commercially reasonable best efforts to do and perform all
things required or necessary to be done and performed under this Agreement
by it prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Series A Notes and the Subsidiary Guarantees.
6. Representations, Warranties and Agreements of the Company and the
Guarantors. As of the date hereof, each of the Company and the Guarantors,
jointly and severally, represents and warrants to, and agrees with, the Initial
Purchaser that:
(a) The Preliminary Offering Memorandum as of its date does not, and
the Offering Memorandum as of its date and the Closing Date does not, and
any supplement or amendment to them will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not
apply to statements in or omissions from the Preliminary Offering
Memorandum or the Offering Memorandum (or any supplement or amendment
thereto) based upon information relating to the Initial Purchaser furnished
to the Company in writing by the Initial Purchaser expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated
by this Agreement are subject to the registration requirements of the Act,
has been issued.
9
<PAGE>
(b) Each of the Company and its subsidiaries has been duly organized,
is validly existing as a corporation or limited liability company in good
standing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as described in the
Preliminary Offering Memorandum and the Offering Memorandum and to own,
lease, license and operate its properties, and each is duly qualified and
is in good standing as a foreign corporation or limited liability company,
as applicable, authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
(i) have a material adverse effect on the business, prospects, condition
(financial or otherwise) or results of operations of the Company and the
Guarantors, taken as a whole, or (ii) draw into question the validity of
this Agreement or any of the other Operative Documents (a "Material Adverse
Effect").
(c) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights and are free and clear of
any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien") created by it or in ---- favor of the Company or
any Guarantor. The authorized, issued and outstanding capital stock of the
Company is, and as of the Closing Date will be, as set forth under the
caption "Capitalization" in the Offering Memorandum and in the financial
statements, and the related notes, included in the Offering Memorandum.
(d) The entities listed on Schedule C-1 hereto are the only
subsidiaries, direct or indirect, of the Company on the date hereof. The
entities listed on Schedule C-2 hereto are the only subsidiaries, direct or
indirect, of the Company on the Closing Date. All of the outstanding shares
of capital stock or other equity interests (including, without limitation,
membership interests in limited liability companies) of each of the
Guarantors have been duly authorized and validly issued and are fully paid
and non-assessable, except in the case of the Guarantors that are New York
corporations, as provided in Section 630 of the New York Business
Corporation Law, are not subject to any preemptive or similar rights,
except in the case of Guarantors (other than Gilpin Realty Corp.) that are
New York corporations, as provided in Section 622 of the New York Business
Corporation Law, and are owned by the Company, directly or indirectly,
through one or more subsidiaries, free and clear of any Liens, except for
the Liens to be created on the Closing Date by the Collateral Documents.
(e) This Agreement has been duly authorized, executed and delivered by
the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and each of
the Guarantors and, on the Closing Date, will have been validly executed
and delivered by the Company and each of the Guarantors. When the Indenture
has been duly executed and delivered by the Company and each of the
Guarantors (assuming the due authorization and execution thereof by the
Trustee), the Indenture will be a valid and binding obligation of the
Company and each Guarantor, enforceable against the Company and each
Guarantor in accordance
10
<PAGE>
with its terms, except as (A) the enforceability thereof may be limited by
the effect of (i) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other or similar laws now in effect relating to or
affecting the rights and remedies of creditors and (ii) general principles
of equity, whether enforcement is considered in a proceeding at law or in
equity, and the discretion of the court before which any proceeding
therefor may be brought, (B) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (C) rights of indemnification may be limited by public
policy considerations. On the Closing Date, the Indenture will conform (x)
as to legal matters, in all material respects, to the description thereof
contained in the Offering Memorandum and (y) in all material respects to
the requirements of the Trust Indenture Act of 1939, as amended (the "TIA"
or "Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by the Company. When
the Series A Notes have been issued, executed and authenticated in
accordance with the terms of the Indenture and delivered to and paid for by
the Initial Purchaser in accordance with the terms of this Agreement, the
Series A Notes will be entitled to the benefits of the Indenture and will
be valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as (A) the enforceability
thereof may be limited by the effect of (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other similar laws
affecting the rights and remedies of creditors and (ii) general principles
of equity, whether enforcement is considered in a proceeding at law or in
equity, and the discretion of the court before which any proceeding
therefor may be brought and (B) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Series A Notes will conform as to
legal matters, in all material respects, to the description thereof
contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
(A) the enforceability thereof may be limited by the effect of (i)
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and
other similar laws affecting the rights and remedies of creditors and (ii)
general principles of equity, whether enforcement is considered in a
proceeding at law or in equity, and the discretion of the court before
which any proceeding therefor may be brought and (B) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. When the Series B Notes are issued,
authenticated and delivered, the Series B Notes will to the extent
described in the Offering Memorandum
11
<PAGE>
conform as to legal matters, in all material respects, to the description
thereof contained in the Offering Memorandum.
(i) The Subsidiary Guarantee to be endorsed on the Series A Notes by
each Guarantor has been duly authorized by such Guarantor and, on the
Closing Date, will have been duly executed and delivered by such Guarantor.
When the Series A Notes have been issued, executed and authenticated in
accordance with the terms of the Indenture and delivered to and paid for by
the Initial Purchaser in accordance with the terms of this Agreement, the
Subsidiary Guarantee of each Guarantor endorsed thereon will be entitled to
the benefits of the Indenture and will be a valid and binding obligation of
such Guarantor, enforceable against such Guarantor in accordance with its
terms, except as (A) the enforceability thereof may be limited by the
effect of (i) bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and other similar laws affecting the rights and remedies of
creditors and (ii) general principles of equity, whether enforcement is
considered in a proceeding at law or in equity, and the discretion of the
court before which any proceeding therefor may be brought, and (B) rights
of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. On the Closing Date, the
Subsidiary Guarantees to be endorsed on the Series A Notes will conform as
to legal matters, in all material respects, to the description thereof
contained in the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on the Series B Notes by
each Guarantor has been duly authorized by such Guarantor and, when issued,
will have been duly executed and delivered by each such Guarantor. When the
Series B Notes have been issued, executed and authenticated in accordance
with the terms of the Exchange Offer and the Indenture, the Subsidiary
Guarantee of each Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be a valid and binding obligation of
such Guarantor, enforceable against such Guarantor in accordance with its
terms, except as (A) the enforceability thereof may be limited by the
effect of (i) bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and other similar laws affecting the rights and remedies of
creditors and (ii) general principles of equity, whether enforcement is
considered in a proceeding at law or in equity, and the discretion of the
court before which any proceeding therefor may be brought and (B) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. When the Series B Notes are
issued, authenticated and delivered, the Subsidiary Guarantees to be
endorsed on the Series B Notes will conform as to legal matters, in all
material respects, to the description thereof in the Offering Memorandum.
(k) The Collateral Documents (other than the Intercreditor Agreements)
have been duly authorized by the Company and each of the Guarantors, as
applicable, and, on the Closing Date, will have been duly executed and
delivered by the Company and the Guarantors, as applicable. When the
Collateral Documents have been duly executed and delivered by the
12
<PAGE>
Company and the Guarantors, as applicable (assuming the due authorization
and execution thereof by the Trustee), each of the Collateral Documents
will be a valid and binding obligation of the Company and each of the
Guarantors, as applicable, enforceable against the Company and each
Guarantor, as applicable, in accordance with its terms, except as (A) the
enforceability thereof may be limited by the effect of (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and other
similar laws affecting the rights and remedies of creditors and (ii)
general principles of equity, whether enforcement is considered in a
proceeding at law or in equity, and the discretion of the court before
which any proceeding therefor may be brought, (B) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability, (C) the application by a court of
principles of due process and public policy considerations may limit or
restrict the enforceability of certain rights and remedies provided for in
the Indenture and the Collateral Documents and (D) rights of
indemnification and contribution may be limited by public policy
considerations. On the Closing Date, the Collateral Documents will conform
as to legal matters, in all material respects, to the description thereof
contained in the Offering Memorandum.
(l) The Intercreditor Agreements have been duly authorized by the
Company and each of the Guarantors, as applicable, and, on the Closing
Date, will have been duly executed and delivered by the Company and each of
the Guarantors, as applicable. When the Intercreditor Agreements have been
duly executed and delivered, each of the Intercreditor Agreements will
(assuming the due authorization and execution by the other parties thereto)
be a valid and binding obligation of the Company and each of the
Guarantors, as applicable, enforceable against the Company and each
Guarantor, as applicable, in accordance with its terms, except as (A) the
enforceability thereof may be limited by the effect of (i) bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws affecting the rights and remedies of creditors and (ii)
general principles of equity, whether enforcement is considered in a
proceeding at law or in equity, and the discretion of the court before
which any proceeding therefor may be brought, (B) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability, (C) the application by a court of
principles of due process and public policy considerations may limit or
restrict the enforceability of certain rights and remedies provided for in
the Indenture and the Collateral Documents and (D) rights of
indemnification and contribution may be limited by public policy
considerations. On the Closing Date, the Intercreditor Agreements will
conform as to legal matters, in all material respects, to the description
thereof contained in the Offering Memorandum.
(m) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, on the Closing Date, will have been
duly executed and delivered by the Company and each of the Guarantors. When
the Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding obligation of the
Company and each of the Guarantors, enforceable against the Company and
each Guarantor in accordance with its terms, except as (A) the
enforceability thereof
13
<PAGE>
may be limited by the effect of (i) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar laws affecting the rights
and remedies of creditors and (ii) general principles of equity, whether
enforcement is considered in a proceeding at law or in equity, and the
discretion of the court before which any proceeding therefor may be
brought, (B) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
and (C) rights of indemnification and contribution may be limited by
federal and state securities laws and public policy considerations. On the
Closing Date, the Registration Rights Agreement will conform as to legal
matters, in all material respects, to the description thereof contained in
the Offering Memorandum.
(n) Neither the Company nor any of the Guarantors is (i) in violation
of its respective charter, by-laws or other organizational document, (ii)
to the best knowledge of the Company after due inquiry, in violation of any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, that is applicable to the Company or any of the Guarantors or
(iii) to the best knowledge of the Company after due inquiry, in default in
the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and the Guarantors,
taken as a whole, to which the Company or any of the Guarantors is a party
or by which the Company or any of the Guarantors or their respective
property is bound (each, a "Contract" and collectively the "Contracts")
that, in the case of clauses (i), (ii) and (iii) above, would be reasonably
expected, in the aggregate, to have a Material Adverse Effect.
(o) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations, if any, under this
Agreement and the other Operative Documents and to perform its obligations
under the Asset Purchase Agreement.
(p) The execution, delivery and performance of this Agreement and the
other Operative Documents (other than the Notes and the Subsidiary
Guarantees) by the Company and each of the Guarantors which is a party
thereto, the issuance, authentication, sale and delivery of the Series A
Notes and Subsidiary Guarantees against payment therefor, and issuance,
authentication and delivery of the Series B Notes and the Subsidiary
Guarantees thereof in accordance with the Exchange Offer, and the
consummation of the transactions contemplated hereby and thereby
(including, without limitation, consummation of the transactions
contemplated by the Asset Purchase Agreement) will not (i) require any
consent, approval, authorization or other order of, or qualification with,
any court or governmental body or agency (except such as will have been
obtained by the Closing Date, as may be required under the securities or
Blue Sky laws of the various states or filings and recordings with certain
governmental bodies to perfect Liens under the Collateral Documents), (ii)
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter, by-laws or other organizational document
of the Company or any of the Guarantors or any Contract to which the
Company or any Guarantor
14
<PAGE>
is a party, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body
or agency having jurisdiction over the Company, any of the Guarantors or
their respective property, (iv) result in the imposition or creation of (or
the obligation to create or impose) a Lien under any agreement or
instrument to which the Company or any of the Guarantors is a party or by
which the Company or any of the Guarantors or their respective property is
bound (other than any Liens created by the Indenture and the Collateral
Documents), or (v) result in the termination or revocation of any material
Authorization (as defined) of the Company or any of the Guarantors or
result in any other impairment of the rights of the holder of any such
Authorization, except insofar as any such violation, conflict, default,
Lien, termination, revocation or impairment would not reasonably be
expected to result in a Material Adverse Effect.
(q) There are no legal or governmental proceedings pending or, to the
best knowledge of the Company after due inquiry, threatened to which the
Company or any of the Guarantors is or could be a party or to which any of
their respective property is or could be subject, which would reasonably be
expected to result, singly or in the aggregate, in a Material Adverse
Effect.
(r) There is no (i) significant unfair labor practice complaint
pending or threatened against the Company or any of the Guarantors nor, to
the best knowledge of the Company, threatened against any of them, before
the National Labor Relations Board, any state or local labor relations
board or any foreign labor relations board, (ii) significant grievance or
significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of the
Guarantors or, to the best knowledge of the Company, threatened against the
Company or any Guarantor and (iii) significant strike, labor dispute,
slowdown or stoppage is pending against the Company or any of the
Guarantors or threatened against the Company or any of the Guarantors,
except, in each case of clause (i), (ii) or (iii), such as would not result
in a Material Adverse Effect. Neither the Company nor any of the Guarantors
has violated any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees, nor any applicable
wage or hour laws, which would result in a Material Adverse Effect.
(s) In the ordinary course of business, the Company and the Guarantors
conduct a periodic review of the effect of Environmental Laws (as defined)
on the business, operations and properties of the Company and the
Guarantors, taken as a whole in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation,
capital and operating expenditures required for response and corrective
actions, closure of properties, permits, licenses and approvals, related
constraints on operating activities and all potential liabilities to third
parties). On the basis of such review, except as set forth in the Offering
Memorandum, the Company has reasonably concluded that such associated costs
and liabilities would not, singly or in the aggregate, have a Material
Adverse Effect. Except as described in
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<PAGE>
the Offering Memorandum, to the knowledge of the Company, the Company and
the Guarantors are in compliance with all applicable existing Environmental
Laws, except for such instances of non-compliance which would not have a
Material Adverse Effect or which are being contested in good faith by
appropriate proceedings by the Company or the Guarantors affected thereby.
For the purposes of this Agreement, "Environmental Laws" means any Federal,
state and local laws, rules or regulations, any orders, decrees, judgments
or injunctions and the common law relating to pollution or protection of
human health, safety or the environment, including, without limitation,
ambient air, indoor air, soil, surface water, ground water, wetlands, land
or subsurface strata to which the Company or the Guarantors are subject,
including, without limitation, those relating to releases or threatened
releases of Hazardous Materials into the environment, or otherwise relating
to the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. For the
purposes of this Agreement, "Hazardous Material" shall mean any pollutant,
contaminant, toxic, hazardous or extremely hazardous substance, constituent
or waste, or any other constituent, waste, material, compound or substance
(including, without limitation, petroleum including crude oil and any
fraction thereof, or any petroleum product), subject to regulation under
any Environmental Law.
(t) Each of the Company and the Guarantors has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each,
an "Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or
notice would not, singly or in the aggregate, have a Material Adverse
Effect. Each such Authorization is valid and in full force and effect and
each of the Company and the Guarantors is in compliance with all the terms
and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of
any notice from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow revocation, suspension or
termination of any such Authorization or results or, after notice or lapse
of time or both, would result in any other impairment of the rights of the
holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Company and the Guarantors taken as
a whole, except where such failure to be valid and in full force and effect
or to be in compliance, the occurrence of any such event or the presence of
any such restriction would not, in the aggregate, have a Material Adverse
Effect.
(u) The accountants Arthur Andersen LLP, Holtz Rubenstein & Co., LLP
and Ernst & Young LLP have each certified certain of the financial
statements, the related notes and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum. Arthur
Andersen LLP are, and Holtz Rubenstein & Co., LLP were, independent public
accountants with respect to the Company and the Guarantors, as required by
the Act and the Exchange
16
<PAGE>
Act. To the knowledge of the Company, Ernst & Young LLP are independent
public accountants with respect to the Berlin-Gorham Mills, as required by
the Act and the Exchange Act. The unaudited consolidated historical
financial statements, together with related schedules and notes, set forth
in the Preliminary Offering Memorandum and the Offering Memorandum comply
as to form in all material respects, with the requirements applicable to
registration statements on Form S-1 under the Act.
(v) The historical financial statements of the Company and its
subsidiaries together with related schedules and notes forming part of the
Offering Memorandum (and any amendment or supplement thereto), present
fairly, in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its subsidiaries on
the basis stated in the Offering Memorandum at the respective dates or for
the respective periods to which they apply and such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as otherwise disclosed therein; and the other financial
and statistical information and data pertaining to the Company and its
subsidiaries set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books
and records of the Company (except as otherwise noted therein or in the
Offering Memorandum).
(w) The pro forma financial statements, and the related notes,
included in the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries and give effect to assumptions used in the preparation thereof
on a reasonable basis and in good faith and present fairly, in all material
respects, the historical and proposed transactions contemplated by the
Offering Memorandum; and such pro forma financial statements comply as to
form, in all material respects, with the requirements applicable to pro
forma financial statements included in registration statements on Form S-1
under the Act. The other pro forma financial and statistical information
and data included in the Offering Memorandum are, in all material respects,
accurately presented and prepared on a basis consistent with the pro forma
financial statements.
(x) The statistical and market-related data included in the Offering
Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate.
(y) The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Series A Notes will not involve any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended. The
representation made by the Company in the preceding sentence is made solely
in reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the prospective
investors as set forth in the Offering Memorandum under "Notices to
Investors."
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(z) Neither the Company nor any Guarantor is and, after giving effect
to the offering and sale of the Series A Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, neither the
Company nor any Guarantor will be, an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(aa) The present fair salable value of the assets of the Company and
the Guarantors exceeds the amount that will be required to be paid on or in
respect of the existing debts and other liabilities (including the maximum
amount of liability that may be reasonably expected to result from
contingent liabilities) of each such person as they become absolute and
matured. The assets of each of the Company and the Guarantors do not
constitute unreasonably small capital to carry out such person's businesses
as conducted or as proposed to be conducted. The Company and the Guarantors
do not intend to, nor do any of them believe that they will, incur debts
beyond their ability to pay such debts as they mature. Upon the issuance of
the Series A Notes and the consummation of the other transactions
contemplated in the Offering Memorandum, the present fair salable value of
the assets of each of the Company and the Guarantors will exceed the amount
that will be required to be paid on or in respect of the existing debts and
other liabilities (including the maximum amount of liability that may
reasonably be expected to result from contingent liabilities) of each such
person as they become absolute and matured. The assets of each of the
Company and the Guarantors, upon the issuance of the Series A Notes and the
consummation of the other transactions contemplated in the Offering
Memorandum, will not constitute unreasonably small capital to carry out
such person's business as now conducted, including the capital needs of
each of the Company and the Guarantors, taking into account the projected
capital requirements and capital availability of each of the Company and
the Guarantors.
(bb) Except for the Registration Rights Agreement, there are no
contracts, agreements or understandings between the Company or any
Guarantor and any person granting such person the right to require the
Company or such Guarantor to file a registration statement under the Act
with respect to any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such securities with the
Notes and Subsidiary Guarantees registered pursuant to any Registration
Statement.
(cc) Neither the Company nor any Guarantor nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the
Series A Notes to violate Regulation T (12 C.F.R. Part 220), Regulation U
(12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(dd) Since the respective dates as of which information is given in
the Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement), (i) there has not occurred
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any material adverse change or any development involving a prospective
material adverse change in the condition (financial or otherwise),
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material
adverse change or any development involving a prospective material adverse
change in the capital stock or in the long-term debt of the Company or any
of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent, which is material to the Company and its subsidiaries taken as
a whole.
(ee) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(ff) When the Series A Notes and the Subsidiary Guarantees are issued
and delivered pursuant to this Agreement, neither the Series A Notes nor
the Subsidiary Guarantees will be of the same class (within the meaning of
Rule 144A under the Act) as any security of the Company or the Guarantors
that is listed on a national securities exchange registered under Section 6
of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(gg) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, the
Guarantors or any of their respective representatives (other than the
Initial Purchaser, as to which the Company and the Guarantors make no
representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof.
(hh) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(ii) None of the Company, the Guarantors nor any of their respective
affiliates or any person acting on its or their behalf (other than the
Initial Purchaser, as to which the Company and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act ("Regulation S") with
respect to the Series A Notes or the Subsidiary Guarantees.
(jj) The Series A Notes offered and sold in reliance on Regulation S
have been and will be offered and sold only in offshore transactions.
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(kk) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(ll) No registration under the Act of the Series A Notes or the
Subsidiary Guarantees is required for the sale of the Series A Notes and
the Subsidiary Guarantees to the Initial Purchaser as contemplated hereby
or for the Exempt Resales, assuming the accuracy of the Initial Purchaser's
representations and warranties and agreements set forth in Section 7
hereof.
(mm) No "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Act, (i) has
imposed (or has informed the Company or any Guarantor that it is
considering imposing) any condition on the Company's or any Guarantor's
retaining any rating assigned to the Company, any Guarantor or any
securities of the Company or any Guarantor or (ii) has indicated to the
Company or any Guarantor that it is considering (a) the downgrading,
suspension or withdrawal of, or any review for a possible change that does
not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company or
any Guarantor or any securities of the Company or any Guarantor.
(nn) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchaser or counsel for the Initial
Purchaser shall be deemed to be a representation and warranty by the
Company or such Guarantor to the Initial Purchaser as to the matters
covered thereby.
(oo) The Company and each Guarantor has good and marketable title in
fee simple to all real property it purports to own, including, without
limitation, all Mortgaged Property (as defined in the Indenture) and good
and legal title to all personal property it purports to own, including,
without limitation, all Collateral (as defined in the Indenture) owned by
them which is material to the business of the Company and its subsidiaries,
taken as a whole, and described in the Offering Memorandum, in each case
free and clear of all Liens, except (i) such as are described in the
Offering Memorandum, (ii) such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries and (iii) Liens
permitted by the Indenture and Collateral Documents; and any real property
(including, without limitation, all Mortgaged Property), personal property
(including, without limitation, all Pledged Collateral) and buildings held
under lease by the Company and each Guarantor are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such real
property, personal property and buildings by the Company and each
Guarantor, in each case except as described in the Offering Memorandum.
(pp) The Company and each Guarantor owns or possesses, or has the
right to use, all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
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trademarks, service marks and trade names ("intellectual property")
currently employed by them in connection with the business now operated by
them except where the failure to own or possess or otherwise be able to
acquire or use such intellectual property would not, singly or in the
aggregate, have a Material Adverse Effect; and neither the Company nor any
of the Guarantors has received any notice of infringement of or conflict
with asserted rights of others with respect to any of such intellectual
property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect.
(qq) The Company and each Guarantor will carry or are covered by
insurance issued by insurers of recognized financial responsibility in such
amounts and covering such risks for the conduct of its business and the
value of their properties as is customary for companies engaged in similar
businesses in the areas in which such business is located and, in the case
of its properties, as would be maintained by a prudent operator of
properties similar in use and configuration to such properties and located
in the locality where such properties are located; and neither the Company
nor any of the Guarantors (i) has received notice from any insurer or agent
of such insurer that substantial capital improvements or other material
expenditures will have to be made in order to continue such insurance or
(ii) has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers at a cost that would not have a
Material Adverse Effect.
(rr) Except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Company or any of its
subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the
other hand, which would be required by the Act to be described in the
Offering Memorandum if the Offering Memorandum were a prospectus included
in a registration statement on Form S-1 filed with the Commission.
(ss) Except as disclosed in the Offering Memorandum, the Company and
each of its subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(tt) All material tax returns required to be filed by the Company and
each of the Guarantors in any jurisdiction have been filed, other than
those filings or failures to have filed being contested in good faith, and
all material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Company or any of its
subsidiaries have been paid or provided
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for, other than those being contested in good faith and for which adequate
reserves have been provided.
(uu) To the knowledge of the Company and the Guarantors, no action has
been taken and no law, statute, rule or regulation or order has been
enacted, adopted or issued by any governmental agency or body which
prevents the execution, delivery and performance of any of the Operative
Documents, the issuance of the Series A Notes or the Subsidiary Guarantees,
or suspends the sale of the Series A Notes or the Subsidiary Guarantees in
any jurisdiction referred to in Section 5(e); and no injunction,
restraining order or other order or relief of any nature by a federal or
state court or other tribunal of competent jurisdiction has been issued
with respect to the Company or the Guarantors which would prevent or
suspend the issuance or sale of the Series A Notes or the Subsidiary
Guarantees in any jurisdiction referred to in Section 5(e).
(vv) The Collateral Documents, once executed and delivered, will
create, in favor of the Trustee for the benefit of the Trustee and the
holders of the Notes, a valid and enforceable, and upon filing of financing
statements (containing adequate descriptions of the personal property
Collateral) or recording of Mortgages (as defined in the Indenture) with
the appropriate governmental authorities (including payment of the
appropriate filing or recording fees and any applicable taxes) and delivery
of the applicable documents to Trustee, a valid and perfected Lien in
Collateral consisting of real property and a perfected security interest in
Collateral consisting of personal property, having the respective
priorities set forth in the Offering Memorandum, but nevertheless, on the
Closing Date, superior to and prior to the rights of all third persons
other than the holders of Prior Liens (as defined in the applicable
Collateral Documents) and thereafter subject to no other Liens except for
Permitted Collateral Liens. The enforceability of the obligations of the
Company and the Guarantors under the Collateral Documents is subject to the
exceptions set forth in Section 6(k) hereof.
(ww) The Company and each of the Guarantors have reviewed its
respective operations and that of its respective subsidiaries to evaluate
the extent to which the business or operations of it or its subsidiaries
will be affected by the Year 2000 Problem (that is, any significant risk
that computer hardware or software applications used by such person and its
respective subsidiaries will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in
the case of dates or times periods occurring prior to January 1, 2000); as
a result of such review, the Company and each of the Guarantors do not
believe, except as disclosed in the Offering Memorandum, that (A) there are
any issues related to this preparedness to address the Year 2000 Problem
that are of a character required to be described or referred to in the
Offering Memorandum which have not been accurately described in the
Offering Memorandum and (B) the Year 2000 Problem will have a Material
Adverse Effect.
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(xx) The Company has delivered to counsel for the Initial Purchaser a
true and correct copy of the Asset Purchase Agreement, together with all
related agreements and all schedules and exhibits thereto, and there shall
have been no material amendments, alterations, modifications or waivers of
any of the provisions of any such documents since their respective dates of
execution, other than any such amendments, alterations, modifications and
waivers as to which the Initial Purchaser has been advised in writing and
which would be required to be disclosed in the Offering Memorandum. To the
best knowledge of the Company, there exists no event or condition which
would constitute a default or an event of default under the Asset Purchase
Agreement or such ancillary agreements which would result in a Material
Adverse Effect or materially adversely affect the ability of the Company or
Pulp & Paper of America LLC to consummate the transactions contemplated
thereby.
The Company and the Guarantors acknowledge that the Initial Purchaser and
counsel to the Initial Purchaser will rely upon the accuracy and truth of the
foregoing representations and hereby consent to such reliance.
7. Initial Purchaser's Representations and Warranties. The Initial
Purchaser represents and warrants to, and agrees with, the Company and the
Guarantors that:
(a) Such Initial Purchaser is either a QIB or a Regulation S
Purchaser, in either case, with such knowledge and experience in financial
and business matters as is necessary in order to evaluate the merits and
risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or
any other applicable jurisdiction and (B) will be reoffering and reselling
the Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in
offshore transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act)
has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series
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A Notes only to, Eligible Purchasers. It further agrees that it will offer
to sell the Series A Notes only to, and will solicit offers to buy the
Series A Notes only from (A) Eligible Purchasers that the Initial Purchaser
reasonably believes are QIBs and (B) Regulation S Purchasers, in each case,
that agree that (x) the Series A Notes purchased by them may be resold,
pledged or otherwise transferred within the time period referred to under
Rule 144(k) (taking into account the provisions of Rule 144(d) under the
Act, if applicable) under the Act, as in effect on the date of the transfer
of such Series A Notes, only (I) to the Company or any of its subsidiaries,
(II) to a person whom the seller reasonably believes is a QIB purchasing
for its own account or for the account of a QIB in a transaction meeting
the requirements of Rule 144A under the Act, (III) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements
of Rule 904 of the Act, (IV) in a transaction meeting the requirements of
Rule 144 under the Act, (V) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
acceptable to the Company) or (VI) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities
laws of any state of the United States or any other applicable jurisdiction
and (y) they will deliver to each person to whom such Series A Notes or an
interest therein is transferred a notice substantially to the effect of the
foregoing.
(e) None of such Initial Purchaser nor any of its affiliates or any
person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to
the Series A Notes or the Subsidiary Guarantees.
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered
and sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan
or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it will not offer, sell or
deliver any of the Series A Notes in any jurisdiction outside the United
States except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the Series A Notes
in such jurisdictions. Such Initial Purchaser understands that no action
has been taken to permit a public offering in any jurisdiction outside the
United States where action would be required for such purpose.
(i) The Initial Purchaser acknowledges that the Company and the
Guarantors and, for purposes of the opinions to be delivered to the Initial
Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchaser will rely upon the accuracy
and truth of the foregoing representations and the Initial Purchaser hereby
consents to such reliance.
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8. Indemnification.
(a) The Company and each Guarantor agree, jointly and severally, to
indemnify and hold harmless the Initial Purchaser, its directors, its officers
and each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) the Initial Purchaser, from and against
any and all losses, claims, damages, liabilities and judgments (including,
without limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Memorandum (or any amendment or supplement thereto), the
Preliminary Offering Memorandum or any Rule 144A Information provided by the
Company or any Guarantor to any holder or prospective purchaser of Series A
Notes pursuant to Section 5(h) or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Initial Purchaser furnished in writing to the Company by such Initial
Purchaser expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum; provided that with respect to any such untrue statement in
or omission from the Preliminary Offering Memorandum, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of the Initial
Purchaser or any other person indemnified under this Section 8(a) to the extent
that any such loss, claim, damage, liability or judgment results from the fact
that both (A) a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of Series A Notes to
such person and (B) the untrue statement in or omission from the Preliminary
Offering Memorandum was corrected in the Offering Memorandum, unless, in either
case, such failure to deliver the Offering Memorandum was a result of
non-compliance by the Company with Section 5(b).
(b) The Initial Purchaser agrees to indemnify and hold harmless the Company
and the Guarantors, and their respective directors and officers and each person,
if any, who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) the Company or the Guarantors, to the same extent as the
foregoing indemnity from the Company and the Guarantors to the Initial Purchaser
but only with reference to information relating to the Initial Purchaser
furnished in writing to the Company by the Initial Purchaser expressly for use
in the Preliminary Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required
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to assume the defense of such action pursuant to this Section 8(c), but may
employ separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchaser). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party)
(and except in the case of clause (ii) hereof, such counsel shall be reasonably
satisfactory to the indemnifying party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. Except as set forth in the immediately preceding
sentence, the indemnifying party shall not be liable for any settlement entered
into by an indemnified party without the prior written consent, which consent
shall not be unreasonably withheld, of the indemnifying party. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the indemnified
party is or could have been a party and indemnity or contribution may be or
could have been sought hereunder by the indemnified party, unless such
settlement, compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability on claims that are or could have been the
subject matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
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contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchaser, on the
other hand, from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchaser bear to the total price to investors of the Series A Notes, in each
case as set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and the Guarantors, on the one hand, and the
Initial Purchaser, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantors, on the one hand, or the
Initial Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Guarantors, and the Initial Purchaser agree that it would
not be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total price of the Series A Notes purchased
by it were sold to investors in Exempt Resales exceeds the amount of any damages
which the Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
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9. Conditions of Initial Purchaser's Obligations. The obligations of the
Initial Purchaser to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct in all
material respects on the Closing Date after giving effect to the
Transactions, with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a
possible change that does not indicate the direction of the possible change
in, any rating of the Company or any Guarantor or any securities of the
Company or any Guarantor (including, without limitation, the placing of any
of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not
have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for the rating of the Company
or any Guarantor or any securities of the Company or any Guarantor by any
such rating organization and (iii) no such rating organization shall have
given notice that it has assigned (or is considering assigning) a lower
rating to the Series A Notes (including the Subsidiary Guarantees) than
that on which the Series A Notes (including the Subsidiary Guarantees) were
marketed.
(c) The Initial Purchaser shall have received on the Closing Date a
certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of the Company, confirming the matters set forth in
Sections 9(a), 9(b) and 9(d).
(d) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition (financial or
otherwise) or the earnings, prospects, business, management or operations
of the Company and the Guarantors, taken as a whole, (ii) there shall not
have been any change or any development involving a prospective change in
the capital stock or in the long-term debt of the Company or any of the
Guarantors and (iii) neither the Company nor any of its subsidiaries shall
have incurred any liability or obligation, direct or contingent, the effect
of which, in any such case described in clause 9(d)(i), 9(d)(ii) or
9(d)(iii), in the Initial Purchaser's reasonable judgment, is material and
adverse and, in the Initial Purchaser's reasonable judgment, makes it
impracticable
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to market the Series A Notes on the terms and in the manner contemplated in
the Offering Memorandum.
(e) In accordance with the terms of the Indenture, the Initial
Purchaser and the Trustee shall have received each of the following
documents which shall be reasonably satisfactory in form and substance to
the Initial Purchaser, the Trustee and each of their respective counsel
with respect to each Mortgaged Property and the Pledged Collateral, as
appropriate:
(i) a Mortgage (as defined in the Indenture) encumbering the
Company's or applicable Guarantor's fee interest or leasehold
interest, as the case may be, in each Mortgaged Property, duly
executed and acknowledged by such owner or holder of the fee interest
or leasehold interest constituting each such Mortgaged Property, in
form for recording in the appropriate recording office of the
political subdivision where such Mortgaged Property is situated,
together with such certificates, affidavits, questionnaires or returns
as shall be required in connection with the recording or filing
thereof and such UCC-1 financing statements and other similar
statements as are contemplated in respect of each such Mortgage by the
local counsel opinion referred to in subparagraph (xii) below, and any
other instruments necessary to grant the interests purported to be
granted by each such Mortgage under the laws of any applicable
jurisdiction, which Mortgages and financing statements and other
instruments shall be effective to create a Lien on such Mortgaged
Property in favor of the Trustee, subject to no Liens other than Prior
Liens, as of the Closing Date, and thereafter Permitted Collateral
Liens;
(ii) such consents, approvals, amendments, supplements,
estoppels, tenant subordination agreements or other instruments as
shall be reasonably necessary in order for the owner or holder of the
fee interest or leasehold interest to grant the Lien contemplated by
the Mortgage with respect to each Mortgaged Property;
(iii) with respect to each Mortgage, a policy of title insurance
(or commitment to issue such a policy) insuring (or committing to
insure) the lien of such Mortgage as a valid mortgage lien on the real
property and fixtures described therein, with the priority
contemplated in the Offering Memorandum, in respect of the Notes in an
amount not less than $165.0 million in the aggregate for all such
policies combined, and which policy (or commitment) shall (a) be
issued by a title company reasonably acceptable to the Initial
Purchaser, (b) include such reinsurance arrangements (with provisions
for direct access) as shall be acceptable to the Initial Purchaser,
(c) have been supplemented by such endorsements, or, where such
endorsements are not available at commercially reasonable premium
costs, opinion letters of special counsel or governmental authorities,
which counsel shall be acceptable to the Initial Purchaser, as shall
be reasonably requested by the Initial Purchaser (including, without
limitation, endorsements or opinion letters on matters relating to
usury, first loss, last dollar, zoning, non-imputation, public
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road access, contiguity (where appropriate), cluster, survey, doing
business, and so-called comprehensive coverage over covenants and
restrictions) and (d) contain only such exceptions to title as shall
be reasonably agreed to by the Initial Purchaser prior to the Closing
Date with respect to each such Mortgaged Property;
(iv) with respect to each Mortgaged Property, within 60 days
following the Closing Date, a survey (i) in such form as shall be
required by the title insurance company to issue the so-called
comprehensive endorsement required under paragraph (iii) hereof and to
remove the standard survey exception from such policy (or commitment)
and (ii) to the extent commercially reasonable, complying with the
minimum detail requirements of the American Land Title Association (as
such requirements are in effect on the date of delivery of such
survey) certified to the Trustee and dated (or redated) not earlier
than twelve months prior to the date of delivery thereof, or if
earlier, accompanied by an officers' certificate stating that there
have been no material changes to the applicable Mortgaged Property
since the date of the survey, unless there shall have occurred any
material exterior change in the property affected thereby during such
period, in which event such survey shall be dated or redated to a date
after the completion of such change, which survey shall locate all
improvements, public streets and recorded easements affecting such
Mortgaged Property and in such form as shall be required by the title
insurance company to issue the so-called comprehensive endorsement
required under paragraph (iii) hereof and to remove the standard
survey exception from such policy (or commitment);
(v) policies or certificates of insurance as required by each
Collateral Document, which policies or certificates shall bear
endorsements of the character required by such Collateral Document;
(vi) UCC, judgment and tax lien searches confirming that the
personal property comprising a part of each Mortgaged Property or the
Pledged Collateral is subject to no Liens other than Prior Liens;
(vii) such affidavits, certificates and instruments of
indemnification as shall be required to induce the title insurance
company to issue the policy or policies (or commitment) contemplated
in subparagraph (iii) above;
(viii) checks payable to the appropriate public officials in
payment of all recording costs and transfer taxes (or checks or wire
transfers to the title insurance company in respect of such amounts)
due in respect of the execution, delivery or recording of the
Mortgages, together with a check or wire transfer for the title
insurance company in payment of its premium, search and examination
charges, applicable survey costs and any other amounts then due in
connection with the issuance of its policies (or commitments);
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(ix) copies of all Leases and Subleases (as defined in the
Mortgages), all of which Leases and Subleases shall be satisfactory to
the Initial Purchaser;
(x) a certificate of an officer of the Company made with respect
to each applicable Mortgaged Property, in the form of Exhibit C
hereto;
(xi) a certificate of the Company, signed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer,
President or any Vice President and the Chief Financial Officer, to
the effect that: (a) the Company has performed in all material
respects all covenants and agreements described in this Section 9(e)
and satisfied in all material respects all conditions on its part to
be performed or satisfied hereunder and (b) upon the execution of the
Collateral Documents, filings of financing statements under the UCC in
all required jurisdictions and recording of the Mortgages in the
appropriate recording offices, the Trustee on behalf of the Trustee
and holders of Notes will have a valid and perfected lien on the
Collateral subject to no Liens, other than Prior Liens; and
(xii) an opinion from local counsel in California, New Hampshire,
New York, Oregon and Wisconsin that shall be substantially in the form
of Exhibit D hereto and otherwise reasonably satisfactory to the
Initial Purchaser and its counsel in all respects.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory to you and counsel for the Initial Purchaser), dated
the Closing Date, of Mandel & Resnik P.C., counsel for the Company and the
Guarantors, to the effect that:
(i) each of the Company and the Guarantors has been duly
organized, is validly existing as a corporation or limited liability
company in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its
business as described in the Offering Memorandum and to own, lease,
license and operate its properties;
(ii) each of the Company and the Guarantors is duly qualified and
is in good standing as a foreign corporation or limited liability
company, as applicable, authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be
so qualified would not have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights and
are free and clear of any Liens created by it or in favor of the
Company or any Guarantor;
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(iv) all of the outstanding shares of capital stock or other
equity interests (including, without limitation, membership interests
in limited liability companies) of each of the Guarantors have been
duly authorized and validly issued and are fully paid and
non-assessable, except, in the case of those Guarantors that are New
York corporations, as provided in Section 630 of the New York Business
Corporation Law, are not subject to any preemptive or similar rights,
except, in the case of Guarantors (other than Gilpin Realty Corp.)
that are New York corporations, as provided in Section 622 of the New
York Business Corporation Law, and are owned by the Company, to the
best knowledge of such counsel, after due inquiry, directly or
indirectly, through one or more subsidiaries, free and clear of any
Liens, except for Liens to be created on the Closing Date by the
Collateral Documents;
(v) the Series A Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their
terms;
(vi) the Subsidiary Guarantees have been duly authorized by each
Guarantor and, when the Series A Notes and the Series B Notes are
executed and authenticated in accordance with the terms of the
Indenture and, in the case of the Series A Notes, when such Series A
Notes have been issued and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement and, with
respect to the Series B Notes, when issued in accordance with the
Indenture, the Exchange Offer and the Registration Rights Agreement,
the Subsidiary Guarantees executed by the Guarantors and endorsed
thereon will be entitled to the benefits of the Indenture and will be
valid and binding obligations of each of the Guarantors, enforceable
against each such Guarantor in accordance with their terms;
(vii) the Indenture has been duly authorized, executed and
delivered by the Company and each Guarantor and is a valid and binding
obligation of the Company and each Guarantor, enforceable against the
Company and each Guarantor in accordance with its terms;
(viii) this Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors;
(ix) each of the Collateral Documents (other than the
Intercreditor Agreements) has been duly authorized, executed and
delivered by the Company and each of the Guarantors to the extent it
is a party thereto;
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(x) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and each of the Guarantors and
is a valid and binding obligation of the Company and each Guarantor,
enforceable against the Company and each Guarantor in accordance with
its terms;
(xi) the Series B Notes have been duly authorized by the Company,
and when issued, executed and authenticated in accordance with the
terms of the Registration Rights Agreement, the Exchange Offer and the
Indenture, will be entitled to the benefits of the Indenture and will
be valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms;
(xii) the statements under the captions "Description of Notes"
and "Plan of Distribution" in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present in all material
respects such legal matters, documents and proceedings;
(xiii) such counsel is of the opinion ascribed to it in the
Offering Memorandum under the caption "Certain United States Federal
Income Tax Considerations";
(xiv) to the best of such counsel's knowledge after due inquiry,
neither the Company nor any of the Guarantors is in violation of its
respective charter, by-laws or other organizational document and
neither the Company nor any of its subsidiaries is (i) in violation of
any applicable law, statute, rule, regulation, judgment, order, writ
or decree of any government, government instrumentality or court,
domestic or foreign, that is applicable to the Company or any of the
Guarantors or (ii) except as disclosed in the Offering Memorandum, in
default in the performance of any obligation, agreement, covenant or
condition contained in any Contract, that in the case of clauses (i)
and (ii) would have a Material Adverse Effect;
(xv) the Company has the requisite corporate power and authority
to execute, deliver and perform each of its obligations under this
Agreement and the other Operative Documents to which it is a party and
to perform its obligations under the Asset Purchase Agreement and on
the Closing Date, the Joinder Agreement (assuming the due
authorization, execution and delivery of the Joinder Agreement by each
party thereto) will be enforceable against each of the Additional
Guarantors in accordance with its terms;
(xvi) to the best of such counsel's knowledge after due inquiry,
the execution, delivery and performance of this Agreement and the
other Operative Documents (other than the Notes and the Subsidiary
Guarantees) by the Company and each of the Guarantors which is a party
thereto, the issuance, authentication, sale and delivery of the Series
A Notes and Subsidiary Guarantees, against payment thereof, and the
issuance,
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authentication and delivery of the Series B Notes and the Subsidiary
Guarantees thereof in accordance with the Indenture, the Exchange
Offer and the Registration Rights Agreement assuming such Series B
Notes and Subsidiary Guarantee were issued as of the Closing Date and
the consummation of the transactions contemplated hereby and thereby
(including, without limitation, consummation of the transactions
contemplated by the Asset Purchase Agreement) will not, as of the
Closing Date (i) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or
agency (except such as have been obtained, as may be required under
any applicable federal or state securities law or filings and
recordings with certain government bodies to perfect Liens under the
Collateral Documents), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter,
by-laws or other organizational document of the Company or any of the
Guarantors or those Contracts listed on Annex A hereto to which the
Company or any Guarantor is a party, (iii) violate any existing
applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over
the Company, any of the Guarantors or their respective property, (iv)
result in the imposition or creation of (or the obligation to create
or impose) a Lien under, any agreement or instrument to which the
Company or any of the Guarantors is a party or by which the Company or
any of its subsidiaries or their respective property is bound (other
than any Liens created by the Indenture and the Collateral Documents),
or (v) result in the termination or revocation of any Authorization of
the Company or any of the Guarantors or result in any other impairment
of the rights of the holder of any such Authorization, except insofar
as any such violation, conflict, default, Liens, termination,
revocation or impairment would not reasonably be expected to result in
a Material Adverse Effect; provided that counsel's opinion in this
paragraph need not address any impact the Company's or any of the
Guarantors' actions may have under any financial covenants or tests in
the Contracts specified in clause (ii) above, any consequences a
default by the Company or any of the Guarantors under the Purchase
Agreement, the Registration Rights Agreement or the Indenture may have
under any Contract specified in clause (ii) above, or any
cross-default provisions in the Contracts specified in the clause (ii)
above;
(xvii) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or other
governmental authority to which the Company or any Guarantor is a
party that is required to be disclosed in the Offering Memorandum and
which is not adequately disclosed therein;
(xviii) to the best of such counsel's knowledge after due
inquiry, each of the Company and the Guarantors has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without
limitation, under any applicable
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Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except
where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. To the best of such counsel's knowledge after
due inquiry, each such Authorization is valid and in full force and
effect and each of the Company and its subsidiaries is in compliance
with all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and to the best of such counsel's
knowledge after due inquiry, no event has occurred (including the
receipt of any notice from any authority or governing body) which
allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such
Authorization; and to the best of such counsel's knowledge after due
inquiry, such Authorizations contain no restrictions that are
burdensome to the Company and the Guarantors taken as a whole; except
where such failure to be valid and in full force and effect or to be
in compliance, the occurrence of any such event or the presence of any
such restriction would not, singly or in the aggregate, have a
Material Adverse Effect;
(xix) to the best of such counsel's knowledge after due inquiry,
neither the Company nor any Guarantor is and, after giving effect to
the offering and sale of the Series A Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, neither
the Company nor any Guarantor will be, an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company nor any Guarantor Act of 1940, as
amended;
(xx) to the best of such counsel's knowledge after due inquiry,
there are no contracts, agreements or understandings between the
Company or any Guarantor and any person granting such person the right
to require the Company or such Guarantor to file a registration
statement under the Act with respect to any securities of the Company
or such Guarantor or to require the Company or such Guarantor to
include such securities with the Notes and Subsidiary Guarantees
registered pursuant to any Registration Statement, except as provided
in the Registration Rights Agreement;
(xxi) assuming the proceeds from the issuance of the Series A
Notes are applied as provided in the Offering Memorandum, neither the
consummation of the transactions contemplated by this Agreement nor
the sale, issuance, execution or delivery of the Series A Notes, nor
the application of the proceeds therefrom (applied as described in the
Offering Memorandum under the caption "Use of Proceeds"), will violate
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221)
or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System;
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(xxii) each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date (except for the financial
statements and the notes thereto and other financial and accounting
data included therein, as to which no opinion need be expressed),
complied in all material respects with the informational requirements
of Rule 144A(d)(4) under the Act;
(xxiii) the Indenture complies in all material respects to the
requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
It is not necessary in connection with the offer, sale and delivery of
the Series A Notes to the Initial Purchaser in the manner contemplated
by this Agreement or in connection with the Exempt Resales to qualify
the Indenture under the TIA;
(xxiv) assuming the accuracy of and compliance with the
representations and warranties and agreements of the Company, the
Guarantors and the Initial Purchasers in the Purchase Agreement, no
registration under the Act of the Series A Notes or the Subsidiary
Guarantees is required for the sale of the Series A Notes and the
Subsidiary Guarantees to the Initial Purchaser as contemplated by this
Agreement or for the Exempt Resales;
(xxv) to the best of such counsel's knowledge after due inquiry,
except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Company or any of its
subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which would be required by the Act to
be described in the Offering Memorandum if the Offering Memorandum
were a prospectus included in a registration statement on Form S-1
filed with the Commission.
In addition, such counsel shall state that it has participated in
conferences with directors and other representatives of the Company and the
Guarantors, representatives of the independent certified public accountants for
the Company and the Guarantors, the Initial Purchaser and its representatives
and counsel, at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum and has not made any independent
check or verification thereof (other than as expressly described in paragraphs
(xii) and (xiii) above), during the course of such participation (relying as to
materiality to the extent they have deemed appropriate upon the statements of
officers and other representatives of the Company and the Guarantors), no facts
came to such counsel's attention that caused such counsel to believe that the
Offering Memorandum, as of its date or as of the date hereof, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
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<PAGE>
it being understood that such counsel need express no belief with respect to the
financial statements, including the notes thereto, pro forma financial
statements and other financial and statistical data included in the Offering
Memorandum.
In rendering such opinion, counsel for the Company and the Guarantors will
opine only as to the Delaware General Corporation Law, the laws of the State of
New York and the federal laws of the United States. Such counsel will be
permitted to except from its opinions with respect to enforceability: (A) the
effect of bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; (B) the effect of general
equitable principles, whether such enforceability is considered in a proceeding
in equity or at law, and the discretion of the court before which any proceeding
therefor may be brought; (C) that rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability; (D) with respect to Registration Rights Agreement, rights of
indemnification and contribution may be limited by federal and state securities
laws and public policy considerations; (E) the unenforceability of any provision
requiring the payment of attorney's fees (except to the extent that a court
determines such fees to be reasonable) or liquidated damages; (F) compliance
with laws relating to permissible rates of interest; and (G) the application by
a court of competent jurisdiction of principles of due process and public policy
considerations may limit or restrict certain right and remedies provided for in
Indenture and/or the Collateral Documents. In determining whether any matters
would have a Material Adverse Effect, such counsel may rely on statements of
officers and responsible employees and consultants of the Company and/or the
Guarantors without independently attempting to verify the accuracy of such
statements.
The opinion of Mandel & Resnik P.C. described in this Section 9(f) shall be
rendered to you and the Trustee at the request of the Company and the Guarantors
and shall so state therein.
(g) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Cahill Gordon & Reindel, counsel for
the Initial Purchaser, in form and substance reasonably satisfactory to the
Initial Purchaser.
(h) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Initial Purchaser from each of Arthur
Andersen LLP, Ernst & Young LLP and Holtz Rubenstein & Co., LLP,
independent public accountants, containing the information and statements
of the type ordinarily included in accountants' "comfort letters" to the
Initial Purchaser with respect to the applicable financial statements and
certain financial information contained in the Offering Memorandum.
(i) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
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(j) The Company, the Guarantors and the Trustee shall have executed
the Indenture and the Initial Purchaser shall have received an original
copy thereof, duly executed by the Company, the Guarantors and the Trustee.
(k) The Company and the Guarantor shall have executed the Registration
Rights Agreement and the Initial Purchaser shall have received an original
copy thereof, duly executed by the Company and the Guarantors.
(l) The Company shall not have failed at or prior to the Closing Date
to perform or comply in any material respect with any of the agreements
herein contained and required to be performed or complied with by the
Company at or prior to the Closing Date.
(m) On the Closing Date, each Additional Guarantor shall have become
party to this Agreement as a Guarantor pursuant to the Joinder Agreement.
(n) The Initial Purchaser shall have received on the Closing Date a
copy of the Asset Purchase Agreement (and all amendments or supplements
thereto and all related schedules and exhibits thereto) which shall be in
form and substance reasonable satisfactory to the Initial Purchaser in all
respects.
(o) The consummation of the transactions contemplated by the Asset
Purchase Agreement shall occur on the Closing Date.
(p) On the Closing Date, all related party debt of the Company and its
subsidiaries shall have been assumed by a newly formed indirect parent
company of the Company, Super American Tissue Inc. ("Super American
Tissue"), as described in the Offering Memorandum, and the terms and
conditions of such assumed debt shall be reasonably satisfactory to the
Initial Purchaser in all respects.
(q) On the Closing Date, the Company shall have received at least
$20.0 million in aggregate principal amount from a newly formed indirect
parent company of the Company and at least $5.0 million in aggregate
principal amount from Super American Tissue, in each case as described in
the Offering Memorandum, and the terms and conditions of such investments
shall be reasonably satisfactory to the Initial Purchaser in all respects.
(r) On the Closing Date, the Initial Purchaser and counsel for the
Initial Purchaser shall have received such further documents, opinions,
certificates and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Guarantors as
they shall have heretofore reasonably requested from the Company and the
Guarantors.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.
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This Agreement may be terminated at any time prior to the Closing Date by
the Initial Purchaser by written notice to the Company if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in the Initial
Purchaser's opinion materially and adversely affects, or will materially and
adversely affect, the business, prospects, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a whole, (v)
the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or any Guarantor,
to American Tissue Inc., 135 Engineers Road, Hauppauge, New York 11788
Attention: President and Chief Executive Officer, with a copy to Mandel & Resnik
P.C., 220 East 42nd Street, New York, New York 10017, Attention: Nicholas J.
Kaiser, Esq., and (ii) if to the Initial Purchaser, Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, with a copy to Cahill Gordon & Reindel, 80 Pine Street,
New York, New York 10005, Attention: John Schuster, Esq., or in any case to such
other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors, and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Series A Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Company, any Guarantor, the officers or directors of the Company
or any Guarantor, or any person controlling the Company or any Guarantor, (ii)
acceptance of the Series A Notes and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company and each Guarantor, jointly
and severally, agree to reimburse the Initial Purchaser only for
39
<PAGE>
all out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by them; provided, further, the Initial Purchaser shall not be entitled
to receive any other amount. Notwithstanding any termination of this Agreement,
each of the Company and the Guarantors, jointly and severally, shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The
Company and each Guarantor also agree, jointly and severally, to reimburse the
Initial Purchaser and its officers, directors and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under this Section 8).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Guarantors, the
Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Guarantors and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include a purchaser of any of the Series A Notes from the Initial Purchaser
merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York, without giving effect to the choice of law rules
thereof.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
40
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Guarantors and the Initial Purchaser.
Very truly yours,
AMERICAN TISSUE INC.
By: /s/ Nourollah Elghanayan
--------------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
--------------------------------------
Mehdi Gabayzadeh
President
AMERICAN CELLULOSE MILL CORP.,
AMERICAN TISSUE CORPORATION,
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE,
INC.,
AMERICAN TISSUE MILLS OF NEW YORK, INC.,
AMERICAN TISSUE MILLS OF OREGON, INC.,
AMERICAN TISSUE MILLS OF WISCONSIN, INC.,
GILPIN REALTY CORP.,
TAGSONS PAPERS, INC.
By: /s/ Nourollah Elghanayan
--------------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
--------------------------------------
Mehdi Gabayzadeh
President
<PAGE>
100 REALTY MANAGEMENT LLC,
AMERICAN TISSUE MILLS OF GREENWICH
LLC,
AMERICAN TISSUE MILLS OF NEENAH LLC,
CALEXICO TISSUE COMPANY LLC,
CORAM REALTY LLC,
ENGINEERS ROAD, LLC,
GRAND LLC,
HYDRO OF AMERICA LLC,
LANDFILL OF AMERICA LLC,
MARKWOOD LLC,
PAPER OF AMERICA LLC,
PULP & PAPER OF AMERICA LLC,
PULP OF AMERICA LLC,
RAILWAY OF AMERICA LLC,
SARATOGA REALTY LLC,
UNIQUE FINANCING LLC
By: /s/ Nourollah Elghanayan
--------------------------------
Nourollah Elghanayan
Manager
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh
Manager
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ [ILLEGIBLE]
-----------------------------------
Name:
Title: Managing Director
<PAGE>
SCHEDULE A
Guarantors
American Cellulose Mill Corp.
American Tissue Corporation
American Tissue Mills of New Hampshire, Inc.
American Tissue Mills of New York, Inc.
American Tissue Mills of Oregon, Inc.
American Tissue Mills of Wisconsin, Inc.
Gilpin Realty Corp.
Tagsons Papers, Inc.
100 Realty Management LLC
American Tissue Mills of Greenwich LLC
American Tissue Mills of Neenah LLC
Calexico Tissue Company LLC
Coram Realty LLC
Engineers Road, LLC
Grand LLC
Hydro of America LLC
Landfill of America LLC
Markwood LLC
Paper of America LLC
Pulp & Paper of America LLC
Pulp of America LLC
Railway of America LLC
Saratoga Realty LLC
Unique Financing LLC
<PAGE>
SCHEDULE B
Additional Guarantors
Berlin Mills Railway, Inc.
Crown Vantage-New Hampshire Electric, Inc.
<PAGE>
SCHEDULE C-1
Subsidiaries as of the Date Hereof
American Cellulose Mill Corp.
American Tissue Corporation
American Tissue Mills of New Hampshire, Inc.
American Tissue Mills of New York, Inc.
American Tissue Mills of Oregon, Inc.
American Tissue Mills of Wisconsin, Inc.
Gilpin Realty Corp.
Tagsons Papers, Inc.
100 Realty Management LLC
American Tissue Mills of Greenwich LLC
American Tissue Mills of Neenah LLC
Calexico Tissue Company LLC
Coram Realty LLC
Engineers Road, LLC
Grand LLC
Hydro of America LLC
Landfill of America LLC
Markwood LLC
Paper of America LLC
Pulp & Paper of America LLC
Pulp of America LLC
Railway of America LLC
Saratoga Realty LLC
Unique Financing LLC
<PAGE>
SCHEDULE C-2
Subsidiaries as of the Closing Date
American Cellulose Mill Corp.
American Tissue Corporation
American Tissue Mills of New Hampshire, Inc.
American Tissue Mills of New York, Inc.
American Tissue Mills of Oregon, Inc.
American Tissue Mills of Wisconsin, Inc.
Berlin Mills Railway, Inc.
Crown Vantage-New Hampshire Electric, Inc.
Gilpin Realty Corp.
Tagsons Papers, Inc.
100 Realty Management LLC
American Tissue Mills of Greenwich LLC
American Tissue Mills of Neenah LLC
Calexico Tissue Company LLC
Coram Realty LLC
Engineers Road, LLC
Grand LLC
Hydro of America LLC
Landfill of America LLC
Markwood LLC
Paper of America LLC
Pulp & Paper of America LLC
Pulp of America LLC
Railway of Americ LLC
Saratoga Realty LLC
Unique Financing LLC
REGISTRATION RIGHTS AGREEMENT
Dated as of July 9, 1999
by and among
AMERICAN TISSUE INC.
AMERICAN TISSUE CORPORATION;
AMERICAN CELLULOSE MILL CORP.;
GILPIN REALTY CORP.;
AMERICAN TISSUE MILLS OF OREGON, INC.;
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.;
AMERICAN TISSUE MILLS OF WISCONSIN, INC.;
TAGSONS PAPERS, INC.;
AMERICAN TISSUE MILLS OF NEW YORK, INC.;
ENGINEERS ROAD, LLC;
GRAND LLC;
MARKWOOD LLC;
AMERICAN TISSUE MILLS OF GREENWICH LLC;
UNIQUE FINANCING LLC;
AMERICAN TISSUE MILLS OF NEENAH LLC;
CORAM REALTY LLC;
CALEXICO TISSUE COMPANY LLC;
SARATOGA REALTY LLC;
100 REALTY MANAGEMENT LLC;
PULP & PAPER OF AMERICA LLC;
HYDRO OF AMERICA LLC;
LANDFILL OF AMERICA LLC;
PAPER OF AMERICA LLC;
PULP OF AMERICA LLC;
RAILWAY OF AMERICA LLC;
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.; AND
BERLIN MILLS RAILWAY, INC.
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of July 9, 1999, by and among American Tissue Inc., a New York
corporation (the "Company"), American Tissue Corporation; American Cellulose
Mill Corp.; Gilpin Realty Corp.; American Tissue Mills of Oregon, Inc.; American
Tissue Mills of New Hampshire, Inc.; American Tissue Mills of Wisconsin, Inc.;
Tagsons Papers, Inc.; American Tissue Mills of New York, Inc.; Engineers Road,
LLC; Grand LLC; Markwood LLC; American Tissue Mills of Greenwich LLC; Unique
Financing LLC; American Tissue Mills of Neenah LLC; Coram Realty LLC; Calexico
Tissue Company LLC; Saratoga Realty LLC; 100 Realty Management LLC; Pulp & Paper
of America LLC; Hydro of America LLC; Landfill of America LLC; Paper of America
LLC; Pulp of America LLC; Railway of America LLC; Crown Vantage-New Hampshire
Electric, Inc.; and Berlin Mills Railway, Inc. (collectively, the "Guarantors"
and each, a "Guarantor"), and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") which has agreed to purchase the Company's
12 1/2% Series A Senior Secured Notes due 2006 (the "Series A Notes") pursuant
to the Purchase Agreement (as defined).
This Agreement is made pursuant to the Purchase Agreement, dated July 1,
1999 (the "Purchase Agreement"), by and among the Company, the Guarantors and
the Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Series A Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser set forth in Section 3 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture (the "Indenture"),
dated July 9, 1999, by and among the Company, the Guarantors and The Chase
Manhattan Bank, as Trustee, relating to the Series A Notes and the Series B
Notes (as defined).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Affiliated Market Maker: A Broker-Dealer who is deemed to be an Affiliate
of the Company.
Board of Directors: The Board of Directors of the Company, or any
authorized committee of the Board of Directors of the Company.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: July 9, 1999.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Series B Notes
to be issued in the Exchange Offer, (b) the maintenance of such
<PAGE>
-2-
Exchange Offer Registration Statement continuously effective and the keeping of
the Exchange Offer open for a period not less than the period required pursuant
to Section 3(b) hereof and (c) the delivery by the Company to the Registrar
under the Indenture of Series B Notes in the same aggregate principal amount as
the aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser proposes to
sell the Series A Notes to (i) certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and (ii) persons permitted to
purchase the Series A Notes in offshore transactions in reliance upon Regulation
S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into such
Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
Restricted Broker-Dealer: Any Broker-Dealer that holds Series B Notes that
were acquired in the Exchange Offer in exchange for Series A Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
<PAGE>
-3-
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 12 1/2% Series B Senior Secured Notes due
2006 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii)
as contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note until (1) the date on
which such Series A Note has been exchanged by a person other than a
broker-dealer for a Series B Note in the Exchange Offer, (2) following the
exchange by a broker-dealer in the Exchange Offer of a Series A Note for a
Series B Note, the date on which such Series B Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (3) the
date on which such Series A Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (4) the date on which such Series A Note is distributed to the
public pursuant to Rule 144 under the Act or may be sold under Rule 144(k) under
the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date (the "Exchange Offer Filing Date"), but in no event later
than 110 days after the Closing Date (for purposes of this Section 3, such 110th
day being the "Filing Deadline"), (ii) use its commercially reasonable best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 210 days after the
Closing Date (for purposes of this Section 3, such 210th day being the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, provided, however, that none of the Company
or the Guarantors shall be required in connection therewith to register or
qualify as a foreign corporation in any jurisdiction where such registration
would result in any adverse effect to the Company or any of the Guarantors, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered in
exchange for the Series A Notes that are Transfer Restricted Securities and to
permit resales of Series B Notes by Broker-Dealers that tendered into the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading activities
<PAGE>
-4-
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective commercially
reasonable best efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Guarantors shall cause the Exchange Offer to comply in all material respects
with applicable federal and state securities laws. No securities other than the
Series B Notes (and the subsidiary guarantees thereof) shall be included in the
Exchange Offer Registration Statement. The Company shall use its commercially
reasonable best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 35 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any sale of Series B Notes received
by such Broker-Dealer in the Exchange Offer and that the Prospectus contained in
the Exchange Offer Registration Statement may be used to satisfy such prospectus
delivery requirement. Such "Plan of Distribution" section shall also contain all
other information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Series B Notes by Broker-Dealers, the
Company and the Guarantors agree to use their respective commercially reasonable
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) hereof and in conformity with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for a period of one year from the date on which the Exchange Offer is
Consummated, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto. The Company and the Guarantors shall promptly provide copies
of the latest version of such Prospectus to such Broker-Dealers promptly upon
request, in such amounts as may be reasonably requested and in no event later
than two Business Days after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the
<PAGE>
-5-
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Series A Notes acquired directly from the Company or any of its
Affiliates, then the Company and the Guarantors shall use their commercially
reasonably best efforts to:
(x) cause to be filed, on or prior to 60 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above
and (ii) the date on which the Company receives the notice specified in
clause (a) (ii) above (for purposes of this Section 4, such earlier date,
the "Filing Deadline", but in no event shall such Filing Deadline be
earlier than 110 days after the Closing Date), a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment to
the Exchange Offer Registration Statement (the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities the holders of
which have provided the information required by Section 4(b) hereof, and
(y) to cause such Shelf Registration Statement to become effective on
or prior to the 60th day after the Filing Deadline (for purposes of this
Section 4, such 60th day the "Effectiveness Deadline", but in no event
shall such Effective Deadline be earlier than 210 days after the Closing
Date).
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
The Company and the Guarantors shall use their respective commercially
reasonable best efforts to keep any Shelf Registration Statement required by
this Section 4(a) continuously effective, supplemented and amended as required
by and subject to the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Transfer Restricted
Securities by the Holders thereof entitled to the benefit of this Section 4(a),
and to ensure that it conforms with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time (x) (1) other than as set forth in clause (2), for a period of at least
two years (as extended pursuant to Section 6(d)) following the date on which
such Shelf Registration Statement first became effective under the Act and (2)
if and for as long as the Initial Purchaser is deemed to be an Affiliate of the
Company, but in no event less than a period of at least two years, or (y) such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Shelf Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 Business Days after receipt of a request
therefor, the information specified in Item 507 or 508 of Regulation S-K, as
applicable, or such other information as the Company may reasonably request of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein or in any application to
NASD. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information. Each selling Holder agrees to promptly
furnish additional information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
<PAGE>
-6-
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated within 35 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv), subject to
Section 6(c)(i) hereof, any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately (but
in any event within 5 Business Days thereafter) by a post-effective amendment to
such Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default"), then the Company and the Guarantors hereby jointly
and severally agree to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.50 per week
per $1,000 in principal amount of Transfer Restricted Securities; provided that
the Company and the Guarantors shall in no event be required to pay liquidated
damages for more than one Registration Default at any given time.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease to accrue.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantors shall comply with all applicable
provisions of Section 6(c) below, shall use their respective commercially
reasonable best efforts to effect such exchange and to permit the resale of
Series B Notes by Broker-Dealers that tendered in the Exchange Offer Series A
Notes that such Broker-Dealer acquired for its own account as a result of its
market making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
<PAGE>
-7-
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law or Commission policy, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision from
the Commission allowing the Company and the Guarantors to Consummate an
Exchange Offer for such Transfer Restricted Securities. The Company and the
Guarantors hereby agree to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect changes in Commission policy. In connection
with the foregoing, the Company and the Guarantors hereby agree to take all
such other actions as may be requested by the Commission or otherwise
reasonably required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic conferences
with the Commission, (B) delivering to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any Person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the Series B Notes
shall acknowledge and agree that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) To the extent required by the Commission, prior to effectiveness
of the Exchange Offer Registration Statement, the Company and the
Guarantors shall provide a supplemental letter to the Commission (A)
stating that the Company and the Guarantors are registering the Exchange
Offer in reliance on the position of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and
Co., Inc. (available June 5, 1991) as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered into
any arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Company's and each Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to
<PAGE>
-8-
participate in the distribution of the Series B Notes received in the
Exchange Offer and (C) any other undertaking or representation required by
the Commission as set forth in any no-action letter obtained pursuant to
clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, the Company and the Guarantors shall comply in all material respects
with all the provisions of Section 6(c) below and shall use their respective
commercially reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company and the Guarantors will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective commercially reasonable best efforts to keep
such Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3 or 4
of this Agreement, as applicable. Upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors shall
file promptly an appropriate amendment to such Registration Statement
curing such defect, and, if Commission review is required, use their
respective commercially reasonable best efforts to cause such amendment to
be declared effective as soon as practicable, thereafter. Notwithstanding
the foregoing, if (A) the Board of Directors determines in good faith that
it is in the best interests of the Company not to disclose the existence of
or facts surrounding any proposed or pending material corporate transaction
involving the Company and (B) the Company notifies the Holders within two
Business Days after the Board of Directors makes such determination, the
Company may allow the Shelf Registration Statement to fail to be effective
and usable as a result of such nondisclosure for up to 40 days during the
two-year period of effectiveness required by Section 4 hereof, but in no
event for a period in excess of 30 consecutive days; provided that the
two-year period referred to in Section 4 hereof during which the Shelf
Registration Statement is required to be effective and usable shall be
extended by the number of days during which such registration statement was
not effective or usable pursuant to the foregoing provisions;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply, in all material respects, with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
<PAGE>
-9-
(iii) advise the selling Holders, the underwriter(s), if any, and any
Affiliated Market Maker promptly and, if requested by such Persons, confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Guarantors shall use their respective commercially
reasonable best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchaser, any Affiliated Market Maker and
each selling Holder named in any Registration Statement or Prospectus and
each of the underwriter(s) in connection with such exchange or sale, if
any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such selling Holders and each of the underwriter(s) in
connection with such sale, if any, for a period of at least five Business
Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which such selling Holders or the underwriter(s) shall
reasonably object in writing within five Business Days after the receipt
thereof. A selling Holder or the underwriter(s) shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails to comply with
the applicable requirements of the Act specified in such written objection;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders, the
<PAGE>
-10-
underwriter(s) and Affiliated Market Makers in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Persons may reasonably
request;
(vii) make available upon reasonable advance notice and at reasonable
times for inspection by the selling Holders, underwriter, if any, and any
Affiliated Market Maker participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents of the Company and the Guarantors
and cause the Company's and the Guarantors' officers, directors and
employees to supply all information reasonably requested by any such
selling Holder, Affiliated Market Maker, underwriter, attorney or
accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior
to its effectiveness; provided that any information that is reasonably and
in good faith designated by the Company or the Guarantors in writing as
confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to federal
securities laws in connection with the filing of such Registration
Statement or the use of any Prospectus, (except if the Company or any
Guarantor obtains "confidential treatment" for any document or information
in accordance with the rules of the Commission), (iii) such information
becomes generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such Person or (iv)
such information becomes available to such Person from a source other than
the Company and its subsidiaries and such source is not known, after due
inquiry, by such Person to be bound by a confidentiality agreement;
(viii) if reasonably requested by any selling Holders, the
underwriter(s), if any, or any Affiliated Market Maker, in connection with
such exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders, underwriter(s), if
any, and any Affiliated Market Maker may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities and the
use of the Registration Statement or Prospectus for market making
activities; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(ix) furnish to each selling Holder, each of the underwriter(s), if
any, and each Affiliated Market Maker in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder, each of the underwriter(s), if
any, and each Affiliated Market Maker without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each of the selling
Holders and each of the underwriter(s) in connection with the offering and
the sale of the Transfer Restricted Securities covered by the
<PAGE>
-11-
Prospectus or any amendment or supplement thereto and all market making
activities of such Affiliated Market Maker, as the case may be;
(xi) enter into such agreements (including underwriting agreements)
and make such representations and warranties and take all such other
reasonable actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any applicable Registration Statement contemplated by this Agreement as
may be reasonably requested by any selling Holder of Transfer Restricted
Securities in connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, and also in connection with
market making activities by any Affiliated Market Maker, the Company and
the Guarantors shall:
(A) upon the reasonable request of any selling Holder, furnish
(or in the case of paragraphs (2) and (3) below, use its commercially
reasonable best efforts to cause to be furnished) to each selling
Holder and each underwriter, if any, upon the effectiveness of the
Shelf Registration Statement or upon Consummation of the Exchange
Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and such Guarantor, confirming, as of the date
thereof, the matters set forth in paragraphs (a), (b) and (d) of
Section 9 of the Purchase Agreement and such other similar
matters as the selling Holders and/or underwriter(s) may
reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer, or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar to those set
forth in paragraph (f) and subparagraph (e)(xii) of Section 9 of
the Purchase Agreement and such other matters as the selling
Holder and/or underwriter(s) may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company and the Guarantors,
representatives of the independent public accountants for the
Company and the Guarantors and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and that
such counsel advises that, on the basis of the foregoing (relying
as to materiality to the extent such counsel deems appropriate
upon the statements of officers and other representatives of the
Company and the Guarantors and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective and, in the
case of the Exchange Offer Registration Statement, as of the date
of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
<PAGE>
-12-
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included
in any Registration Statement contemplated by this Agreement or
the related Prospectus or information included therein as to any
selling Holder or underwriter which information was provided in
writing to the Company or its counsel by such selling Holder or
underwriter for inclusion therein; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to paragraph (h) of
Section 9 of the Purchase Agreement; and
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders and the underwriter(s), if
any, to evidence compliance with clause (A) above and with any
customary conditions contained in the any agreement entered into by
the Company and the Guarantors pursuant to this clause (xi);
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any
time the representations and warranties of the Company contemplated in
(A)(1) above cease to be true and correct, the Company shall so advise the
underwriter(s), if any, and the selling Holders promptly and if reasonably
requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or the underwriter(s), if any,
may reasonably request and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that neither the Company nor any Guarantor
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes covered
by any Shelf Registration Statement contemplated by this Agreement, Series
B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes surrendered to the Company by such
<PAGE>
-13-
Holder in exchange therefor or being sold by such Holder, such Series B
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Series B Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the selling Holders may reasonably
request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xv) use their respective commercially reasonable best efforts to
cause the disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other U.S.
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate the
disposition of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with The Depository Trust Company;
(xvii) otherwise use their respective commercially reasonable best
efforts to comply in all material respects with all applicable rules and
regulations of the Commission, and make generally available to its security
holders with regard to any applicable Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of
Rule 158 (which need not be audited) covering a twelve-month period
beginning after the effective date of the Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
(xviii) make appropriate officers of the Company reasonably available
to the selling Holders for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to potential
investors customary "road show" material in a manner consistent with other
new issuances of other securities similar to the Transfer Restricted
Securities;
(xix) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective commercially reasonable best efforts to
cause such Registration Statement to become effective and approved by such
U.S. governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities; provided that neither
the Company nor the Guarantors shall take any position during review by the
NASD that would, in any manner, create the implication that the offering of
the Series A Notes on the Closing Date by the Company and the Guarantors
should be or is subject to the rules and regulations of the NASD;
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
<PAGE>
-14-
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its commercially reasonable best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xxi) provide promptly to each Holder, the Initial Purchaser and
Affiliated Market Maker upon request each document filed with the
Commission pursuant to the requirements of Section 13 or Section 15(d) of
the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, and each Affiliated Market Maker agrees that,
upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice
from the Company of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until (i) such Holder has received copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(iv)
hereof, or (ii) such Holder is advised in writing by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the "Recommencement Date"). Each Holder receiving a Suspension Notice
hereby agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Holder's possession which have been replaced
by the Company with more recently dated Prospectuses and, if requested by the
Company, deliver a certificate to the Company executed by an executive officer
or other responsible representative of such Holder certifying as to such
destruction or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Series B Notes to be issued in the Exchange Offer and printing of Prospectuses,
whether for exchanges, sales, market making or otherwise), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company, the Guarantors and the Holders of Transfer Restricted Securities
(but limited in accordance with Section 7(b)); (v) all application and filing
fees in connection with listing the Series B Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance). Notwithstanding
the foregoing or anything in this Agreement to the contrary, each Holder of
Transfer Restricted Securities being registered shall pay all commissions,
placement agent fees and underwriting discounts and commissions with respect to
any Transfer Restricted Securities sold by it.
The Company will, in any event, bear its and the Guarantors internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
<PAGE>
-15-
expenses of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchaser and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Cahill Gordon & Reindel or such other counsel as selected by Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder (each such Holder, an "Indemnified
Holder"), its directors, its officers and each Person, if any, who controls such
Holder (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary Prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any holder or any prospective purchaser of Series B
Notes, or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders expressly for
use therein; provided, that with respect to any such untrue statement in or
omission from the Preliminary Prospectus, the indemnity agreement contained in
this Section 8(a) shall not inure to the benefit of the Initial Purchaser to the
extent that any such loss, claim, damage, liability or judgment results from the
fact that both (A) a copy of the Prospectus was not sent or given to such Person
at or prior to the written confirmation of the sale of Series A Notes to such
Person and (B) the untrue statement in or omission from the Preliminary
Prospectus was corrected in the Prospectus.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors, officers, and each Person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors to the same extent as the foregoing indemnity from
the Company and the Guarantors to each of the Indemnified Holders, but only with
reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Indemnified Holder for such Transfer Restricted Securities
and (ii) the amount of any damages that such Indemnified Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(c) In case any action or proceeding (including any governmental or
regulatory proceeding) shall be commenced involving any Person in respect of
which indemnity may be sought pursuant to Section 8(a) or
<PAGE>
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8(b) (the "indemnified party"), the indemnified party shall promptly notify in
writing the Person against whom such indemnity may be sought (the "indemnifying
person") and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Indemnified Holder); provided, that failure to give any such
notice of indemnity will not relieve the indemnifying party from its obligations
pursuant to this Agreement, except to the extent that such indemnifying party
has been materially prejudiced by such failure. Any indemnified party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Indemnified Holders, in
the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty Business Days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. Except as set
forth in the immediately preceding sentence, the indemnifying party shall not be
liable for any settlement entered into by an indemnified party without the prior
written consent, which consent shall not be unreasonably withheld, of the
indemnifying party. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein (other than by reason of
the proviso in Section 8(a)), then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors, on the one hand,
and the Indemnified Holders, on the other hand, from their sale of Transfer
Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is
<PAGE>
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not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company and the Guarantors, on the one hand, and of the
Indemnified Holders, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors, on the one hand, and of the Indemnified
Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or such Guarantor, on the one hand, or by the
Indemnified Holders, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(d) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144 and RULE 144A
The Company and each Guarantor agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder of Transfer
Restricted Securities, to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and
(ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any underwritten registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in customary underwriting arrangements entered into in
connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
<PAGE>
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SECTION 11. SELECTION OF UNDERWRITERS
For any underwritten offering, the investment banker or investment bankers
and manager or managers for any underwritten offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such offering; provided
that such investment bankers and managers must be reasonably acceptable to the
Company. Such investment bankers and managers are referred to herein as the
"underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that any
failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchaser, any Affiliated Market Maker or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser, any Affiliated Market Maker or any Holder may
obtain such relief as may be required to specifically enforce the Company's and
the Guarantors' obligations under Sections 3 and 4 hereof. The Company and the
Guarantors further agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor will,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Neither the
Company nor any Guarantor has previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's and the
Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company of its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders and Affiliated Market Makers shall
be third party beneficiaries to the agreements made hereunder between the
Company and the Guarantors, on the one hand, and the Initial Purchaser, on the
other hand, and shall have the right to enforce such agreements directly to the
extent they may deem such enforcement necessary or advisable to protect its
rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
<PAGE>
-19-
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
American Tissue Inc.
135 Engineers Road
Hauppauge, New York 11788
Telecopier No.: (516) 435-8980
Attention: President and Chief Executive Officer
With a copy to:
Mandel & Resnick P.C.
220 East 42nd Street
New York, New York 10017
Telecopier No.: (212) 573-0067
Attention: Nicholas J. Kaiser, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Donaldson, Lufkin &
Jenrette Securities Corporation (in the form attached hereto as Exhibit A) and
shall be addressed to: Attention: Louise Guarneri (Compliance Department), 277
Park Avenue, New York, New York 10172.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE>
-20-
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE>
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AMERICAN TISSUE INC.,
By: /s/ Nourollah Elghanayan
----------------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
----------------------------------------
Mehdi Gabayzadeh
President
AMERICAN CELLULOSE MILL CORP.,
AMERICAN TISSUE CORPORATION,
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.,
AMERICAN TISSUE MILLS OF NEW YORK, INC.,
AMERICAN TISSUE MILLS OF OREGON, INC.,
AMERICAN TISSUE MILLS OF WISCONSIN, INC.,
BERLIN MILLS RAILWAY, INC.,
CROWN VANTAGE-NEW HAMPSHIRE ELECTRIC, INC.,
GILPIN REALTY CORP.,
TAGSONS PAPERS, INC.
By: /s/ Nourollah Elghanayan
----------------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
----------------------------------------
Mehdi Gabayzadeh
President
<PAGE>
-22-
100 REALTY MANAGEMENT LLC,
AMERICAN TISSUE MILLS OF GREENWICH LLC,
AMERICAN TISSUE MILLS OF NEENAH LLC,
CALEXICO TISSUE COMPANY LLC,
CORAM REALTY LLC,
ENGINEERS ROAD, LLC,
GRAND LLC,
HYDRO OF AMERICA LLC,
LANDFILL OF AMERICA LLC,
MARKWOOD LLC,
PAPER OF AMERICA LLC,
PULP & PAPER OF AMERICA LLC,
PULP OF AMERICA LLC,
RAILWAY OF AMERICA LLC,
SARATOGA REALTY LLC,
UNIQUE FINANCING LLC
By: /s/ Nourollah Elghanayan
----------------------------------------
Nourollah Elghanayan
Manager
By: /s/ Mehdi Gabayzadeh
----------------------------------------
Mehdi Gabayzadeh
Manager
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Jonathan Mishkin
-------------------------------
Name: Jonathan Mishkin
Title: Managing Director
================================================================================
AMERICAN TISSUE INC.,
as Issuer
and
THE PLEDGORS PARTY HERETO
----------------------
SECURITY AGREEMENT
Dated as of July 9, 1999
----------------------
THE CHASE MANHATTAN BANK
as Trustee
================================================================================
<PAGE>
Table of Contents
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R E C I T A L S.........................................................................1
AGREEMENT...............................................................................1
Section 1. Definitions; Interpretation; Resolution of Drafting Ambiguities.............1
(a) Definitions.............................................................1
(b) Interpretation.........................................................10
(c) Resolution of Drafting Ambiguities.....................................11
Section 2. Pledge.....................................................................11
Section 3. Secured Obligations........................................................13
Section 4. No Release.................................................................14
Section 5. Perfection; Supplements; Further Assurances; Use of Pledged Collateral.....14
(a) Delivery of Certificated Securities Collateral.........................14
(b) Perfection of Uncertificated Securities Collateral.....................14
(c) Financing Statements and Other Filings.................................15
(d) Motor Vehicles.........................................................15
(e) Supplements; Further Assurances........................................15
(f) Use and Pledge of Pledged Collateral...................................15
Section 6. Representations, Warranties and Covenants..................................16
(a) Perfection Actions; Prior Liens........................................16
(b) No Liens...............................................................16
(c) Other Financing Statements.............................................16
(d) Chief Executive Office; Change of Name.................................17
(e) Location of Equipment and Inventory....................................17
(f) Due Authorization and Issuance.........................................17
(g) No Violations, etc.....................................................18
(h) No Options, Warrants, etc..............................................18
(i) No Claims..............................................................18
(j) Authorization, Enforceability..........................................18
(k) No Conflicts, Consents, etc............................................18
(l) Pledged Collateral.....................................................19
(m) Insurance..............................................................19
(n) Payment of Taxes; Claims...............................................20
(o) Access to Books and Records............................................20
(p) Acquisition Documents..................................................20
Section 7. Special Provisions Concerning General Collateral...........................21
(a) Incorporation by Reference of the Revolving Credit Agreement...........21
(g) Instruments............................................................21
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(h) Maintenance of Equipment...............................................21
(i) Warehouse Receipts Non-Negotiable......................................21
(j) Consents to Assignment of Contracts....................................22
(k) Fair Labor Standards Act...............................................22
Section 8. Special Provisions Concerning Securities Collateral........................22
(a) Pledge of Additional Securities........................................22
(b) Voting Rights; Distributions; etc......................................22
(c) No New Securities......................................................23
(d) Operative Agreements...................................................23
(e) Defaults, etc..........................................................24
Section 9. Special Provisions Concerning Intellectual Property Collateral.............24
(a) Grant of License.......................................................24
(b) Registrations..........................................................24
(c) No Violations or Proceedings...........................................24
(d) Protection of Trustee's Security.......................................24
(e) After-Acquired Property................................................25
(f) Modifications..........................................................25
(g) Applications...........................................................25
(h) Litigation.............................................................26
Section 10. Transfers and Other Liens..................................................26
Section 11. Reasonable Care............................................................27
Section 12. Remedies upon Default......................................................27
(a) Obtaining the Pledged Collateral upon Event of Default.................27
(b) Disposition of the Pledged Collateral..................................28
(c) Waiver of Notice and Claims............................................29
(d) Certain Sales of Pledged Collateral....................................29
(e) Certain Sales of Securities Collateral.................................29
Section 13. Application of Proceeds....................................................30
Section 14. Miscellaneous..............................................................30
(a) Expenses...............................................................30
(b) No Waiver; Cumulative Remedies.........................................30
(c) Actions by Trustee.....................................................30
(d) Trustee May Perform; Trustee Appointed Attorney-in-Fact................31
(e) Indemnity..............................................................31
(f) Modification in Writing................................................32
(g) Termination; Release...................................................32
(h) Notices................................................................32
(i) Continuing Security Interest; Assignment...............................32
(j) Joinder of Affiliates..................................................32
(k) GOVERNING LAW; TERMS...................................................33
(l) CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
WAIVER OF JURY TRIAL.................................................33
</TABLE>
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(m) Severability of Provisions.............................................33
(n) Execution in Counterparts..............................................33
(o) Obligations Absolute...................................................34
(q) Future Advances........................................................34
Signatures.............................................................................55
SCHEDULE I-A - Initial Pledged Shares
SCHEDULE I-B - Initial Pledged Interests
SCHEDULE II - Initial Patents
SCHEDULE III - Initial Trademarks
SCHEDULE IV - Initial Copyrights
SCHEDULE V - Initial Licenses
SCHEDULE VI - Boise Equipment
SCHEDULE VII - Required Consents
ANNEX A - Financing Statements and Other Necessary Filings
ANNEX B-1 - Primary Prior Liens
ANNEX B-2 - Secondary Prior Liens
ANNEX B-3 - Boise Prior Liens
ANNEX C - Locations of Pledgors
EXHIBIT 1 - Form of Issuer Acknowledgment
EXHIBIT 2 - Form of Securities Pledge Amendment
EXHIBIT 3 - Form of Joinder Agreement
</TABLE>
-iii-
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement"), dated as of July 9, 1999, made by
AMERICAN TISSUE INC., a Delaware corporation having an office at 135 Engineers
Road, Hauppauge, New York 11788 (the "Issuer"), and EACH OF THE GUARANTORS
LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME PARTY HERETO BY
EXECUTION OF A JOINDER AGREEMENT (collectively, the "Guarantors"), as pledgors,
assignors and debtors (the Issuer, together with the Guarantors, in such
capacities and together with any successors in such capacities, the "Pledgors",
and each, a "Pledgor"), in favor of THE CHASE MANHATTAN BANK, having an office
at 450 West 33rd Street, New York, New York 10001, in its capacity as collateral
agent and trustee, as pledgee, assignee and secured party (in such capacity and
together with any successors in such capacity, the "Trustee") pursuant to the
Indenture (as hereinafter defined).
R E C I T A L S:
A. The Issuer, the Guarantors and the Trustee have, in connection with the
execution and delivery of this Agreement, entered into a certain indenture,
dated as of July 9, 1999 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Issuer has issued its 12 1/2% senior secured notes due July 15, 2006 (the
"Senior Secured Notes") in the aggregate principal amount of $165,000,000. It is
contemplated that Issuer may, after the date hereof, issue exchange notes
pursuant to the Indenture ("Exchange Notes"; together with the Senior Secured
Notes, the "Notes").
B. Each Pledgor is or will be the legal and/or beneficial owner of the
Pledged Collateral (as hereinafter defined) to be pledged by it hereunder.
C. This Agreement is given by each Pledgor in favor of the Trustee for its
benefit and the benefit of the holders of the Notes (collectively, the "Secured
Parties") to secure the payment and performance of all of the Secured
Obligations (as hereinafter defined).
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgors and the Trustee hereby agree as follows:
Section 1. Definitions; Interpretation; Resolution of Drafting Ambiguities.
(a) Definitions. Capitalized terms used in this Agreement, but not defined
herein shall have the meanings assigned to such terms in the Indenture. The
following terms used in this Agreement shall have the following meanings:
"Accounts" shall mean, collectively, with respect to each Pledgor, all
"accounts", as such term is defined in the UCC.
"Acquisition Document Rights" shall mean, with respect to each Pledgor,
collectively, all of such Pledgor's rights, title and interest in, to and under
the Acquisition Documents including, without limitation, (a) all rights and
remedies relating to monetary damages, including indemnification rights and
remedies, and
<PAGE>
-2-
claims for damages or other relief pursuant to or in respect of the Acquisition
Documents, (b) all rights and remedies relating to monetary damages, including
indemnification rights and remedies, and claims for monetary damages under or in
respect of the agreements, documents and instruments referred to in the
Acquisition Documents or related thereto and (c) all proceeds, collections,
recoveries and rights of subrogation with respect to the foregoing.
"Acquisition Documents" shall mean, collectively, with respect to each
Pledgor, the following agreements, each as amended, amended and restated,
supplemented, extended, renewed, replaced or otherwise modified from time to
time: the Asset Purchase Agreement and all documents, agreements and other
instruments executed and/or delivered in connection therewith or related
thereto.
"Additional Interests" shall mean, with respect to each Pledgor, all
options, warrants, rights, agreements, additional membership or partnership
interests or other interests relating to each Person described in the definition
of Initial Pledged Interests or any interest in any such Person, including,
without limitation, all rights, privileges, authority and powers of each Pledgor
relating to the equity or membership or partnership interests in any such Person
or under the Operative Agreement of any such Person, from time to time acquired
by such Pledgor in any manner and the certificates, instruments and agreements,
if any, representing such additional interests.
"Additional Shares" shall mean, with respect to each Pledgor, all
additional shares of capital stock of whatever class of any issuer of the
Pledged Shares from time to time acquired by such Pledgor in any manner
including, without limitation, each corporation hereafter acquired or formed by
such Pledgor (which are and shall remain at all times until this Agreement
terminates, certificated shares), including the certificates representing such
additional shares and any interest of such Pledgor in the entries on the books
of any financial intermediary pertaining to such additional shares.
"After-Acquired Property" shall have the meaning assigned to such term in
the Indenture.
"Asset Purchase Agreement" shall mean that certain asset purchase agreement
dated as of March 24, 1999 by and among Crown Paper Co., Crown Vantage New
Hampshire Electric, Inc. and Berlin Mills Railway, Inc., as seller, and American
Tissue Holdings Inc. and Pulp & Paper of America LLC, as buyer.
"Boise Agreement" shall have the meaning assigned to such term in the
Indenture.
"Boise Agreement Lien" shall mean the Lien on the Boise Collateral created
in favor of Boise Cascade Corporation pursuant to the terms of the Boise
Agreement.
"Boise Collateral" shall have the meaning assigned to such term in Section
2(d) of this Agreement.
"Boise Equipment" shall mean all the Equipment listed on Schedule VI of
this Agreement.
"Boise Permitted Liens" shall have the meaning assigned to such term in
Section 6(b) of this Agreement.
"Boise Prior Liens" shall mean, collectively, the Liens identified in Annex
B-3 annexed hereto relating to the items of Pledged Collateral identified in
such annex.
<PAGE>
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"Cash" shall mean, collectively, with respect to each Pledgor, the cash,
deposit accounts and collection accounts of such Pledgor wherever located, other
than the Collateral Account and Collateral Account Funds.
"Cash Equivalents" shall have the meaning assigned to such term in the
Indenture.
"Charges" shall mean all property and other taxes, assessments,
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials, supplies and warehousing and other claims in respect of
Property Collateral arising by operation of law) against, the Pledged
Collateral.
"Chattel Paper" shall mean, collectively, with respect to each Pledgor, all
"chattel paper", as such term is defined in the UCC.
"Collateral Account" shall have the meaning assigned to such term in the
Indenture.
"Collateral Account Funds" shall mean, collectively, all funds from time to
time on deposit in the Collateral Account; all investments (including, without
limitation, Cash Equivalents) and all certificates and instruments from time to
time representing or evidencing such investments; all notes, certificates of
deposit, checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Trustee for or on behalf of any Pledgor in
substitution for, or in addition to, any or all of the Pledged Collateral; and
all interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the items constituting Pledged Collateral.
"Collateral Documents" shall have the meaning assigned to such term in the
Indenture.
"Contested Liens" shall mean, collectively, any Liens incurred in respect
of any Charges to the extent that the amounts owing in respect thereof are not
yet delinquent or are being contested and otherwise comply with the provisions
of Section 6(n); provided, however, that such Liens shall in all respects be
subject and subordinate in priority to the Lien and security interest created
and evidenced by this Agreement, except if and to the extent that the law
(including the common law) or regulation creating, permitting or authorizing
such Lien provides that such Lien must be superior to the Lien and security
interest created and evidenced hereby.
"Contracts" shall mean, collectively, with respect to each Pledgor, all
sale, service, performance and equipment or property lease contracts, agreements
and grants (whether written or oral, or third party or intercompany), and any
other documents (whether written or oral) between such Pledgor and third
parties, and all assignments, amendments, restatements, supplements, extensions,
renewals, replacements or modifications thereof;
"Copyrights" shall mean, collectively, with respect to each Pledgor, all
copyrights (whether statutory or common law and whether established or
registered in the United States or any other country) owned by or assigned to
such Pledgor, including, without limitation, the copyrights, registrations and
applications listed in Schedule IV annexed hereto, together with any and all (i)
rights and privileges arising under applicable law with respect to such
Pledgor's use of any copyrights, (ii) reissues, renewals, continuations and
extensions thereof, (iii) income, fees, royalties, damages, claims and payments
now and hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) rights corresponding thereto throughout the world and (v) rights
to sue for past, present and future infringements thereof.
<PAGE>
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"Distributions" shall mean, collectively, with respect to each Pledgor, all
dividends, cash, options, warrants, rights, instruments, distributions, returns
of capital or principal, income, interest, profits and other property, interests
(debt or equity) or proceeds, including as a result of a split, revision,
reclassification or other like change of the Pledged Securities, from time to
time received, receivable or otherwise distributed to such Pledgor in respect of
or in exchange for any or all of the Pledged Securities.
"Documents" shall mean, collectively, the Primary Documents and the
Secondary Documents.
"Equipment" shall mean, collectively, with respect to each Pledgor, all
"equipment", as such term is defined in the UCC, and, in any event shall
include, without limitation, the Boise Equipment, the Existing Mortgage
Equipment and all other machinery, apparatus, equipment, office machinery,
electronic data-processing equipment, computers and computer hardware and
software (whether owned or licensed), furniture, conveyors, tools, materials,
storage and handling equipment, automotive equipment, motor vehicles, tractors,
trailers and other like property, whether or not the title thereto is governed
by a certificate of title or ownership, and all other equipment of every kind
and nature owned by such Pledgor or in which such Pledgor may have any interest
(to the extent of such interest) and all modifications, renewals, improvements,
alterations, repairs, substitutions, attachments, additions, accessions and
other property now or hereafter affixed thereto or used in connection therewith,
all replacements and all parts therefor and together with all substitutes for
any of the foregoing.
"Event of Default" shall have the meaning assigned to such term in the
Indenture.
"Existing Mortgage Equipment" shall mean the Equipment encumbered by the
Existing Mortgage Lien.
"Existing Mortgage Loans" shall have the meaning assigned to such terms in
the Indenture.
"Existing Mortgage Lien" shall mean the Lien securing the Existing Mortgage
Loans.
"Foreign Subsidiary" shall have the meaning assigned to such term in the
Indenture.
"Guarantee Obligation" shall have the meaning assigned to such term in the
Indenture.
"General Collateral" shall mean the Pledged Collateral other than the
Securities Collateral and the Intellectual Property Collateral.
"Goodwill" shall mean, with respect to each Pledgor, the entire goodwill
connected with such Pledgor's business and, in any event shall include, without
limitation, (i) all goodwill connected with the use of and symbolized by any of
the Intellectual Property Collateral in which such Pledgor has any interest,
(ii) all know-how, trade secrets, customer lists, proprietary information,
inventions, methods, procedures, formulae, descriptions, name plates, catalogs,
confidential information, consulting agreements, engineering contracts and such
other assets which relate to such goodwill and (iii) all product lines of such
Pledgor's business.
"Governmental Authority" shall mean any federal, state, local, foreign or
other governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission or other similar dispute-resolving
body including, without limitation, those governing the regulation and
protection of the environment.
<PAGE>
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"Guarantors" shall have the meaning assigned to such term in the Preamble
of this Agreement.
"Indenture" shall have the meaning assigned to such term in Recital A of
this Agreement.
"Initial Pledged Interests" shall mean, with respect to each Pledgor, all
membership interests and/or partnership interests, as applicable, of each Person
described in Schedule I-B annexed hereto and each other limited liability
company or partnership hereafter acquired or formed by such Pledgor, together
with all rights, privileges, authority and powers of such Pledgor in and to each
such Person or under Operative Agreement of each such Person, and the
certificates, instruments and agreements, if any, representing such membership
or partnership interests.
"Instruments" shall mean, collectively, with respect to each Pledgor, all
"instruments", as such term is defined in the UCC, relating to any of the
Collateral, and in any event shall include, without limitation, all promissory
notes, drafts, bills of exchange or acceptances relating to any of the Secondary
Collateral.
"Insurance Policies" shall mean, collectively, with respect to each
Pledgor, subject to the provisions of the Intercreditor Agreements, all
insurance policies held by such Pledgor or naming such Pledgor as insured,
additional insured or loss payee (including, without limitation, casualty
insurance, liability insurance, property insurance and business interruption
insurance), all such insurance policies entered into after the date hereof,
other than insurance policies (or certificates of insurance evidencing such
insurance policies) relating to health and welfare insurance and life insurance
policies in which such Pledgor is not named as beneficiary (i.e., insurance
policies that are not "Key Man" insurance policies) and all rights, claims and
recoveries relating thereto (including, without limitation, all dividends,
returned premiums and other rights to receive money in respect of any of the
foregoing).
"Intangibles" shall mean, collectively, the Primary Intangibles and the
Secondary Intangibles.
"Intellectual Property Collateral" shall mean, collectively, the Patents,
Trademarks, Copyrights, Licenses and Goodwill.
"Intercreditor Agreements" shall have the meaning assigned to such term in
the Indenture.
"Inventory" shall mean, collectively, with respect to each Pledgor, all
"inventory", as such term is defined in the UCC, of such Pledgor wherever
located and of every class, kind and description.
"Investment Property" shall mean, collectively, with respect to each
Pledgor, all "investment property", as such term is defined in the UCC, other
than Securities Collateral.
"Issuer" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"Joinder Agreement" shall mean the form of joinder agreement attached
hereto as Exhibit 3.
"Licenses" shall mean, collectively, with respect to each Pledgor, all
license and distribution agreements and covenants not to sue with any other
party with respect to any Patent, Trademark, or Copyright, whether such Pledgor
is a licensor or licensee, distributor or distributee under any such license or
distribution agreement including, without limitation, the license and
distribution agreements listed in Schedule V annexed hereto, along with any and
all (i) renewals, extensions, supplements and continuations thereof, (ii)
income, fees, royalties, damages, claims and payments now and hereafter due
and/or payable thereunder and with respect
<PAGE>
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thereto, including, without limitation, damages and payments for past, present
or future infringements or violations thereof, (iii) rights to sue for past,
present and future infringements or violations thereof and (iv) any other rights
to use, exploit or practice any or all of the Patents, Trademarks or Copyrights.
"Lien" shall have the meaning assigned to such term in the Indenture.
"Miscellaneous Collateral" shall mean, collectively, with respect to each
Pledgor, any and all property or assets of such Pledgor whether tangible or
intangible, fixed or liquid other than Pledged Collateral (excluding Pledged
Collateral of the type described in clause ((Miscellaneous Collateral)) of
Subsection 2(a) of this Agreement.
"Notes" shall have the meaning assigned to such term in Recital A of this
Agreement.
"Operative Agreement" shall mean any membership or partnership agreement of
any limited liability company or partnership.
"Patents" shall mean, collectively, with respect to each Pledgor, all
patents issued or assigned to and all patent applications and registrations made
by such Pledgor (whether established or registered or recorded in the United
States or any other country), including, without limitation, the patents, patent
applications, registrations and recordings listed in Schedule II annexed hereto,
together with any and all (i) rights and privileges arising under applicable law
with respect to such Pledgor's use of any patents, (ii) inventions and
improvements described and claimed therein, (iii) reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof, (iv)
income, fees, royalties, damages, claims and payments now and hereafter due
and/or payable thereunder and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (v) rights corresponding thereto throughout the world and (vi) rights
to sue for past, present and future infringements thereof.
"Permitted Indenture Liens" shall mean (i) with respect to all Pledged
Collateral, the Liens of the type described in clauses (4), (5), (10) (only to
the extent the applicable Pledgor has used its commercially reasonable effects
to obtain waivers of landlord's liens as required by Section 6(d) of this
Agreement and has nevertheless failed to obtain the same) (18) (provided,
however, that with respect to the Lien described in clause (18) of the
definition of Permitted Liens such Lien shall not extend to or cover any
property or asset other than the property or asset leased pursuant to the
capital lease or operating lease in question) and (20) of the definition of
Permitted Liens, (ii) with respect to any Secondary Collateral, the Liens of the
type described in clauses (6), (12), (14) (16) (17), (24) and (27) of the
definition of Permitted Liens solely to the extent permitted to be a Lien on
such Secondary Collateral pursuant to the Revolving Credit Agreement and (iii)
with respect to any After-Acquired Property, the Liens of the type described in
clause (11) (provided, however, such Lien shall extend only to After-Acquired
Property at any time having a fair market value not to exceed $5 million) and
(28) (provided, however, such Lien shall extend only After-Acquired Property at
any time having a fair market value not to exceed $10 million) of the definition
of Permitted Liens.
"Permitted Liens" shall have the meaning assigned to such term in the
Indenture.
"Person" shall have the meaning assigned to such term in the Indenture.
"Pledge Amendment" shall mean a pledge amendment delivered to the Trustee
in substantially the form of Exhibit 2 annexed hereto.
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"Pledged Collateral" shall have the meaning assigned to such term in
Section 2(a) of this Agreement.
"Pledged Collateral Permitted Liens" shall mean, collectively, the Primary
Permitted Liens, the Secondary Permitted Liens and/or the Boise Permitted Liens,
as applicable.
"Pledged Interests" shall mean, collectively, the Initial Pledged Interests
and the Additional Interests.
"Pledged Securities" shall mean, collectively, the Pledged Interests, the
Pledged Shares and the Successor Interests.
"Pledged Shares" shall mean, collectively, with respect to each Pledgor,
(i) the issued and outstanding shares of capital stock of each Person described
in Schedule I-A annexed hereto (which are and shall remain at all times until
this Agreement terminates, certificated shares), including the certificates
representing the Pledged Shares and any interest of such Pledgor in the entries
on the books of any financial intermediary pertaining to the Pledged Shares and
(ii) all Additional Shares; provided, however, that such Pledgor shall not be
required to pledge shares possessing more than 65% of the voting power of all
classes of capital stock entitled to vote of any Subsidiary which is a
controlled foreign corporation (as defined in Section 957(a) of the Tax Code)
and, in any event, shall not be required to pledge the shares of stock of any
Subsidiary otherwise required to be pledged pursuant to this Agreement to the
extent that such pledge would constitute an investment of earnings in United
States property under Section 956 (or a successor provision) of the Tax Code,
which investment would trigger an increase in the gross income of a United
States shareholder of such Pledgor pursuant to Section 951 (or a successor
provision) of the Tax Code.
"Pledgor" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"Primary Collateral" shall have the meaning assigned to such term in
Section 2(b) of this Agreement.
"Primary Documents" shall mean, collectively, with respect to each Pledgor,
all "documents", as such term is defined in the UCC, of such Pledgor, relating
to any of the Primary Collateral, and in any event, shall include, without
limitation, all receipts of such Pledgor covering, evidencing or representing
Inventory or Equipment (excluding the Existing Mortgage Equipment).
"Primary Intangibles" shall mean, collectively, with respect to each
Pledgor, all "general intangibles", as such term is defined in the UCC, of such
Pledgor, relating to the Primary Collateral specified in clauses (i) through
(viii) of Section 2(b) hereof and, in any event shall include, without
limitation, (i) all of such Pledgor's rights, title and interest in, to and
under all Contracts and Insurance Policies included in the Primary Collateral,
(ii) all manuals, blueprints, know-how, warranties and records in connection
with the Equipment (excluding the Existing Mortgage Equipment), (iii) any and
all other rights, claims, choses-in-action and causes of action of such Pledgor
against any other Person and the benefits of any and all collateral or other
security given by any other Person in connection therewith relating to any of
the Primary Collateral specified in clauses (i) through (viii) of Section 2(b)
hereof, (iv) all lists, books, records, ledgers, print-outs, files (whether in
printed form or stored electronically), tapes and other papers or materials
containing information relating to any of the Primary Collateral specified in
clauses (i) through (viii) of Section 2(b) hereof including, without limitation,
all customer lists, identification of suppliers, data, plans, blueprints,
specification designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, standards, processing standards, performance
<PAGE>
-8-
standards, catalogs, research data, computer and automatic machinery software
and programs and the like pertaining to any of the Primary Collateral specified
in clauses (i) through (viii) of Section 2(b) hereof, field repair data, sales
data and other information relating to sales of products now or hereafter
manufactured, distributed or franchised by such Pledgor, accounting information
pertaining to any of the Primary Collateral specified in clauses (i) through
(viii) of Section 2(b) hereof and all media in which or on which any of the
information or knowledge or data or records relating to any of the Primary
Collateral specified in clauses (i) through (viii) of Section 2(b) hereof may be
recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data, (v) all licenses,
consents, permits, variances, certifications and approvals of any Governmental
Authority (or any Person acting on behalf of a Governmental Authority) now or
hereafter held by such Pledgor or any of the Primary Collateral specified in
clauses (i) through (viii) of Section 2(b) hereof now or hereafter held by such
Pledgor, and (vi) all rights to refund or indemnification to the extent the
foregoing relate to any Primary Collateral specified in clauses (i) through
(viii) of Section 2(b) hereof and claims for tax or other refunds against any
city, county or state or federal government, or any agency or authority or other
subdivision thereof relating to any real property provided, however, that
Primary Intangibles shall not include any of the foregoing or other document set
forth in Schedule VII annexed hereto to the extent that such Pledgor is
prohibited from granting a Lien thereon or applicable law provides for the
involuntary forfeiture thereof in the event that a Lien is granted thereon
without the consent of the appropriate Person or Governmental Authority;
provided, further, that in the event of the termination or elimination of any
prohibition or requirement for any consent contained in any law, rule,
regulation, contract, agreement, grant or other document, or upon the granting
of any consent, the contract, agreement, grant or other document so excluded
from the definition of Primary Intangibles by virtue of the immediately
preceding proviso shall (without any act or delivery by any Person) constitute a
Primary Intangible hereunder.
"Primary Permitted Liens" shall have the meaning assigned to such term in
Section 6(b) of this Agreement.
"Primary Prior Liens" shall mean, collectively, the Liens identified in
Annex B-1 annexed hereto relating to the items of Pledged Collateral identified
in such Annex.
"Proceeds" shall mean all "proceeds", as such term is defined in the UCC or
under other relevant law, and in any event shall include, without limitation,
any and all (i) proceeds of any insurance (except payments made to a Person
which is not a party to this Agreement), indemnity, warranty, guaranty or claim
payable to the Trustee or to such Pledgor from time to time with respect to any
of the Pledged Collateral, (ii) payments (in any form whatsoever) made or due
and payable to such Pledgor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Pledged Collateral by any Governmental Authority (or any Person
acting on behalf of a Governmental Authority), (iii) instruments representing
obligations to pay amounts in respect of the Pledged Collateral, (iv) products
of the Pledged Collateral and (v) other amounts from time to time paid or
payable under or in connection with any of the Pledged Collateral.
"Purchase Money Lien" shall have the meaning assigned to such term in the
Indenture.
"Revolving Credit Agreement" shall mean that certain amended and restated
loan and security agreement, dated as of the date hereof among LaSalle Bank
National Association, for itself and as agent for all lenders that are now or
hereafter parties to such agreement, certain other lenders and certain of the
Pledgors and all Exhibits, Annexes, Schedules and other addenda thereto,
together with all assignments, amendments, restatements, supplements,
extensions, renewals, replacements or modification, thereof.
<PAGE>
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"Revolving Credit Facility" shall have the meaning assigned to such term in
the Indenture.
"Revolving Credit Lien" shall mean the Lien securing the Revolving Credit
Facility.
"Secondary Collateral" shall have the meaning assigned to such term in
Section 2(b) of this Agreement.
"Secondary Documents" shall mean, collectively, with respect to each
Pledgor, all "documents" as such term is defined in the UCC, of such Pledgor,
relating to any of the Secondary Collateral, and in any event shall include,
without limitation, all receipts of such Pledgor covering, evidencing or
representing Inventory or Existing Mortgage Equipment.
"Secondary Intangibles" shall mean, collectively, with respect to each
Pledgor, all "general intangibles", as such term is defined in the UCC, of such
Pledgor, relating to any of the Secondary Collateral specified in clauses (i)
through (ix) of Section 2(c) hereof and, in any event including, without
limitation, (i) all of such Pledgor's rights, title and interest in, to and
under all Contracts and Insurance Policies included in the Secondary Collateral,
(ii) all manuals, blueprints, know-how, warranties and records in connection
with the Existing Mortgage Equipment, (iii) any and all other rights, claims,
choses-in-action and causes of action of such Pledgor against any other Person
and the benefits of any and all collateral or other security given by any other
Person in connection therewith relating to any of the Secondary Collateral
specified in clauses (i) through (ix) of Section 2(c) hereof, (iv) all lists,
books, records, ledgers, print-outs, files (whether in printed form or stored
electronically), tapes and other papers or materials containing information
relating to any of the Secondary Collateral specified in clauses (i) through
(ix) of Section 2(c) hereof including, without limitation, all customer lists,
identification of suppliers, data, plans, blueprints, specification designs,
drawings, recorded knowledge, surveys, engineering reports, test reports,
manuals, standards, processing standards, performance standards, catalogs,
research data, computer and automatic machinery software and programs and the
like pertaining to any of the Secondary Collateral specified in clauses (i)
through (ix) of Section 2(c) hereof, field repair data, sales data and other
information relating to sales of products now or hereafter manufactured,
distributed or franchised by such Pledgor, accounting information pertaining to
any of the Secondary Collateral specified in clauses (i) through (ix) of Section
2(c) hereof and all media in which or on which any of the information or
knowledge or data or records relating to any of the Secondary Collateral may be
recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data, (v) all licenses,
consents, permits, variances, certifications and approvals of any Governmental
Authority (or any Person acting on behalf of a Governmental Authority) now or
hereafter held by such Pledgor pertaining to any of the Secondary Collateral
specified in clauses (i) through (ix) of Section 2(c) hereof now or hereafter
held by such Pledgor, and (vi) all rights to refund or indemnification to the
extent the foregoing relate to any of the Secondary Collateral specified in
clauses (i) through (ix) of Section 2(c) hereof and income tax refunds, claims
for tax or other refunds against any city, county or state or federal
government, or any agency or authority or other subdivision thereof, except any
claims for tax or other refunds constituting Primary Intangibles provided,
however, that Secondary Intangibles shall not include any of the foregoing or
other document set forth in Schedule VII annexed hereto to the extent that such
Pledgor is prohibited from granting a Lien thereon or applicable law provides
for the involuntary forfeiture thereof in the event that a Lien is granted
thereon without the consent of the appropriate Person of Governmental Authority;
provided, further, that in the event of the termination or elimination of any
prohibition or requirement for any consent contained in any law, rule,
regulation, contract, agreement, grant or other document, or upon the granting
of any consent, the contract, agreement, grant or other document so excluded
from the definition of Secondary Intangible by virtue of the immediately
preceding proviso shall (without any act or delivery by any Person) constitute a
Secondary Intangible hereunder.
<PAGE>
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"Secondary Permitted Liens" shall have the meaning assigned to such term in
Section 6(b) of this Agreement.
"Secondary Prior Liens" shall mean, collectively, the Liens identified in
Annex B-2 annexed hereto relating to the items of Pledged Collateral identified
in such Annex.
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 of this Agreement.
"Secured Parties" shall have the meaning assigned to such term in Recital C
of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Collateral" shall mean, collectively, the Pledged Securities
and the Distributions.
"Subsidiary" shall have the meaning assigned to such term in the Indenture.
"Subsidiary Guarantee" shall have the meaning assigned to such term in the
Indenture.
"Successor Interests" shall mean, collectively, with respect to each
Pledgor, all shares of each class of the capital stock of the successor
corporation or interests or certificates of the successor limited liability
company or partnership owned by such Pledgor (unless such successor is such
Pledgor itself) formed by or resulting from any consolidation or merger in which
any Person listed in Schedule I-A or Schedule I-B annexed hereto is not the
surviving entity; provided, however, that such pledge shall in no event affect
the obligations of such Pledgor under any provision prohibiting such action
hereunder or under the Indenture.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Trademarks" shall mean, collectively, with respect to each Pledgor, all
trademarks (including service marks), logos, federal and state trademark
registrations and applications made by such Pledgor, common law trademarks and
trade names owned by or assigned to such Pledgor and all registrations and
applications for the foregoing, including, without limitation, the registrations
and applications listed in Schedule III annexed hereto, together with any and
all (i) rights and privileges arising under applicable law with respect to such
Pledgor's use of any trademarks, (ii) reissues, continuations, extensions and
renewals thereof, (iii) income, fees, royalties, damages and payments now and
hereafter due and/or payable thereunder and with respect thereto, including,
without limitation, damages, claims and payments for past, present or future
infringements thereof, (iv) rights corresponding thereto throughout the world
and (v) rights to sue for past, present and future infringements thereof.
"Trust Moneys" shall have the meaning assigned to such term in the
Indenture.
"Trustee" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in any applicable jurisdiction.
(b) Interpretation. In this Agreement, unless otherwise specified, (i)
singular words include the plural and plural words include the singular, (ii)
words importing any gender include the other gender, (iii)
<PAGE>
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references to any Person include such Person's successors and assigns and in the
case of an individual, the word "successors" includes such Person's heirs,
devisees, legatees, executors, administrators and personal representatives, (iv)
references to any statute or other law include all applicable rules, regulations
and orders adopted or made thereunder and all statutes or other laws amending,
consolidating or replacing the statute or law referred to, (v) the words
"consent", "approve" and "agree", and derivations thereof or words of similar
import, mean the prior written consent, approval or agreement of the Person in
question, (vi) the words "include" and "including", and words of similar import,
shall be deemed to be followed by the words "without limitation", (vii) the
words "hereto", "herein", "hereof" and "hereunder", and words of similar import,
refer to this Agreement in its entirety, (viii) unless otherwise expressly
indicated, references to Articles, Sections, Schedules, Exhibits, subsections,
paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits,
subsections, paragraphs and clauses of this Agreement, (ix) the Schedules and
Exhibits to this Security Agreement are incorporated herein by reference, (x)
the titles and headings of Articles, Sections, Schedules, Exhibits, subsections,
paragraphs and clauses are inserted as a matter of convenience only and shall
not affect the constructions of this Agreement, and (xi) all obligations of each
Pledgor hereunder shall be satisfied by each Pledgor at each Pledgor's sole cost
and expense.
(c) Resolution of Drafting Ambiguities. Each Pledgor acknowledges that it
was represented by counsel in connection with this Agreement, that it and its
counsel reviewed and participated in the preparation and negotiation of this
Agreement and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party (i.e., the Trustee) shall not be
employed in the interpretation of this Agreement.
Section 2. Pledge. (a), As collateral security for the payment and
performance when due of all the Secured Obligations, each Pledgor hereby,
subject to the terms of the Intercreditor Agreements, pledges, assigns,
transfers and grants to the Trustee for its benefit and the benefit of the other
Secured Parties, a continuing security interest in and to and pledge of all of
the right, title and interest of such Pledgor in, to and under the following
property, wherever located, whether now existing or hereafter arising or
acquired from time to time (collectively, the "Pledged Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) Intangibles;
(v) Pledged Securities;
(vi) Distributions;
(vii) Intellectual Property Collateral;
(viii) Documents;
(ix) Instruments;
(x) Acquisition Document Rights;
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(xi) the Collateral Account and all Collateral Account Funds;
(xii) Cash;
(xiii) Chattel Paper;
(xiv) Investment Property;
(xv) Miscellaneous Collateral;
(xvi) Proceeds of any and all of the foregoing.
(b) The security interest created by Section 2(a) above shall be a
continuing first priority security interest, subject only to Primary Permitted
Liens, in and to all of the right, title and interest of each Pledgor in to and
under the following property (collectively, the "Primary Collateral"):
(i) Equipment (excluding the Existing Mortgage Equipment and the Boise
Equipment);
(ii) Pledged Securities;
(iii) Distributions;
(iv) Intellectual Property Collateral;
(v) Primary Documents;;
(vi) Acquisition Document Rights (to the extent related to the Primary
Collateral set forth in clauses (i) through (v) and (vii) through
(ix) of this Section 2(b));
(vii) the Collateral Account and Collateral Funds;
(viii) Miscellaneous Collateral;
(ix) Primary Intangibles; and
(x) any and all Proceeds of the Pledgor Collateral of the type
described in clauses (i) through (ix) of this Section 2(b).
(c) The security interest created by Section 2(a) above shall be a
continuing security interest (which security interest shall be subject and
subordinated only to Secondary Permitted Liens) in and to all of the right,
title and interest of each Pledgor in, to and under the following property
(collectively, the "Secondary Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) Existing Mortgage Equipment;
<PAGE>
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(iv) Cash;
(v) Chattel Paper;
(vi) Investment Property;
(vii) Secondary Documents;
(viii) Instruments;
(ix) Acquisition Document Rights (to the extent related to the
Secondary Collateral set forth in clauses (i) through (viii) and
(x) of this Section 2(c));
(x) Secondary Intangibles; and
(xi) any and all Proceeds of the Pledged Collateral of the type
described in clauses (i) through (x) of this Section 2(c).
(d) The security interest created by Section 2(a) above shall be a
continuing security interest (which security interest shall be (i) subject and
subordinated only to Boise Permitted Liens and (ii) equal in right to
participate in the distribution of proceeds with the Boise Agreement Lien as
contemplated in the Indenture and the Intercreditor Agreements in and to all of
the right, title and interest of Pledgor in, to and under the following property
(collectively, the "Boise Collateral"):
(i) all Boise Equipment; and
(ii) all Proceeds of the Boise Equipment.
(e) Notwithstanding the foregoing provisions of this Section 2, the Pledged
Collateral shall not include any property or asset hereafter acquired by Pledgor
which is subject to a Purchase Money Lien; provided, further, that at such time
as such property or asset is no longer subject to such Purchase Money Lien, such
property or asset shall (without any act or delivery by any Person) constitute
Pledged Collateral hereunder.
Section 3. Secured Obligations. This Agreement secures, and (i) the Pledged
Collateral pledged by the Issuer is collateral security for, the payment and
performance in full when due, whether at stated maturity, by acceleration or
otherwise (including, without limitation, the payment of interest and other
amounts which would accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. ss. 362(a)), of all Obligations of the Issuer now
existing or hereafter arising under or in respect of the Indenture and the
Notes, (including, without limitation, the obligations of the Issuer to pay
principal of, premium, if any, and interest on the Notes when due and payable)
and all other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and all other amounts due or become due under or in connection with
the Indenture and the Notes, (ii) the Pledged Collateral pledged by each
Guarantor is collateral security for the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the filing of a petition in bankruptcy or the operation
of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)), of the Guarantee Obligations of such Guarantor (including, without
limitation, the obligations of such Guarantor to pay, pursuant to the provisions
of the Subsidiary Guarantee, principal of, premium if any, and interest on the
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Notes when due and payable), and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and all other amounts due or to become due
under or in connection with the Indenture and the Notes and (iii) without
duplication of the amounts described in clauses (i) and (ii), all obligations of
each Pledgor now existing or hereafter arising under or in respect of this
Agreement or any other Collateral Document, including, without limitation, all
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
other payments related to or in respect of the obligations contained in this
Agreement or in any other Collateral Document, in each case whether in the
regular course of business or otherwise (the obligations described in clauses
(i), (ii) and (iii) of this Section 3, collectively, the "Secured Obligations").
The liability of each Guarantor hereunder and each other Collateral Document, to
which it is a party, shall be subject to the provisions of and limited to the
extent set forth in the Indenture.
Section 4. No Release. Except to the extent limited by the Indenture,
nothing set forth in this Agreement shall relieve any Pledgor from the
performance of any term, covenant, condition or agreement on such Pledgor's part
to be performed or observed under or in respect of any of the Pledged Collateral
or from any liability to any Person under or in respect of any of the Pledged
Collateral or shall impose any obligation on the Trustee or any other Secured
Party to perform or observe any such term, covenant, condition or agreement on
such Pledgor's part to be so performed or observed or shall impose any liability
on the Trustee or any other Secured Party for any act or omission on the part of
such Pledgor relating thereto or for any breach of any representation or
warranty on the part of such Pledgor contained in this Agreement, or under or in
respect of the Pledged Collateral or made in connection herewith or therewith.
The obligations of each Pledgor referred to in this Section 4 shall survive the
termination of this Agreement and the discharge of such Pledgor's other
obligations under this Agreement.
Section 5. Perfection; Supplements; Further Assurances; Use of Pledged
Collateral.
(a) Delivery of Certificated Securities Collateral. All certificates,
agreements or instruments representing or evidencing the Securities Collateral,
to the extent not previously delivered to the Trustee, shall with reasonable
promptness following receipt thereof by any Pledgor be delivered to and held by
or on behalf of the Trustee pursuant hereto. All certificated Securities
Collateral shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to the Trustee. The Trustee shall
have the right, at any time upon the occurrence and during the continuance of
any Event of Default and without notice to any Pledgor, to endorse, assign or
otherwise transfer to or to register in the name of the Trustee or any of its
nominees or endorse for negotiation any or all of the Securities Collateral,
without any indication that such Securities Collateral is subject to the Lien
and security interest hereunder. In addition, the Trustee shall have the right
at any time to exchange certificates representing or evidencing Pledged
Securities for certificates of smaller or larger denominations.
(b) Perfection of Uncertificated Securities Collateral. If any issuer of
Pledged Securities is organized in a jurisdiction which does not permit the use
of certificates to evidence equity ownership, or if any of the Pledged
Securities are at any time not evidenced by certificates of ownership, then each
applicable Pledgor shall, to the extent permitted by applicable law, record such
pledge on the equityholder register or the books of the issuer, cause the issuer
to execute and deliver to the Trustee an acknowledgment of the pledge of such
Pledged Securities substantially in the form of Exhibit 1 annexed hereto,
execute any customary pledge forms or other documents necessary or appropriate
to complete the pledge and give the Trustee the right to transfer such Pledged
Securities under the terms hereof and provide to the Trustee an opinion of
counsel, in form and substance reasonably satisfactory to the Trustee,
confirming such pledge.
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(c) Financing Statements and Other Filings. The only filings, registrations
and recordings necessary to perfect the security interest granted by each
Pledgor to the Trustee pursuant to this Agreement in respect of the Pledged
Collateral are listed in Annex A annexed hereto to the extent that a security
interest in such Pledged Collateral can be perfected by such filing,
registration or recording. All such filings, registrations and recordings will
be filed, registered and recorded contemporaneously with or as soon as possible
following the execution of the Indenture and Collateral Documents. Each Pledgor
agrees that at any time and from time to time, it will execute and, at the sole
cost and expense of the Pledgors file and refile, or permit the Trustee to file
and refile (upon the refusal of the Pledgors to do so in violation of this
Agreement), such financing statements, continuation statements and other
documents (including, without limitation, this Agreement), in form reasonably
acceptable to the Trustee, in such offices (including, without limitation, the
United States Patent and Trademark Office and the United States Copyright
Office) as the Trustee may deem necessary or reasonably appropriate, wherever
required or permitted by law in order to perfect and continue a valid,
enforceable, Lien on and security interest in the Pledged Collateral as provided
herein and, as against third parties, with respect to any Pledged Collateral.
Without limiting each Pledgor's obligation to make such filings, each Pledgor
authorizes the Trustee following the occurrence and during the continuance of an
Event of Default to file, upon notice to Pledgor, at the sole cost and expense
of such Pledgor, any such financing or continuation statements or other
documents without the signature of such Pledgor to the fullest extent permitted
by applicable law.
(d) Motor Vehicles. At any time after the occurrence and during the
continuance of an Event of Default, each Pledgor shall, upon the request of the
Trustee, deliver to the Trustee originals of the certificates of title or
ownership for the motor vehicles (and any other Equipment covered by
certificates of title or ownership owned by it) with the Trustee listed therein
as lienholder.
(e) Supplements; Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver to the Trustee such additional
assignments, agreements, supplements, powers and instruments, as shall be
required or permitted by law, and as shall from time to time be reasonably
requested by the Trustee in writing, in order to perfect, preserve and protect
the Lien on and security interest in the Pledged Collateral as provided herein
and the rights and interests granted to the Trustee hereunder, to carry into
effect the purposes of this Agreement or better to assure and confirm unto the
Trustee or permit the Trustee to exercise and enforce its respective rights,
powers and remedies hereunder with respect to any Pledged Collateral. Without
limiting the foregoing, each Pledgor shall make, execute, endorse, acknowledge,
file or refile and/or deliver to the Trustee from time to time such lists,
descriptions and designations of the Pledged Collateral, copies of schedules,
confirmatory assignments, supplements, additional security agreements,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances and following a Default copies of
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, or instruments, and as shall
from time to time be reasonably requested by the Trustee in writing. The Trustee
may institute and maintain, in its own name or in the name of any Pledgor, such
suits and proceedings as the Trustee may be advised by counsel shall be
necessary to prevent any material impairment of the Lien on and security
interest in or perfection of the Pledged Collateral. All of the foregoing shall
be at the sole cost and expense of the Pledgors.
(f) Use and Pledge of Pledged Collateral. Unless an Event of Default shall
have occurred and be continuing, the Trustee shall from time to time execute and
deliver, upon written request of any Pledgor and at the sole cost and expense of
the Pledgors, any and all instruments, certificates or other documents, in a
form reasonably requested by such Pledgor, necessary or appropriate in the
reasonable judgment of such Pledgor to enable such Pledgor to continue to
exploit, license, use, enjoy and protect the Pledged Collateral, except as may
be expressly prohibited by the terms of this Agreement or the Indenture. The
Pledgors and the Trustee acknowledge that this Agreement is intended to grant to
the Trustee for the benefit of the Secured Parties a Lien
<PAGE>
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on and security interest in the Pledged Collateral and shall not constitute or
create a present assignment of any of the Pledged Collateral.
Section 6. Representations, Warranties and Covenants. Each Pledgor
represents, warrants and covenants as follows:
(a) Perfection Actions; Prior Liens. Upon the completion of the
deliveries, filings and other actions contemplated in Sections 5(a) through
5(c) hereof, the Lien and security interest granted to the Trustee for its
benefit and the benefit of other Secured Parties pursuant to this Agreement
in and to the Pledged Collateral will constitute (i) as to the Primary
Collateral, a perfected Lien superior and prior to the rights of all other
Persons therein other than the holders of (A) the Primary Prior Liens and
(B) Contested Liens, (ii) as to the Secondary Collateral, a perfected Lien
superior and prior to the rights of all other Persons therein other than
the holders of (A) Secondary Prior Liens and (B) Contested Liens and (iii)
as to the Boise Collateral, a perfected Lien superior and prior to the
rights of all other Persons therein other than the holders of (A) the Boise
Prior Liens and (B) Contested Liens; provided, however, that the
representations and warranties set forth above in this Section 6(a) with
respect to the perfection or priority of the Pledgors to any Pledged
Collateral subject to the security interests granted hereby shall not be
deemed to be untrue when made or deemed made for purposes of this Agreement
and the Indenture unless as of the date hereof such representations and
warranties fail to be true with respect to Pledged Collateral having an
aggregate fair market value as of the date hereof of more than $250,000.
(b) No Liens. With respect to the Primary Collateral, such Pledgor is
as of the date hereof, and, as to Primary Collateral acquired by it from
time to time after the date hereof, such Pledgor will own or have the right
to use all Primary Collateral pledged by it hereunder free from any Lien or
other right, title or interest of any Person other than (i) Primary Prior
Liens, (ii) the Lien and security interest created by this Agreement, (iii)
Contested Liens and (iv) Permitted Indenture Liens (the Liens described in
clauses (i) through (iv) of this sentence, collectively, "Primary Permitted
Liens"). With respect to the Secondary Collateral, such Pledgor is as of
the date hereof, and as to the Secondary Collateral acquired by it from
time to time after the date hereof, such Pledgor will own or have the right
to use all the Secondary Collateral pledged by it hereunder free from any
Lien or other right, title or interest of any Person other than (i)
Secondary Prior Liens, (ii) the Lien and security interest created by this
Agreement, (iii) Contested Liens and (iv) Permitted Indenture Liens (the
Liens described in clauses (i) through (iv) of this sentence, collectively,
"Secondary Permitted Liens"). With respect to the Boise Collateral, such
Pledgor is as of the date hereof, and as to the Boise Collateral acquired
by it from time to time after the date hereof, such Pledgor will own or
have the right to use all the Boise Collateral pledged by it hereunder free
from any Lien or other right, title or interest of any Person other than
(i) Boise Prior Liens, (ii) the Lien and security interest created by this
Agreement, (iii) Contested Liens and (iv) Permitted Indenture Liens (the
Liens described in clauses (i) through (iv) of this sentence, collectively,
"Boise Permitted Liens"). Each Pledgor shall defend the Pledged Collateral
pledged by it hereunder against all claims and demands of all Persons at
any time claiming any interest therein adverse to the Trustee or any other
Secured Party. There is no agreement, and no Pledgor shall enter into any
agreement or take any other action, that would result in the imposition of
any Lien, restrict the transferability of any of the Pledged Collateral or
otherwise impair or conflict with such Pledgors' obligations or the rights
of the Trustee hereunder other than any agreement or action relating to
Pledged Collateral Permitted Liens.
(c) Other Financing Statements. There is no (nor will be any) valid or
effective financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) covering
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or purporting to cover any interest of any kind in (i) the Primary
Collateral other than the financing statements or similar statements or
instruments filed in respect of the Primary Permitted Liens, (ii) the
Secondary Collateral other than the financing statements in respect of the
Secondary Permitted Liens or (iii) the Boise Collateral other than the
financing statements in respect of the Boise Permitted Liens, and so long
as any of the Secured Obligations remain unpaid, no Pledgor shall execute,
authorize or permit to be filed in any public office any financing
statement (or similar statement or instrument of registration under the law
of any jurisdiction) or statements relating to any Primary Collateral,
Secondary Collateral and Boise Collateral, except, in each case, financing
statements filed or to be filed in respect of Primary Permitted Liens,
Secondary Permitted Liens and Boise Permitted Liens, respectively.
(d) Chief Executive Office; Change of Name. The chief executive office
of such Pledgor is located at the address indicated next to its name in
Annex C annexed hereto. Such Pledgor shall not move its chief executive
office, except to such new location as such Pledgor may establish in
accordance with the last sentence of this Section 6(d). Such Pledgor shall
not establish a new location for its chief executive office nor shall it
change its name until (i) it shall have given the Trustee not less than
fifteen (15) days' prior written notice of its intention so to do, clearly
setting forth the new address or name and providing such other information
in connection therewith as the Trustee may reasonably request and (ii) with
respect to such new location or name, such Pledgor shall have taken all
action required or permitted by law to maintain the perfection and priority
of the Lien and security interest of the Trustee for its benefit and for
the benefit of the other Secured Parties on and in the Pledged Collateral
intended to be granted hereby, including, without limitation, using its
commercially reasonable efforts to obtain waivers of landlord's or
warehouseman's liens with respect to such new location.
(e) Location of Equipment and Inventory. All Equipment (other than
motor vehicles or rolling stock when in use) and Inventory held on the date
hereof by such Pledgor is located at the addresses indicated next to its
name in Annex C annexed hereto. All Equipment and Inventory now held or
subsequently acquired shall be kept at one or more of the locations listed
in Annex C annexed hereto, or such new location as such Pledgor may
establish if (i) it shall have given to the Trustee at least fifteen (15)
days' prior written notice of its intention so to do, clearly describing
such new location and providing such other information in connection
therewith as the Trustee may reasonably request, and (ii) with respect to
such new location, such Pledgor shall have taken all reasonable action
satisfactory to the Trustee to maintain the perfection and priority of the
security interest of the Trustee for the benefit of the other Secured
Parties on and in the Pledged Collateral intended to be granted hereby,
including, without limitation using commercially reasonable efforts to
obtain waivers of landlord's or warehouseman's liens with respect to such
new location; provided, however, that with respect to moveable Equipment,
(i) such Pledgor shall not be required to comply with the requirements of
clause (i) of this Section 6(e) if such Equipment is moved to any of the
other locations listed on Annex C and such relocation does not impair the
perfection or priority of the security interest of the Trustee and (ii)
such Pledgor may relocate such Equipment to Mexico so long as such Pledgor
shall comply with the provisions of Section 10.01(c) of the Indenture.
(f) Due Authorization and Issuance. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized, validly issued and fully paid and nonassessable, except as
provided in Section 630 of the New York Business Corporation Law. All of
the Initial Pledged Interests have been fully paid for, and there is no
amount or other obligation owing by any Pledgor to any issuer of the
Initial Pledged Interests in exchange for or in connection with the
<PAGE>
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issuance of the Initial Pledged Interests or any Pledgor's status as a
partner or a member of any issuer of the Initial Pledged Interests.
(g) No Violations, etc. The pledge of the Pledged Securities pursuant
to this Agreement does not violate Regulation T, U or X of the Federal
Reserve Board.
(h) No Options, Warrants, etc. There are no options, warrants, calls,
rights, commitments or agreements of any character to which such Pledgor is
a party or by which it is bound obligating such Pledgor to issue, deliver
or sell or cause to be issued, delivered or sold, additional Pledged
Securities or obligating such Pledgor to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement. There are no
voting trusts or other agreements or understandings to which such Pledgor
is a party with respect to the transfer, voting or exercise of any other
right of the equity interests of any issuer of the Pledged Securities.
(i) No Claims. Subject to the Pledged Collateral Permitted Liens and
the Intercreditor Agreements and except as disclosed in that certain
offering memorandum relating to the issuance of the Notes, such Pledgor
owns or has rights in all the Pledged Collateral now in existence and
created or acquired by such Pledgor and to the extent pledged by it
hereunder and such Pledged Collateral, together with all other Collateral
pledged under the Collateral Documents on the date hereof, constitute all
the properties or assets used in, necessary for or material to such
Pledgor's business as currently conducted and as contemplated to be
conducted pursuant to the Indenture and the Collateral Documents. To the
knowledge of such Pledgor, after due inquiry, the use by such Pledgor of
such Pledged Collateral and all such rights with respect to the foregoing
do not infringe on the rights of any Person, other than any such
infringements which individually or in the aggregate would not have a
material adverse affect on the operations of the business of such Pledgor
as currently conducted. To the knowledge of such Pledgor, after due
inquiry, no claim, other than any such claim which would not have a
material adverse affect on the operations of the business of such Pledgor
as currently conducted, has been received and remains outstanding that such
Pledgor's use of any Pledged Collateral does or may violate the rights of
any third Person.
(j) Authorization, Enforceability. Such Pledgor has the requisite
organizational power, authority and legal right to pledge and grant a Lien
on and security interest in all the Pledged Collateral pledged by it
pursuant to this Agreement, and this Agreement constitutes the legal, valid
and binding obligation of such Pledgor, enforceable against such Pledgor in
accordance with its terms, except as such enforceability may be limited by
(i) the effect of bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or similar laws relating to or limiting rights and
remedies of creditors generally, by (ii) the effect of the application of
general equitable principles (whether applied in a proceeding at law or in
equity), and the discretion of the court where such proceeding is brought,
(iii) the effect of the application of due process and public policy
considerations and the availability of certain equitable remedies may be
limited by equitable principles of general applicability.
(k) No Conflicts, Consents, etc. Neither the execution and delivery of
this Agreement by each Pledgor nor the consummation of the transactions
herein contemplated nor the fulfillment of the terms hereof (i) violates
any charter or by-laws or other organizational document of such Pledgor or
any issuer of Pledged Securities, (ii) violates the terms of any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which such Pledgor is a party, or by which it may be bound or
to which any of its properties or assets may be subject, which violation or
conflict would have a material adverse effect on the value of the Pledged
Collateral taken as a whole or an
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adverse effect on the Lien and security interests granted hereunder, (iii)
violates any law, order, rule or regulation applicable to any such Pledgor
of any Governmental Authority having jurisdiction over such Pledgor or its
property, which violation would have a material adverse effect on the value
of the Pledged Collateral taken as a whole or an adverse effect on the Lien
and security interests granted hereunder or (iv) results in or requires the
creation or imposition of any Lien (other than the Liens contemplated
hereby and described in the Intercreditor Agreements) upon or with respect
to any of the Pledged Collateral now owned or which may hereafter be
acquired by such Pledgor. Except as disclosed in Schedule VII annexed
hereto, no consent of any party (including, without limitation,
equityholders or creditors of such Pledgor or any account debtor under a
Receivable) and no consent, authorization, approval, license or other
action by, and no notice to or filing with, any Governmental Authority or
regulatory body or other Person, except as required in accordance with
Section 5(c) hereof, is required for (x) the pledge by such Pledgor of the
Pledged Collateral pledged by it pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by such Pledgor, (y)
except as may be provided in the Intercreditor Agreements, the exercise by
the Trustee of the rights provided for in this Agreement or (z) except as
may be provided in the Intercreditor Agreements, the exercise by the
Trustee of the remedies in respect of the Pledged Collateral pursuant to
this Agreement. In the event that upon the occurrence and during the
continuance of an Event of Default, the Trustee desires to exercise any
remedies, voting or consensual rights or attorney-in-fact powers set forth
in this Agreement and determines it necessary to obtain any approvals or
consents of any Governmental Authority or any other Person therefor, then,
upon the request of the Trustee, such Pledgor agrees to use its
commercially reasonable efforts to assist and aid the Trustee to obtain as
soon as practicable any necessary approvals or consents for the exercise of
any such remedies, rights and powers.
(l) Pledged Collateral. All information set forth herein, including
the schedules and annexes attached hereto, and all information contained in
any documents, schedules and lists heretofore delivered to any Secured
Party in connection with this Agreement, in each case, relating to the
Pledged Collateral, is accurate and complete in all material respects. The
Pledged Collateral described on the annexes and schedules attached hereto
constitutes materially all of the property of such type of Pledged
Collateral owned or held by the Pledgors.
(m) Insurance. Each Pledgor shall at all times keep the Inventory and
Equipment insured, at such Pledgor's own expense against fire, theft and
other risks to which the Pledged Collateral may be subject, in such amounts
and with such deductibles as would be maintained by a prudent operator of
businesses similar to the business of such Pledgor in the locations where
such business is conducted. Each policy or certificate with respect to such
insurance shall be endorsed to the Trustee's reasonable satisfaction for
the benefit of the Trustee (including, without limitation, by naming the
Trustee as an additional named insured and loss payee as the Trustee may
request) and a certificate of such insurance shall be delivered to the
Trustee. Each such policy shall state that to the extent reasonably
obtainable it cannot be cancelled without 30 days' prior written notice to
the Trustee. At least 30 days prior to the expiration of any such policy of
insurance, each Pledgor shall deliver to the Trustee an insurance
certificate evidencing renewal or extension of such policy. If any Pledgor
shall fail to insure such Pledged Collateral to the Trustee's reasonable
satisfaction, the Trustee shall have the right (but shall be under no
obligation) upon reasonable notice to such Pledgor to advance funds to
procure or renew or extend such insurance, and such Pledgor agrees to
reimburse the Trustee for all costs and expenses thereof, with interest on
all such funds from the date advanced until paid in full at the highest
rate then in effect under the Indenture. In case of any loss or damage to
any of the Pledged Collateral, all proceeds of insurance maintained by
Pledgor shall be paid to Trustee as Trust Moneys pursuant to
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Article 12 of the Indenture and shall be subject to retention and
disbursement by Trustee in accordance with the terms of the Indenture.
(n) Payment of Taxes; Claims. Each Pledgor shall pay promptly before
the same become delinquent all Charges. Notwithstanding the foregoing, each
Pledgor may at its own expense contest the validity, amount or
applicability of any such Charge by appropriate legal proceedings;
provided, however, that (i) any such contest shall be conducted in good
faith by appropriate proceedings instituted with reasonable promptness and
diligently conducted and (ii) in connection with such contest, such Pledgor
shall have (A) made provision for the payment of such contested obligation
on such Pledgor's books if and to the extent required by GAAP or (B)
subject to the provisions of the Intercreditor Agreements, deposited with
Trustee a sum sufficient to pay and discharge such charge and Trustee's
estimate of all interest and penalties related thereto, properly bonded
such amount or obtained a stay of enforcement of any such Lien pending the
final determination of such proceeding or (C) in the case of any contested
judgment, delivered to Trustee an instrument in which an appropriate
insurance carrier shall have agreed in writing that full insurance coverage
(subject to a customary deductible) exists in respect of such contested
judgment. Notwithstanding the foregoing provisions of this Section 6(n),
(i) no contest of any such charge may be pursued by such Pledgor if such
contest would expose Trustee or any other Secured Party to (A) any possible
criminal liability or, (B) unless such Pledgor shall have furnished a bond
or other security therefor reasonably satisfactory to Trustee, any
additional civil liability for failure to comply with its obligations with
respect to such charge and (ii) if at any time payment of any charge shall
become necessary to prevent the imposition of remedies because of
non-payment, such Pledgor shall pay the same in sufficient time to prevent
the imposition of remedies in respect of such default or prospective
default.
(o) Access to Books and Records. Upon reasonable request to such
Pledgor, the Trustee shall have full and free access during normal business
hours to all of the books, correspondence and records of such Pledgor
relating to the Pledged Collateral, and the Trustee and its representatives
may examine the same, take extracts therefrom and make photocopies thereof,
and such Pledgor agrees to render to the Trustee, at such Pledgor's cost
and expense, such clerical and other assistance as may be reasonably
requested by the Trustee with regard thereto.
(p) Acquisition Documents. Each Pledgor to the extent it is a party
thereto, shall perform and comply with the terms and conditions of all
Acquisition Documents. Except to the extent that any of the following would
not adversely affect the rights of Trustee under the Asset Purchase
Agreement, each Pledgor to the extent it is a party thereto, shall not
without the consent of Trustee (i) cancel or terminate the Asset Purchase
Agreement or consent to or accept any cancellation or termination thereof,
(ii) amend, supplement or otherwise modify the Asset Purchase Agreement,
(iii) waive any default under or breach the Asset Purchase Agreement or
waive, fail to enforce, forgive or release any right, interest, or
entitlement of any kind, howsoever arising under or in respect of the Asset
Purchase Agreement or, vary or agree to the variation of any of the
provisions of the Asset Purchase Agreement or of the performance of any
other Person under the Asset Purchase Agreement, (iv) petition, request or
take any other legal or administrative action which seeks, or may be
expected, to rescind, terminate or suspend, the Asset Purchase Agreement or
amend or modify any thereof. Each Pledgor to the extent it is a party
thereto, shall not, other than in the ordinary course of business
consistent with prudent business practices: (i) cancel or terminate any of
the Acquisition Documents (other than the Asset Purchase Agreement) or
consent to or accept any cancellation or termination thereof, (ii) amend,
supplement or otherwise modify any of the Acquisition Documents (in each
case as in effect on the date hereof) (other than the Asset Purchase
Agreement), (iii) waive any default under or breach of any of the
<PAGE>
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Acquisition Documents(other than the Asset Purchase Agreement) or waive,
fail to enforce, forgive or release any right, interest, or entitlement of
any kind, howsoever arising, under or in respect of such Acquisition
Documents (other than the Asset Purchase Agreement) or, vary or agree to
the variation of any of the provisions of any of such Acquisition Documents
(other than the Asset Purchase Agreement) or of the performance of any
other Person under any of such Acquisition Documents (other than the Asset
Purchase Agreement), or (iv) petition, request or take any other legal or
administrative action which seeks, or may be expected, to rescind,
terminate or suspend, any of the Acquisition Documents (other than the
Asset Purchase Agreement) or amend or modify any thereof. Each Pledgor
shall notify Trustee in the event it receives any notices of default with
respect to the Acquisition Documents and shall forward promptly copies of
any such notices to Trustee. Following the occurrence and during the
continuance of an Event of Default, in the event of any Pledgor's default
under any of the Acquisition Documents to the extent it is a party thereto,
the parties thereto shall permit Trustee to cure such default and
thereafter perform any of such Pledgor's obligations thereunder and such
performance by Trustee will not constitute a default under any such
Acquisition Document.
Section 7. Special Provisions Concerning General Collateral.
(a) Incorporation by Reference of the Revolving Credit Agreement. Each of
the provisions of Sections 11(a), (f), (g), (j), (k) and (l) and 12(a) of the
Revolving Credit Agreement as in effect on the date hereof is restated herein in
their entirety (including all defined terms referenced therein) mutatis
mutandis. Each Pledgor shall at all times comply with the provisions of such
sections as if it were a "Borrower" or "Company," as applicable, as referenced
therein, including, without limitation, at such time as the Revolving Credit
Facility shall be paid or otherwise satisfied in full. The representations,
warranties and covenants set forth in this Section 7(a) with respect to the
Secondary Collateral (excluding the Existing Mortgage Equipment) shall not be
deemed to be untrue when made or deemed made for purposes of this Agreement
unless the representations and warranties fail to be true with respect to a
material portion of the Secondary Collateral (excluding the Existing Mortgage
Equipment), taken as a whole.
(b) Instruments. Upon the occurrence and during the continuance of any
Event of Default, each Pledgor shall, subject to the provisions of the
Intercreditor Agreements, deliver to the Trustee, within five days after receipt
thereof by such Pledgor, any Instrument evidencing Accounts which is in the
principal amount of $500,000 or more. Any Instrument delivered to the Trustee
pursuant to this Section 7(b) shall be appropriately endorsed (if applicable) to
the order of the Trustee, as agent for the Secured Parties, and shall be held by
the Trustee as further security hereunder; provided, however, that so long as no
Default shall have occurred and be continuing, the Trustee shall, promptly upon
request of such Pledgor, make appropriate arrangements for making any Instrument
pledged by such Pledgor available to such Pledgor for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent deemed
appropriate by the Trustee, against trust receipt or like document).
(c) Maintenance of Equipment. Each Pledgor shall cause the Equipment to be
maintained and preserved in operating condition, repair and working order,
ordinary wear and tear and casualty loss excepted, and to the extent consistent
with current business practice and shall forthwith, or in the case of any loss
or damage which (individually or in the aggregate) exceeds $500,000 to any of
the Equipment (of which prompt notice shall be given to the Trustee) as quickly
as commercially reasonable (including, without limitation, delays caused by the
failure to receive insurance proceeds relating thereto in a timely fashion)
after the occurrence thereof, make or cause to be made all repairs, replacements
and other improvements in connection therewith which are necessary or desirable
in the conduct of such Pledgor's business.
<PAGE>
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(d) Warehouse Receipts Non-Negotiable. If any warehouse receipt or receipt
in the nature of a warehouse receipt is issued with respect to any of the
Inventory, the applicable Pledgor shall not permit such warehouse receipt or
receipt in the nature thereof to be "negotiable" (as such term is used in
Section 7-104 of the UCC or under other relevant law).
(e) Consents to Assignment of Contracts. To the extent that any contract or
other agreement of any Pledgor is listed on Schedule VII annexed hereto, such
Pledgor after the occurrence of an Event of Default and during the continuance
thereof and at the written request of Trustee shall use commercially reasonable
efforts to cause the counterparty thereto to deliver the consent required
therein within 30 days after the date hereof. For purposes of this Section 7(e),
"commercially reasonably efforts" shall not require such Pledgor to pay or cause
to be paid any renumeration to any such counterparty in order to obtain such
consent to the extent that it would be commercially unreasonable to do so.
(f) Fair Labor Standards Act. If applicable, any goods now or hereafter
produced by each Pledgor included in the Pledged Collateral have been and will
be produced in compliance in all material respects with the requirements of the
Fair Labor Standards Act of 1938, as amended.
Section 8. Special Provisions Concerning Securities Collateral.
(a) Pledge of Additional Securities. Subject to the provisions of the
Intercreditor Agreements, each Pledgor shall, upon obtaining any Pledged
Securities of any Person, accept the same in trust for the benefit of the
Trustee and promptly (and in any event within five Business Days) deliver to the
Trustee a pledge amendment, duly executed by such Pledgor, in substantially the
form of Exhibit 2 annexed hereto (each, a "Pledge Amendment"), and the
certificates and other documents required under Sections 5(a) and 5(b) in
respect of the additional Pledged Securities which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien and security interest
hereby created on and in respect of such Pledged Securities. Each Pledgor hereby
authorizes the Trustee to attach each Pledge Amendment to this Agreement and
agrees that all Pledged Securities listed on any Pledge Amendment delivered to
the Trustee shall for all purposes hereunder be considered Pledged Collateral.
(b) Voting Rights; Distributions; etc.
(i) So long as no Event of Default shall have occurred and be
continuing:
(A) Each Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Securities Collateral or
any part thereof for any purpose not inconsistent with the terms or
purposes of this Agreement, the Indenture or any other Collateral
Document; provided, however, that no Pledgor shall in any event
exercise such rights in any manner which may have a material adverse
effect on the value of the Pledged Collateral taken as a whole or the
security intended to be provided by this Agreement.
(B) Each Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the Lien of this Agreement, any and all
Distributions, but only if and to the extent made in accordance with
the provisions of the Indenture; provided, however, that any and all
such Distributions consisting of rights or interests in the form of
securities shall be forthwith delivered to the Trustee to hold as
Pledged Collateral and shall, if received by any Pledgor, be received
in trust for the benefit of
<PAGE>
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the Trustee, be segregated from the other property or funds of such
Pledgor and be forthwith delivered to the Trustee as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(C) The Trustee shall be deemed without further action or
formality to have granted to each Pledgor all necessary consents
relating to voting rights and shall, if necessary, upon written
request of any Pledgor and at the sole cost and expense of the
Pledgors, from time to time execute and deliver (or cause to be
executed and delivered) to such Pledgor all such instruments as such
Pledgor may reasonably request in order to permit such Pledgor to
exercise the voting and other rights which it is entitled to exercise
pursuant to Section 8(b)(i)(A) hereof and to receive the Distributions
which it is authorized to receive and retain pursuant to Section
8(b)(i)(B) hereof.
(ii) Upon the occurrence and during the continuance of any Event of
Default:
(A) All rights of each Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant
to Section 8(b)(i)(A) hereof without any action or the giving of any
notice shall cease, and all such rights shall thereupon become vested
in the Trustee, which shall thereupon have the sole right to exercise
such voting and other consensual rights.
(B) All rights of each Pledgor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to
Section 8(b)(i)(B) hereof shall cease and all such rights shall
thereupon become vested in the Trustee, which shall thereupon have the
sole right to receive and hold as Pledged Collateral such
Distributions.
(iii) Each Pledgor shall, at its sole cost and expense, from time to
time execute and deliver to the Trustee appropriate instruments as the
Trustee may reasonably request in order to permit the Trustee to exercise
the voting and other rights which it may be entitled to exercise pursuant
to Section 8(b)(ii)(A) hereof and to receive all Distributions which it may
be entitled to receive under Section 8(b)(ii)(B) hereof.
(iv) All Distributions which are received by any Pledgor contrary to
the provisions of Section 8(b)(ii)(B) hereof shall be received in trust for
the benefit of the Trustee, shall be segregated from other funds of such
Pledgor and shall immediately be paid over to the Trustee as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(c) No New Securities. Except as permitted by Section 10(c) hereof, each
Pledgor shall cause each issuer of the Pledged Securities not to issue any stock
or other securities or equity interests in addition to or in substitution for
the Pledged Securities issued by such issuer, except to such Pledgor.
(d) Operative Agreements. Each Pledgor has delivered to the Trustee true,
correct and complete copies of its Operative Agreements. The Operative
Agreements are in full force and effect, have not as of the date hereof been
amended or modified, except as shall be delivered to the Trustee on or before
the date hereof, and to the knowledge of such Pledgor, after due inquiry, there
is no existing default by any party thereunder or any event which, with the
giving of notice or passage of time or both, would constitute a default
<PAGE>
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by any party thereunder. Each Pledgor shall deliver to the Trustee a copy of any
notice of default given or received by it under any Operative Agreement within
ten (10) days after such Pledgor gives or receives such notice. Except to the
extent permitted by the Indenture, no Pledgor will terminate or agree to
terminate any Operative Agreement or make any amendment or modification to any
Operative Agreement which would have a material adverse effect on the value of
the Pledged Interests or the security intended to be provided by this Agreement.
(e) Defaults, etc. Such Pledgor is not in default in the payment of any
portion of any mandatory capital contribution, if any, required to be made under
any agreement to which such Pledgor is a party relating to the Pledged
Securities pledged by it, and to its knowledge, after due inquiry, such Pledgor
is not in violation of any other material provisions of any such agreement to
which such Pledgor is a party, or otherwise in default or violation thereunder.
To the knowledge of such Pledgor, after due inquiry, no Pledged Securities
pledged by such Pledgor are subject to any defense, offset or counterclaim, nor
has any Pledgor received written notice that the foregoing been asserted or
alleged against such Pledgor by any Person with respect thereto, and as of the
date hereof, there are no certificates, instruments, documents or other writings
(other than the Operative Agreements and certificates, if any, delivered to the
Trustee) which evidence any Pledged Securities of such Pledgor.
Section 9. Special Provisions Concerning Intellectual Property Collateral.
(a) Grant of License. Subject to the Intercreditor Agreements, for the
purpose of enabling the Trustee, during the continuance of an Event of Default,
to exercise rights and remedies under Section 13 hereof at such time as the
Trustee shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, each Pledgor hereby grants to the Trustee, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to such Pledgor) to use, assign, license or
sublicense any of the Intellectual Property Collateral now owned or hereafter
acquired by such Pledgor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout hereof.
(b) Registrations. Except pursuant to licenses and other user agreements
entered into by any Pledgor in the ordinary course of business, that are listed
in Schedule V annexed hereto, on and as of the date hereof (i) except as set
forth on Schedule V annexed hereto, each Pledgor owns and possesses the right to
use, and has done nothing to authorize or enable any other Person to use, any
Copyright, Patent or Trademark listed in Schedules II, III and IV, and (ii) to
the knowledge of such Pledgor, after due inquiry, all registrations listed in
Schedules II, III and IV are valid and in full force and effect.
(c) No Violations or Proceedings. To each Pledgor's knowledge, on and as of
the date hereof, (i) except as set forth in Schedule V annexed hereto, there is
no violation by others of any right of such Pledgor with respect to any
Copyright, Patent or Trademark listed in Schedules II, III and IV annexed
hereto, respectively, pledged by it under the name of such Pledgor, (ii) such
Pledgor is not infringing upon any Copyright, Patent or Trademark of any other
Person and (iii) no proceedings have been instituted or are pending against such
Pledgor or, to such Pledgor's knowledge, after due inquiry, threatened in
writing, and no claim against such Pledgor has been received by such Pledgor,
alleging any such violation, except as may be set forth in Schedule V.
(d) Protection of Trustee's Security. Subject to the provisions of the
Intercreditor Agreements, on a continuing basis, each Pledgor shall, at its sole
cost and expense, (i) promptly following receipt of notice thereof, notify the
Trustee of (A) any adverse determination in any proceeding in the United
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States Patent and Trademark Office or the United States Copyright Office with
respect to any Patent, Trademark or Copyright which would have a material
adverse effect on the value of the Intellectual Property, taken as a whole, or
(B) the institution of any proceeding or any adverse determination in any
federal, state or local court or administrative body regarding such Pledgor's
claim of ownership in or right to use the Intellectual Property Collateral, its
right to register the Intellectual Property Collateral or its right to keep and
maintain such registration in full force and effect, (ii) maintain and protect
the Intellectual Property Collateral necessary for the operation of the
Pledgors' business, taken as a whole, as presently conducted and as contemplated
by the Indenture, (iii) not permit to lapse or become abandoned any Intellectual
Property Collateral necessary for the operation of the Pledgors' business, taken
as a whole, as presently conducted and as contemplated by the Indenture, and not
settle or compromise any pending or future litigation or administrative
proceeding with respect to the Intellectual Property Collateral necessary for
the operation of the Pledgors' business, taken as a whole, (iv) upon such
Pledgor obtaining knowledge thereof, promptly notify the Trustee in writing of
any event which may reasonably be expected to have a material adverse affect on
the value or utility of the Intellectual Property Collateral or any portion
thereof necessary for the operation of the Pledgors' business, taken as a whole,
the ability of such Pledgor or the Trustee to dispose of the Intellectual
Property Collateral or any portion thereof or the rights and remedies of the
Trustee in relation thereto, including, without limitation, a levy or threat of
levy or any legal process against the Intellectual Property Collateral or any
portion thereof, (v) not license the Intellectual Property Collateral other than
licenses entered into by such Pledgor in, or incidental to, the ordinary course
of business, or amend or permit the amendment of any of the licenses in a manner
that adversely affects the right to receive payments thereunder, or in any
manner that would impair the value of the Intellectual Property Collateral,
taken as a whole, or the Lien and security interest in the Intellectual Property
Collateral, taken as a whole, intended to be granted to the Trustee for the
benefit of the other Secured Parties, (vi) until the Trustee exercises its
rights to make collection, diligently keep adequate records respecting the
Intellectual Property Collateral and (vii) furnish to the Trustee from time to
time pursuant to the provisions of the Indenture and at the written reasonable
request of Trustee therefor statements and amended schedules further identifying
and describing the Intellectual Property Collateral and such other materials
evidencing or reports pertaining to the Intellectual Property Collateral as the
Trustee may from time to time reasonably request, all in reasonable detail.
(e) After-Acquired Property. If any Pledgor shall, at any time before the
Secured Obligations have been paid in full (i) obtain any additional
Intellectual Property Collateral or (ii) become entitled to the benefit of any
additional Intellectual Property Collateral or any renewal or extension thereof,
including any reissue, division, continuation, or continuation-in-part of any
Patent, or any improvement on any Patent, the provisions of this Agreement shall
automatically apply thereto and any such item enumerated in clauses (i) or (ii)
of this Section 9(e) with respect to such Pledgor shall automatically constitute
Intellectual Property Collateral if such would have constituted Intellectual
Property Collateral at the time of execution of this Agreement and be subject to
the Lien and security interest created by this Agreement without further action
by any party other than actions required to perfect such Lien and security
interest. Each Pledgor shall promptly provide to the Trustee written notice of
any of the foregoing. Each Pledgor agrees, with reasonable promptness following
a written request by the Trustee, to confirm the attachment of the Lien and
security interest created by this Agreement to any rights described in clauses
(i) and (ii) of this Section 9(e) if such would have constituted Intellectual
Property Collateral at the time of execution of this Agreement by execution of
an instrument in form reasonably acceptable to the Trustee.
(f) Modifications. After the occurrence and during the continuance of an
Event of Default, each Pledgor authorizes the Trustee to modify this Agreement
by amending Schedules II, III, IV and V hereto to include any future
Intellectual Property Collateral of such Pledgor, including, without limitation,
any of the items listed in Section 9(e).
<PAGE>
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(g) Applications. Each Pledgor shall file and prosecute diligently all
applications for the Patents, the Trademarks or the Copyrights now or hereafter
pending that such Pledgor deems to be necessary to the operation of the
Pledgors' business, taken as a whole, as presently conducted and as contemplated
by the Indenture to which any such applications pertain, and shall do all acts
necessary to preserve and maintain all rights in the Intellectual Property
Collateral necessary to the operation of such Pledgor's business as presently
conducted and as contemplated by the Indenture. Any and all costs and expenses
incurred in connection with any such actions shall be borne by the Pledgors.
Except in the ordinary course of business consistent with prudent business
practice and as may otherwise be specified in Section 10.06 of the Indenture, no
Pledgor shall abandon any right to file a Patent, Trademark or Copyright
application, or any pending Patent, Trademark or Copyright.
(h) Litigation.
(i) Unless there shall occur and be continuing any Event of Default,
each Pledgor shall have the right to commence and prosecute in its own
name, as the party in interest, for its own benefit and at the sole cost
and expense of the Pledgors, such applications for protection of the
Intellectual Property Collateral and suits, proceedings or other actions
for infringement, counterfeiting, unfair competition, dilution or other
damage as are in its reasonable business judgment necessary to protect the
Intellectual Property Collateral. Each Pledgor shall promptly notify the
Trustee in writing as to the commencement and prosecution of any such
actions, or threat thereof relating to the Intellectual Property Collateral
if any such action or threat would in the judgment of such Pledgor
materially and adversely affect the value of the Intellectual Property
Collateral, taken as a whole, and shall provide to the Trustee such
information with respect thereto as may be reasonably requested by the
Trustee. Each Pledgor shall indemnify and hold harmless each Secured Party
for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, expenses or disbursements (including reasonable
attorneys' fees and expenses) of any kind whatsoever which may be imposed
on, incurred by or asserted against such Secured Party in connection with
or in any way arising out of such suits, proceedings or other actions.
(ii) Upon the occurrence and during the continuance of any Event of
Default, the Trustee shall have the right but shall in no way be obligated
to file applications for protection of the Intellectual Property Collateral
and/or bring suit in the name of any Pledgor, the Trustee or the other
Secured Parties to enforce the Intellectual Property Collateral and any
license thereunder. In the event of such suit, each Pledgor shall, at the
written request of the Trustee, do any and all lawful acts and execute any
and all documents reasonably requested by the Trustee in aid of such
enforcement and the Pledgors shall promptly, upon demand, reimburse and
indemnify the Trustee, as the case may be, for all costs and expenses
(including reasonable fees and expenses of counsel) incurred by the Trustee
in the exercise of its rights under this Section 9(h). In the event that
the Trustee shall elect not to bring suit to enforce the Intellectual
Property Collateral, each Pledgor agrees, at the written request of the
Trustee, to use all reasonable measures, whether by action, suit,
proceeding or otherwise, to prevent the infringement, counterfeiting or
other diminution in value of any of the Intellectual Property Collateral,
taken as a whole, by others and for that purpose agrees to diligently
maintain any action, suit or proceeding against any person so infringing
necessary to prevent such infringement unless such Pledgor has determined
that such Intellectual Property Collateral that is the subject of any
pending or contemplated infringement or enforcement action or proceeding
does not contain or represent any value or utility (other than of an
immaterial nature), consistent with prudent business practice.
<PAGE>
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Section 10. Transfers and Other Liens. No Pledgor shall (a) sell, convey,
assign or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral pledged by it hereunder, except as permitted by the Indenture
or this Agreement, (b) create or permit to exist any Lien upon or with respect
to any of the Pledged Collateral pledged by it hereunder, other than (i) Primary
Permitted Liens in the case of the Primary Collateral, (ii) Secondary Permitted
Liens in the case of the Secondary Collateral or (iii) Boise Permitted Liens in
the case of the Boise Collateral or (c) permit any issuer of the Pledged
Securities to merge, consolidate or change its legal form, unless all of the
outstanding equity interests of the surviving or resulting entity are, upon such
merger or consolidation, pledged hereunder (unless such surviving or resulting
entity is a Foreign Subsidiary, in which case 65% of such equity interests shall
be pledged hereunder) and no cash, securities or other property is distributed
in respect of the outstanding equity interests of any other entity that was
merged into or consolidated with such issuer, unless such cash, securities or
other property is deposited in the Collateral Account or otherwise pledged to
the Trustee and such Pledgor has otherwise complied with all applicable
provisions of the Indenture.
Section 11. Reasonable Care. The Trustee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which the Trustee, in its individual capacity, accords its
own property consisting of similar instruments or interests, it being understood
that neither the Trustee nor any of the Secured Parties shall have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Securities Collateral, whether or not the Trustee or any other Secured Party has
or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any Person with respect to any Pledged
Collateral.
Section 12. Remedies upon Default.
(a) Obtaining the Pledged Collateral upon Event of Default.
If any Event of Default shall have occurred and be continuing, then and in
every such case, subject to the terms of the Intercreditor Agreements, the
Trustee may:
(i) Personally, or by agents or attorneys, immediately take possession
of the Pledged Collateral or any part thereof, from any Pledgor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon any Pledgor's
premises where any of the Pledged Collateral is located, remove such
Pledged Collateral, remain present at such premises to receive copies of
all communications and remittances relating to the Pledged Collateral and
use in connection with such removal and possession any and all services,
supplies, aids and other facilities of any Pledgor;
(ii) Demand, sue for, collect or receive any money or property at any
time payable or receivable in respect of the Pledged Collateral, including,
without limitation, instructing the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the Accounts
and Contracts) constituting part of the Pledged Collateral to make any
payment required by the terms of such instrument or agreement directly to
the Trustee, and in connection with any of the foregoing, to compromise, to
settle, or to extend the time for payment and making other modifications
with respect thereto; provided, however, that in the event that any such
payments are made directly to any Pledgor, prior to receipt by any such
obligor of such instruction, such Pledgor shall segregate all amounts
received pursuant thereto in a separate account and pay the same promptly
to the Trustee;
<PAGE>
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(iii) Sell, assign, grant a license to use or otherwise liquidate, or
direct any Pledgor to sell, assign, grant a license to use or otherwise
liquidate, any or all investments made in whole or in part with the Pledged
Collateral or any part thereof, and take possession of the proceeds of any
such sale, assignment, license or liquidation;
(iv) Take possession of the Pledged Collateral or any part thereof, by
directing any Pledgor in writing to deliver the same to the Trustee at any
place or places so designated by the Trustee, in which event such Pledgor
shall at its own expense: (A) forthwith cause the same to be moved to the
place or places designated by the Trustee and there delivered to the
Trustee, (B) store and keep any Pledged Collateral so delivered to the
Trustee at such place or places pending further action by the Trustee; and
(C) while the Pledged Collateral shall be so stored and kept, provide such
security and maintenance services as shall be reasonably necessary to
protect the same and to preserve and maintain them in good condition. Each
Pledgor's obligation to deliver the Pledged Collateral is of the essence of
this Agreement. Upon application to a court of equity having jurisdiction,
the Trustee shall be entitled to a decree requiring specific performance by
any Pledgor of such obligation;
(v) Retain and apply the Distributions to the Secured Obligations as
provided in Section 13 hereof; and
(vi) Exercise any and all rights as beneficial and legal owner of the
Pledged Collateral, including, without limitation, perfecting assignment of
and exercising any and all voting, consensual and other rights and powers
with respect to any Pledged Collateral.
(b) Disposition of the Pledged Collateral.
(i) Upon the occurrence and during the continuance of any Event of Default,
the Trustee may from time to time, in accordance with the terms of and at the
times, if any, specified in the Indenture and/or the Intercreditor Agreements,
exercise in respect of the Pledged Collateral, in addition to the other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party after default under the UCC, and the Trustee may
also in its sole discretion, subject to the terms of the Intercreditor
Agreement, without notice except to the extent required by law, sell, assign or
grant a license to use the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at any of
the Trustee's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Trustee may deem
commercially reasonable. Except to the extent not permitted by law, the Trustee
or any other Secured Party or any of their respective Affiliates may be the
purchaser, licensee, assignee or recipient of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold, assigned or licensed at such sale, to use and apply
any of the Secured Obligations owed to such Person as a credit on account of the
purchase price of any Pledged Collateral payable by such Person at such sale.
Except to the extent not permitted by law, each purchaser, assignee, licensee or
recipient at any such sale shall acquire the property sold, assigned or licensed
absolutely free from any claim or right on the part of any Pledgor, and each
Pledgor hereby waives, to the fullest extent permitted by law, all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Trustee shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Trustee may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Each Pledgor hereby waives, to the
fullest extent permitted by law, any claims against the Trustee arising by
reason of the fact that the price at which any
<PAGE>
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Pledged Collateral may have been sold, assigned or licensed at such a private
sale was less than the price which might have been obtained at a public sale,
even if the Trustee accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree.
(ii) Each Pledgor acknowledges and agrees that, to the extent notice of
sale shall be required by law, ten days' notice to such Pledgor of the time and
place of any public sale or of the time after which any private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters. No notification need be given to any Pledgor if it
has signed, after the occurrence of an Event of Default, a statement renouncing
or modifying any right to notification of sale or other intended disposition.
(c) Waiver of Notice and Claims. Each Pledgor hereby waives, to the fullest
extent permitted by applicable law, notice or judicial hearing in connection
with the Trustee's taking possession or the Trustee's disposition of any of the
Pledged Collateral, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which such
Pledgor would otherwise have under law, and each Pledgor hereby further waives,
to the fullest extent permitted by applicable law: (i) all damages occasioned by
such taking of possession, (ii) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of the
Trustee's rights hereunder, and (iii) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable law. The Trustee shall not be liable for any incorrect or improper
payment made pursuant to this Section 14 in the absence of gross negligence or
willful misconduct. Except to the extent not permitted by law, any sale of, or
the grant of options to purchase, or any other realization upon, any Pledged
Collateral shall operate to divest all right, title, interest, claim and demand,
either at law or in equity, of the applicable Pledgor therein and thereto, and
shall be a perpetual bar both at law and in equity against such Pledgor and
against any and all Persons claiming or attempting to claim the Pledged
Collateral so sold, optioned or realized upon, or any part thereof, from,
through or under such Pledgor.
(d) Certain Sales of Pledged Collateral. Each Pledgor recognizes that, by
reason of certain prohibitions contained in law, rules, regulations or orders of
any foreign Governmental Authority, the Trustee may be compelled, with respect
to any sale of all or any part of the Pledged Collateral, to limit purchasers to
those who meet the requirements of such foreign Governmental Authority. Each
Pledgor acknowledges that any such sales may be at prices and on terms less
favorable to the Trustee than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agrees that any such
restricted sale shall be deemed to have been made in a commercially reasonable
manner and that, except as may be required by applicable law, the Trustee shall
have no obligation to engage in public sales.
(e) Certain Sales of Securities Collateral.
(i) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Securities Collateral, to limit purchasers to Persons who will agree, among
other things, to acquire such Securities Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges that any such private sales may be at prices and on terms
less favorable to the Trustee than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to engage in public sales and no obligation to
delay the sale of any Securities Collateral for the period of time necessary to
permit the issuer
<PAGE>
-30-
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would agree to do so.
(ii) If the Trustee determines to exercise its right to sell any or all of
the Securities Collateral, upon written request, the applicable Pledgor shall
from time to time furnish to the Trustee all such information as the Trustee may
reasonably request in order to determine the number of securities included in
the Securities Collateral which may be sold by the Trustee as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
Section 13. Application of Proceeds. The proceeds received by the Trustee
in respect of any sale of, collection from or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by the Trustee of its
remedies as a secured creditor as provided in Section 12 hereof shall be
applied, together with any other sums then held by the Trustee pursuant to this
Agreement, promptly by the Trustee in the manner set forth in the Indenture
and/or the Intercreditor Agreements.
Section 14. Miscellaneous.
(a) Expenses. Each Pledgor will upon demand pay to the Trustee the amount
of any and all expenses reasonably incurred, including the reasonable fees and
expenses of its counsel and the reasonable fees and expenses of any experts and
agents which the Trustee may incur in connection with (i) the collection of the
Secured Obligations, (ii) the enforcement and administration of this Agreement,
(iii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of the Trustee or any Secured Party hereunder
or (v) the failure by any Pledgor to perform or observe any of the provisions
hereof. All amounts payable by any Pledgor under this Section 14(a) shall be due
upon demand and shall be part of the Secured Obligations. Each Pledgor's
obligations under this Section 14(a) shall survive the termination of this
Agreement and the discharge of such Pledgor's other obligations hereunder.
(b) No Waiver; Cumulative Remedies.
(i) No failure on the part of the Trustee to exercise, no course of
dealing with respect to, and no delay on the part of the Trustee in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power
or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy; nor shall the Trustee be
required to look first to, enforce or exhaust any other security,
collateral or guaranties. The remedies herein provided are cumulative and
are not exclusive of any remedies provided by law.
(ii) In the event that the Trustee shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee, then and in every such case, the Pledgors, the
Trustee and each other Secured Party shall be restored to their respective
former positions and rights hereunder with respect to the Pledged
Collateral, and all rights, remedies and powers of the Trustee and the
other Secured Parties shall continue as if no such proceeding had been
instituted.
(c) Actions by Trustee. The Trustee has been appointed as Trustee pursuant
to the Indenture. The actions of the Trustee hereunder are subject to the
provisions of the Indenture. The Trustee shall
<PAGE>
-31-
have the right hereunder to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking action
(including, without limitation, the release or substitution of Pledged
Collateral), in accordance with this Agreement, the Indenture and or the
Intercreditor Agreements. The Trustee may employ agents and attorneys-in-fact in
connection herewith and shall not be liable for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it in good faith. The Trustee
may resign and a successor Trustee may be appointed in the manner provided in
the Indenture. Upon the acceptance of any appointment as the Trustee by a
successor Trustee, that successor Trustee shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Trustee under this Agreement, and the retiring Trustee shall thereupon be
discharged from its duties and obligations under this Agreement. After any
retiring Trustee's resignation, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was the Trustee.
(d) Trustee May Perform; Trustee Appointed Attorney-in-Fact. If any Pledgor
shall fail in a material respect to do any act or thing that it has covenanted
to do hereunder or if any warranty on the part of any Pledgor contained herein
shall be breached such that the effect of such failure or breach would have a
material adverse effect on the value of the Pledged Collateral, taken as a
whole, or an adverse effect or the Lien and security interest granted herein the
Trustee may (but shall not be obligated to) do the same or cause it to be done
or remedy any such breach, and may expend funds for such purpose. Any and all
amounts so expended by the Trustee shall be paid by the Pledgors promptly upon
demand therefor, with interest at the highest rate then in effect under the
Indenture during the period from and including the date on which such funds were
so expended to the date of repayment. Each Pledgor's obligations under this
Section 14(d) shall survive the termination of this Agreement and the discharge
of such Pledgor's other obligations under this Agreement, the Indenture and the
other Credit Documents. Each Pledgor hereby appoints the Trustee its
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor, or otherwise, from time to time in the Trustee's
discretion to take any action and to execute any and all instruments consistent
with the terms of this Agreement, the Indenture and the other Collateral
Documents which the Trustee may deem necessary or advisable to accomplish the
purposes of this Agreement. The foregoing grant of authority is a power of
attorney coupled with an interest and such appointment shall be irrevocable for
the term of this Agreement. Each Pledgor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof.
(e) Indemnity.
(i) Indemnity. Each Pledgor agrees to indemnify, pay and hold harmless
the Trustee and each of the other Secured Parties and the officers,
directors, employees, agents and Affiliates of the Trustee and each of the
other Secured Parties (collectively, the "Indemnitees") from and against
any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including, without limitation,
settlement costs), reasonable expenses or disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party
thereto) which may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement, the
Indenture or any other Collateral Document (including, without limitation,
any misrepresentation by any Pledgor in this Agreement, the Indenture or
any other Collateral Document) (the "indemnified liabilities"); provided,
however, that no Pledgor shall have any obligation to an Indemnitee
hereunder with respect to indemnified liabilities if it has been determined
by a final decision (after all appeals and the expiration of time to
appeal) of a court of competent jurisdiction that such indemnified
liability arose from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the
<PAGE>
-32-
preceding sentence may be unenforceable because it is violative of any law
or public policy, each Pledgor shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or
any of them to the extent such right of contribution is not in violation of
any law or public policy.
(ii) Survival. The obligations of the Pledgors contained in this
Section 14(e) shall survive the termination of this Agreement and the
discharge of the Pledgors' other obligations under this Agreement, the
Indenture and under the other Collateral Documents.
(iii) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
(f) Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by any Pledgor therefrom, shall be effective unless the same shall
be made in accordance with the terms of the Indenture and unless in writing and
signed by the Trustee. Any amendment, modification or supplement of or to any
provision of this Agreement, any waiver of any provision of this Agreement and
any consent to any departure by any Pledgor from the terms of any provision of
this Agreement shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, the Indenture or any other Collateral Document, no
notice to or demand on any Pledgor in any case shall entitle any Pledgor to any
other or further notice or demand in similar or other circumstances.
(g) Termination; Release. When all the Secured Obligations have been paid
in full this Agreement shall terminate. Upon termination of this Agreement or
any release of Pledged Collateral in accordance with the provisions of the
Indenture, the Trustee shall, upon the request and at the sole cost and expense
of the Pledgors, forthwith assign, transfer and deliver to Pledgor, against
receipt and without recourse to or warranty by the Trustee, such of the Pledged
Collateral to be released (in the case of a release) as may be in possession of
the Trustee and as shall not have been sold or otherwise applied pursuant to the
terms hereof, and, with respect to any other Pledged Collateral, proper
documents and instruments (including UCC-3 termination statements or releases)
acknowledging the termination of this Agreement or the release of such Pledged
Collateral, as the case may be.
(h) Notices. Unless otherwise provided herein or in the Indenture, any
notice or other communication herein required or permitted to be given shall be
given in the manner set forth in the Indenture, as to any Pledgor, addressed to
it at the address of such Pledgor set forth in the Indenture and as to the
Trustee, addressed to it at the address set forth in the Indenture, or in each
case at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section 14(h); provided, however, that notices to the Trustee or any Pledgor
shall not be effective until received by the Trustee or such Pledgor.
(i) Continuing Security Interest; Assignment. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) be binding
upon the Pledgors, their respective successors and assigns and (ii) inure,
together with the rights and remedies of the Trustee hereunder, to the benefit
of the Trustee and the other Secured Parties and each of their respective
successors, transferees and assigns. No other Persons (including, without
limitation, any other creditor of any Pledgor) shall have any interest herein or
any right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Secured Party may assign or otherwise transfer, to
the extent that such assignment or transfer does not violate any applicable
Federal or state securities law, any indebtedness held by it secured by this
Agreement to any other
<PAGE>
-33-
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Secured Party, herein or otherwise,
subject however, to the provisions of the Indenture.
(j) Joinder of Affiliates. Each Affiliate of the Issuer which from time to
time after the initial date of this Agreement is required under the Indenture to
pledge any assets to the Trustee for its benefit and of the other Secured
Parties may become a party hereto upon execution and delivery to the Trustee of
a joinder agreement substantially in the form attached hereto as Exhibit 3, and
upon such execution and delivery shall be deemed to be a "Guarantor" and a
"Pledgor" for all purposes hereunder.
(k) GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCLUDING (TO THE GREATEST EXTENT PERMITTED BY LAW) ANY RULE OF LAW THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
NEW YORK, AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PLEDGED COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(l) CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR OR THE TRUSTEE WITH RESPECT
TO THIS AGREEMENT MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS OF ANY THEREOF, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PLEDGOR AND THE TRUSTEE ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
EACH PLEDGOR AND THE TRUSTEE AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO EACH PLEDGOR AND
THE TRUSTEE AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS
OF WHICH THE TRUSTEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT
APPOINTED BY ANY PLEDGOR OR THE TRUSTEE REFUSES TO ACCEPT SERVICE, SUCH PLEDGOR
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE TRUSTEE OR ANY PLEDGOR TO BRING
PROCEEDINGS AGAINST ANY PLEDGOR OR THE TRUSTEE IN THE COURTS OF ANY OTHER
JURISDICTION. EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(m) Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
<PAGE>
-34-
(n) Execution in Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same agreement.
(o) Obligations Absolute. Subject to the Indenture and applicable law, all
obligations of each Pledgor hereunder shall be absolute and unconditional
irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any other Pledgor;
(ii) any lack of validity or enforceability of the Indenture or any
Collateral Document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
or any other Collateral Document, or any other agreement or instrument
relating thereto;
(iv) any pledge, exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise, non-exercise or waiver of any right, remedy, power
or privilege under or in respect of this Agreement, the Indenture or any
Collateral Document except as specifically set forth in a waiver granted
pursuant to the provisions of Section 14(o) hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any Pledgor.
(p) Future Advances. This Agreement shall secure the payment of any amounts
advanced from time to time pursuant to the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Pledgors and the Trustee have caused this Agreement
to be duly executed and delivered by their duly authorized officers as of the
date first above written.
AMERICAN TISSUE INC.,
as Pledgor
By: /s/ Nourollah Elghanayan
----------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
President
AMERICAN CELLULOSE MILL CORP.,
AMERICAN TISSUE CORPORATION,
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.,
AMERICAN TISSUE MILLS OF NEW YORK, INC.,
AMERICAN TISSUE MILLS OF OREGON, INC.,
AMERICAN TISSUE MILLS OF WISCONSIN, INC.,
BERLIN MILLS RAILWAY, INC.,
CROWN VANTAGE - NEW HAMPSHIRE ELECTRIC, INC.,
GILPIN REALTY CORP.,
TAGSONS PAPERS, INC.,
each as a Pledgor
By: /s/ Nourollah Elghanayan
----------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
President
<PAGE>
100 REALTY MANAGEMENT LLC,
AMERICAN TISSUE MILLS OF GREENWICH LLC,
AMERICAN TISSUE MILLS OF NEENAH LLC,
CALEXICO TISSUE COMPANY LLC,
CORAM REALTY LLC,
ENGINEERS ROAD, LLC,
GRAND LLC,
HYDRO OF AMERICA LLC,
LANDFILL OF AMERICA LLC,
MARKWOOD LLC,
PAPER OF AMERICA LLC,
PULP & PAPER OF AMERICA LLC,
PULP OF AMERICA LLC,
RAILWAY OF AMERICA LLC,
SARATOGA REALTY LLC,
UNIQUE FINANCING LLC,
each as a Pledgor
By: /s/ Nourollah Elghanayan
----------------------------------
Nourollah Elghanayan
Manager
By: /s/ Mehdi Gabayzadeh
----------------------------------
Mehdi Gabayzadeh
Manager
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Kathleen Perry
----------------------------------
Name: Kathleen Perry
Title: Vice President
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE, ASSIGNMENT OF LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
BY
[_____________________]
as Mortgagor,
TO
THE CHASE MANHATTAN BANK, as Trustee,
as Mortgagee,
Securing Principal Indebtedness of $165,000,000;
Relating to Premises in:
[________________________]
Dated as of: July 9, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This instrument prepared by and,
after recording, please return to:
John Schuster, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
--------------------------------
<PAGE>
TABLE OF CONTENTS
Section Heading Page
- ------- ------- ----
INTRODUCTION.................................................................1
RECITALS.....................................................................1
GRANTING CLAUSES.............................................................2
COVENANTS....................................................................3
ARTICLE I WARRANTIES, REPRESENTATIONS AND COVENANTS OF MORTGAGOR............3
1.1 Payment.............................................................3
1.2 Authority and Validity..............................................3
1.3 Good Title..........................................................4
1.4 Recording Documentation To Assure Security Interest;
Fees and Expenses.................................................5
1.5 Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law
and Insurance Requirements.......................................5
1.6 Certain Tax Law Changes.............................................7
1.7 Required Insurance Policies.........................................7
1.8 Failure To Make Certain Payments....................................9
1.9 Inspection..........................................................9
1.10 Grantor To Maintain Improvements....................................9
1.11 Grantor's Obligations with Respect to Leases........................10
1.12 Transfer Restrictions...............................................12
1.13 Destruction; Condemnation...........................................13
1.14 Alterations.........................................................13
1.15 Hazardous Material..................................................14
1.16 Asbestos............................................................15
1.17 Books and Records, Other Information................................15
1.18 No Claims Against Beneficiary.......................................16
1.19 Utility Services....................................................16
ARTICLE II ASSIGNMENT OF LEASES; SECURITY AGREEMENT; ASSIGNMENT AGREEMENT...16
2.1 Assignment of Leases, Rents, Issues and Profits.....................16
2.2 Security Interest in Personal Property..............................18
ARTICLE III EVENTS OF DEFAULT AND REMEDIES..................................18
3.1 Events of Default...................................................18
3.2 Remedies in Case of an Event of Default.............................18
3.3 Sale of Mortgaged Property if Event of Default Occurs;
Proceeds of Sale...................................................19
3.4 Additional Remedies in Case of an Event of Default..................20
3.5 Legal Proceedings After an Event of Default.........................21
-i-
<PAGE>
Section Heading Page
- ------- ------- ----
3.6 Remedies Not Exclusive..............................................21
ARTICLE IV CERTAIN DEFINITIONS..............................................22
ARTICLE V MISCELLANEOUS.....................................................23
5.1 Severability of Provisions..........................................23
5.2 Notices.............................................................23
5.3 Covenants To Run with the Land......................................23
5.4 Headings............................................................23
5.5 Limitation on Interest Payable......................................23
5.6 Indemnity...........................................................23
5.7 Governing Law; Terms................................................24
5.8 No Merger...........................................................24
5.9 Modification in Writing.............................................24
5.10 No Credit for Payment of Taxes or Impositions.......................25
5.11 Stamp and Other Taxes...............................................25
5.12 Estoppel Certificates...............................................25
5.13 Additional Security.................................................25
5.14 Release.............................................................25
5.15 Certain Expenses of Beneficiary and Trustee.........................25
5.16 Expenses of Collection..............................................26
5.17 Business Days.......................................................26
5.18 Relationship........................................................26
5.19 Concerning Beneficiary..............................................26
5.20 Waiver of Stay......................................................27
5.21 Continuing Security Interest; Assignment............................27
5.22 Obligations Absolute................................................27
1 SIGNATURES
2 ACKNOWLEDGMENTS
3 SCHEDULE A LEGAL DESCRIPTION
4 SCHEDULE B PRIOR LIENS
-ii-
<PAGE>
MORTGAGE,
ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
MORTGAGE, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE FILING
("Mortgage"), dated as of [_________], 1999, made by [_________________], a
[_________] , having an office at [____________] [______________________], as
mortgagor, assignor and debtor (in such capacities and together with any
successors in such capacities, "Mortgagor"), to THE CHASE MANHATTAN BANK, having
an office at 450 West 33rd Street, New York, New York 10001, as trustee and
collateral agent pursuant to the Indenture (as hereinafter defined), as
mortgagee, assignee and secured party (in such capacities and together with any
successors in such capacities, "Mortgagee").
R E C I T A L S :
A. American Tissue Inc. ("Issuer"), Mortgagor, Mortgagee and certain other
parties are, contemporaneously with the execution and delivery of this Mortgage,
entering into that certain indenture, dated as of the date hereof (as amended,
amended and restated, supplemented, or otherwise modified from time to time, the
"Indenture"; capitalized terms used herein and not defined shall have the
meanings assigned to them in the Indenture), pursuant to which Issuer is issuing
its 12 1/2 % senior secured notes due July 15, 2006 (the "Senior Secured Notes")
in the aggregate principal amount of $165,000,000. It is contemplated that
Issuer may, after the date hereof, issue exchange notes pursuant to the
Indenture ("Exchange Notes"; together with the Senior Secured Notes, the
"Notes"). Mortgagor, a subsidiary of Issuer, is unconditionally guaranteeing the
Issuer's obligations under the Notes.
B. Mortgagor is the owner of the Mortgaged Property (as hereinafter
defined).
C. Mortgagor is executing and delivering this Mortgage to grant to
Mortgagee for its benefit and the benefit of the Holders (collectively, the
"Secured Parties") liens of the character and priority contemplated herein on
the Mortgaged Property to secure the payment and performance of the Secured
Obligations (as hereinafter defined).
D. This Mortgage is given by Mortgagor in favor of Mortgagee for its
benefit and the benefit of the Holders to secure the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all obligations of Issuer now existing or
hereafter arising under or in respect of the Indenture and the Notes (including,
without limitation, Issuer's obligation to pay principal of, premium if any, and
interest on the Notes when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of the such obligations, (ii) all obligations of
Mortgagor now existing or hereafter arising under or in respect of the Indenture
and the Notes (including, without limitation, Mortgagor's obligation arising
under the applicable Subsidiary Guarantee to pay principal of, premium if any,
and interest on the Notes when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of such obligations and (iii) without duplication of
the amounts described in clauses (i) and (ii), all obligations of Mortgagor now
existing or hereafter arising under or in respect of this Mortgage or any other
Security Document, including, without limitation, with respect to all charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in
<PAGE>
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this Mortgage or in any other Security Document, in each case whether in the
regular course of business or otherwise (the obligations described in clauses
(i) and (ii), collectively, the "Secured Obligations").
G R A N T I N G C L A U S E S :
For and in consideration of the sum of Ten Dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor does hereby pledge, give, grant, bargain, sell, assign,
and convey and transfer to Mortgagee, its successors and assigns, with powers of
sale, a security interest in and mortgage lien upon, all Mortgagor's right,
title and interest in, to and under the following property, whether now owned or
held or hereafter acquired from time to time (collectively, the "Mortgaged
Property"):
A. Any and all present estates or interest of Mortgagor in the land
described in Schedule A, together with all Mortgagor's reversionary rights in
and to any and all easements, rights-of-way, sidewalks, strips and gores of
land, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer
rights, waters, water courses, water rights, and all power, air, light and other
rights, estates, titles, interests, privileges, liberties, servitudes, licenses,
tenements, hereditaments and appurtenances whatsoever, in any way belonging,
relating or appertaining thereto, or any part thereof, or which hereafter shall
in any way belong, relate or be appurtenant thereto (collectively, the "Land");
B. Any and all estates or interests of Mortgagor in the buildings,
structures and other improvements and any and all Alterations (as hereinafter
defined) now or hereafter located or erected on the Land, including, without
limitation, attachments, walks and ways (collectively, the "Improvements";
together with the Land, the "Premises");
C. Any and all permits, certificates, licenses, franchises, consents,
approvals and authorizations, however characterized, issued or in any way
furnished in connection with the Premises, whether necessary or not for the
operation and use of the Premises, including, without limitation, building
permits, certificates of occupancy, environmental certificates, industrial
permits or licenses and certificates of operation;
D. Any and all interest of Mortgagor in all machinery, apparatus,
equipment, fittings, fixtures, improvements and articles of personal property of
every kind and nature whatsoever now or hereafter attached or affixed to the
Premises or used in connection with the use and enjoyment of the Premises or the
maintenance or preservation thereof, including, without limitation, all utility
systems, fire sprinkler and alarm systems, HVAC equipment, boilers, electronic
data processing, telecommunications or computer equipment, refrigeration,
electronic monitoring, water or lighting systems, power, sanitation, waste
removal, elevators, maintenance or other systems or equipment, and all other
articles used or useful in connection with the use or operation of any part of
the Premises (collectively, the "Equipment");
E. All Mortgagor's right, title and interest as landlord, franchisor,
licensor or grantor, in all leases and subleases of space, oil, gas and mineral
leases, franchise agreements, licenses, occupancy or concession agreements now
existing or hereafter entered into relating in any manner to the Premises or the
Equipment and any and all amendments, modifications, supplements and renewals of
any thereof (each such lease, license or agreement, together with any such
amendment, modification, supplement or renewal, a "Lease"), whether now in
effect or hereafter coming into effect, including, without limitation, all
rents, additional rents, cash, guaranties, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the lessee's,
franchisee's, licensee's or obligee's obligations thereunder, revenues,
earnings, profits and income, advance rental payments, payments incident to
assignment, sublease or surrender of a Lease, claims for forfeited deposits and
claims for damages, now due or hereafter to become due, with respect to any
Lease, any indemnification
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against, or reimbursement for, sums paid and costs and expenses incurred by
Mortgagor under any Lease or otherwise, and any award in the event of the
bankruptcy of any tenant under or guarantor of a Lease (collectively, the
"Rents");
F. All drawings, surveys, title insurance policies, construction contracts,
plans, specifications, file materials, operating and maintenance records,
catalogues, tenant lists, correspondence, advertising materials, operating
manuals, warranties, guaranties, appraisals, studies and data relating to the
Premises or the Equipment or the construction of any Alteration or the
maintenance of any Permit (as hereinafter defined); and
G. All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation or other awards or payments and refunds
of real estate taxes and assessments, including interest thereon (collectively,
"Proceeds");
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee for the purpose
of securing payment and performance of the Secured Obligations, and Mortgagor
hereby binds itself and its successors and assigns to warrant and forever defend
the Mortgaged Property unto Mortgagee, its substitutes, successors and assigns,
as the case may be, against the claim or claims of all persons claiming or to
claim the same or any party thereof.
Notwithstanding the foregoing, the Mortgaged Property shall not include
property or assets hereafter acquired by Mortgagor which is subject to any
Purchase Money Lien (as defined in the Indenture); provided, however, that at
such time as such property or asset is no longer subject to such Purchase Money
Lien, such property or asset shall (without any act or delivery by any Person)
constitute Mortgaged Property hereunder.
C O V E N A N T S :
Mortgagor warrants, represents and covenants to and for the benefit of
Mortgagee as follows:
ARTICLE I
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF MORTGAGOR
SECTION 1.1 Payment. Mortgagor shall pay as and when the same shall become
due, whether at its stated maturity, by acceleration or otherwise, each and
every amount payable by Mortgagor under the Secured Obligations and shall
perform, at or prior to the same time such performance shall be due all other
obligations of Mortgagor which constitute Secured Obligations.
SECTION 1.2 Authority and Validity. Mortgagor represents, warrants and
covenants that (i) Mortgagor is duly authorized to execute and deliver this
Mortgage and all corporate and governmental consents, authorizations and
approvals necessary or required therefor have been duly and effectively taken or
obtained, (ii) this Mortgage is a legal, valid, binding and enforceable
obligation of Mortgagor and (iii) Mortgagor has full corporate power and lawful
authority to execute and deliver this Mortgage and to mortgage and grant a
security interest in the Mortgaged Property as contemplated herein.
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SECTION 1.3 Good Title.
1.3.1 Mortgagor represents, warrants and covenants that (i) Mortgagor has
good and legal title to the Premises and the landlord's interest, if any, and
estate under or in respect of the Leases and good title to the interest it
purports to own, if any, in and to each of the Permits, the Equipment and the
Contract Rights, in each case subject to no deed of trust, mortgage, pledge,
security interest, encumbrance, lien, lease, license, easement, assignment,
collateral assignment or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any filing or agreement to file a financing statement as debtor under
the Uniform Commercial Code or any similar statute or any subordination
arrangement in favor of any party other than Mortgagor (collectively, "Liens";
each, a "Lien"), except for those Liens identified on Schedule B (collectively,
the "Prior Liens"), (ii) Mortgagor will keep in effect all rights and
appurtenances to or that constitute a part of the Mortgaged Property, (iii)
Mortgagor will protect, preserve and defend its interest in the Mortgaged
Property and title thereto, (iv) Mortgagor will comply with each of the terms,
conditions and provisions of any obligation of Mortgagor which is secured by the
Mortgaged Property or the noncompliance with which may result in the imposition
of a Lien on the Mortgaged Property, (v) Mortgagor will appear and defend the
Lien and security interests created and evidenced hereby and the validity and
priority of this Mortgage in any action or proceeding affecting or purporting to
affect the Mortgaged Property or any of the rights of Mortgagee hereunder, (vi)
this Mortgage creates and constitutes a valid and enforceable Lien on the
Mortgaged Property, and, to the extent any of the Mortgaged Property shall
consist of personalty, a security interest in the Mortgaged Property, which Lien
and security interest are and will be subject only to (a) Prior Liens (but not
to extensions, amendments, supplements or replacements of Prior Liens unless
consented to by Mortgagee) and (b) Liens hereafter created and which, pursuant
to the provisions of Section 1.12, are superior to the Lien and security
interests created and evidenced hereby, and Mortgagor does now and will forever
warrant and defend to Mortgagee and all its successors and assigns such title
and the validity and priority of the Lien and security interests created and
evidenced hereby against the claims of all persons and parties whomsoever, (vii)
there has been issued and there remain in effect each and every certificate of
occupancy or use or other Permit currently required (except where the same is
being contested in accordance with the provisions of subsection 1.5.5) for the
existing use and occupancy by Mortgagor and its tenants, if any, of the Premises
and (viii) no notice of violation (other than a notice which has previously been
delivered to the Mortgagee or disclosed in the Real Property Officer's
Certificate) has been received by Mortgagor and remains outstanding (except
where the same is being contested in accordance with the provisions of
subsection 1.5.5) with respect to the Premises in connection with local zoning,
land use, set back or other development and use requirements of Governmental
Authorities (as hereinafter defined), other than a violation which would be
acceptable to a Prudent Operator.
1.3.2 Mortgagor, immediately upon obtaining knowledge of the pendency of
any proceedings for the eviction of Mortgagor from the Mortgaged Property or any
part thereof by paramount title or otherwise questioning Mortgagor's title to
the Mortgaged Property as warranted in this Mortgage, or of any condition that
might reasonably be expected to give rise to any such proceedings, shall notify
Mortgagee thereof. Mortgagee may participate in such proceedings, and Mortgagor
will deliver or cause to be delivered to Mortgagee all instruments requested by
Mortgagee to permit such participation. In any such proceedings Mortgagee may be
represented by counsel satisfactory to Mortgagee at the expense of Mortgagor.
If, upon the resolution of such proceedings, Mortgagor shall suffer a loss of
the Mortgaged Property or any part thereof or interest therein and title
insurance proceeds shall be payable in connection therewith, such proceeds are
hereby assigned to and shall be paid to Mortgagee to be applied as Net Cash
Proceeds to the payment of the Secured Obligations in accordance with the
provisions of Section 4.04 of the Indenture.
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SECTION 1.4 Recording Documentation To Assure Security Interest; Fees and
Expenses.
1.4.1 Mortgagor shall, forthwith after the execution and delivery of this
Mortgage and thereafter, from time to time, cause this Mortgage and any
financing statement, continuation statement or similar instrument relating to
any thereof or to any property intended to be subject to the Lien of this
Mortgage to be filed, registered and recorded in such manner and in such places
as may be required by any present or future law in order to publish notice of
and fully to protect the validity and priority thereof or the Lien hereof
purported to be created upon the Mortgaged Property and the interest and rights
of Mortgagee therein. Mortgagor shall pay or cause to be paid all taxes and fees
incident to such filing, registration and recording, and all expenses incident
to the preparation, execution and acknowledgment thereof, and of any instrument
of further assurance, and all Federal or state stamp taxes or other taxes,
duties and charges arising out of or in connection with the execution and
delivery of such instruments.
1.4.2 Mortgagor shall, at the sole cost and expense of Mortgagor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers, financing
statements, continuation statements and assurances as Mortgagee shall from time
to time reasonably request, which may be necessary in the reasonable judgment of
Mortgagee from time to time to assure, perfect, convey, assign, mortgage,
transfer and confirm unto Mortgagee, the property and rights hereby conveyed or
assigned or which Mortgagor may be or may hereafter become bound to convey or
assign to Mortgagee or for carrying out the intention or facilitating the
performance of the terms of this Mortgage or the filing, registering or
recording of this Mortgage. In the event Mortgagor shall fail after demand to
execute any instrument required to be executed by Mortgagor under this
subsection 1.4.2, Mortgagee may execute the same as the attorney-in-fact for
Mortgagor, such power of attorney being coupled with an interest and
irrevocable.
SECTION 1.5 Payment of Taxes, Insurance Premiums, Assessments; Compliance
with Law and Insurance Requirements.
1.5.1 Unless and to the extent contested by Mortgagor in accordance with
the provisions of subsection 1.5.5 hereof, Mortgagor shall pay and discharge, or
cause to be paid and discharged, from time to time when the same shall become
due, all real estate and other taxes, special assessments, levies, permits,
inspection and license fees, all premiums for insurance, all water and sewer
rents and charges and all other public charges imposed upon or assessed against
the Mortgaged Property or any part thereof or upon the Rents. Mortgagor shall,
upon Mortgagee's request, deliver to Mortgagee, receipts evidencing the payment
of all such taxes, assessments, levies, fees, rents and other public charges
imposed upon or assessed against the Mortgaged Property or any part thereof or
the Rents.
1.5.2 From and after the occurrence and during the continuance of an Event
of Default, at the option and upon the request of Mortgagee, Mortgagor shall
deposit with Mortgagee, on the first day of each month, an amount estimated by
Mortgagee to be equal to one-twelfth of the annual taxes, assessments and other
items required to be discharged by Mortgagor under subsection 1.5.1. Such
amounts shall be held by Mortgagee without interest to Mortgagor and applied to
the payment of the obligations in respect of which such amounts were deposited,
in such priority as Mortgagee shall determine, on or before the respective dates
on which such obligations or any part thereof would become delinquent. Nothing
contained in this Section 1.5 shall (i) affect any right or remedy of Mortgagee
under any provision of this Mortgage or of any statute or rule of law to pay any
such amount as provided above from its own funds and to add the amount so paid,
together with interest at a rate per annum (the "Default Rate") equal to the
highest rate then payable under the Notes during such time that any amount
remains outstanding, to the Secured Obligations or (ii) relieve Mortgagor of its
obligations to make or provide for the payment of the annual taxes, assessments
and other charges required to be discharged by Mortgagor under subsection 1.5.1.
Mortgagor hereby grants to Mortgagee a security interest in all sums held
pursuant to this subsection 1.5.2 to secure payment and performance of the
Secured Obligations. During the continuance of any Event of Default, Mortgagee
may, at its option, apply all or any part of the sums held pursuant to
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this subsection 1.5.2 to payment and performance of the Secured Obligations.
Mortgagor shall redeposit with Mortgagee an amount equal to all amounts so
applied as a condition to the cure, if any, of such Event of Default in addition
to fulfillment of any other required conditions.
1.5.3 Unless and to the extent contested by Mortgagor in accordance with
the provisions of subsection 1.5.5, Mortgagor shall timely pay, or cause to be
paid, all lawful claims and demands of mechanics, materialmen, laborers,
government agencies administering worker's compensation insurance, old age
pensions and social security benefits and all other claims, judgments, demands
or amounts of any nature which, if unpaid or not bonded, might result in, or
permit the creation of, a Lien on the Mortgaged Property or any part thereof, or
on the Rents or which might result in forfeiture of all or any part of the
Mortgaged Property.
1.5.4 Except as disclosed in the Real Property Officer's Certificate,
Mortgagor shall maintain, or cause to be maintained, in full force and effect
all permits, certificates, authorizations, consents, approvals, licenses,
franchises or other instruments now or hereafter required by any Governmental
Authority to operate or use and occupy the Premises and the Equipment for its
intended uses (collectively, "Permits"; each, a "Permit"). Except as disclosed
in the Real Property Officer's Certificate, and unless and to the extent
contested by Mortgagor in accordance with the provisions of subsection 1.5.5
hereof, Mortgagor shall comply with all requirements set forth in the Permits
and all requirements of any law, ordinance, rule, regulation or similar statute
or case law (collectively, "Requirements of Law") of any Governmental Authority
applicable to all or any part of the Mortgaged Property or the condition, use or
occupancy of all or any part thereof or any recorded deed of restriction,
declaration, covenant running with the land or otherwise, now or hereafter in
force. Mortgagor shall not initiate, join in, or consent to any change in the
zoning or any other permitted use classification of the Premises without the
prior written consent of Mortgagee, which shall not be unreasonably withheld or
delayed.
1.5.5 Mortgagor may at its own expense contest the amount or applicability
of any of the obligations described in subsections 1.3.1 (viii), 1.4.1, 1.5.1,
1.5.3, 1.5.4, 1.15.2 and/or 1.16 by appropriate legal proceedings, prosecution
of which operates to prevent the collection or enforcement thereof and the sale
or forfeiture of the Mortgaged Property or any part thereof to satisfy such
obligations; provided, however, that (i) any such contest shall be conducted in
good faith by appropriate proceedings promptly instituted and diligently
conducted and (ii) in connection with such contest, Mortgagor shall, (A) have
made provision for the payment or performance of such contested obligation on
Mortgagor's books if and to the extent required by GAAP or (B) deposited with
Mortgagee to hold for the benefit of Mortgagor a sum sufficient to pay and
discharge such obligation and Mortgagee's estimate of all interest and penalties
related thereto or property bonded for such amount or (C) in the case of any
contested judgment, delivered to Mortgagee an instrument in which an appropriate
insurance carrier shall have agreed in writing that full insurance coverage
(subject to customary deductible) exists in respect of such contested judgment.
Any such deposit (and any income earned thereon) not otherwise used to pay such
obligation, interest or penalties shall be promptly returned to Mortgagor.
Notwithstanding the foregoing provisions of this subsection 1.5.5, (i) no
contest of any such obligations may be pursued by Mortgagor if such contest
would expose Mortgagee or any Holder of Notes to any possible criminal liability
or, unless Mortgagor shall have furnished a bond or other security therefor
reasonably satisfactory to Mortgagee, any additional civil liability for failure
to comply with such obligations and (ii) if at any time payment or performance
of any obligation contested by Mortgagor pursuant to this subsection 1.5.5 shall
become necessary to prevent the delivery of a tax or similar deed conveying the
Mortgaged Property or any portion thereof because of nonpayment or
nonperformance, Mortgagor shall pay or perform the same, in sufficient time to
prevent the delivery of such tax or similar deed or such termination or
forfeiture.
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1.5.6 Mortgagor shall not take any action that could be the basis for
termination, revocation or denial of any insurance coverage required to be
maintained under this Mortgage or that could be the basis for a defense to any
claim under any insurance policy maintained in respect of the Premises or the
Equipment and Mortgagor shall otherwise comply in all respects with the
requirements of any insurer that issues a policy of insurance in respect of the
Premises or the Equipment; provided, however, that Mortgagor may, at its own
expense and after notice to Mortgagee, (i) contest the applicability or
enforceability of any such requirements by appropriate legal proceedings,
prosecution of which does not constitute a basis for cancellation or revocation
of any insurance coverage required under Section 1.7 hereof or (ii) cause the
insurance policy containing any such requirement to be replaced by a new policy
or included in a different policy complying with the provisions of Section 1.7.
1.5.7 Mortgagor shall, promptly upon receipt of any written notice
regarding any failure by Mortgagor to pay or discharge any of the obligations
described in subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a copy of such
notice to Mortgagee.
1.5.8 In the event that the proceeds of any tax claim are paid after
Mortgagee has exercised its right to foreclose the Lien of this Mortgage, such
proceeds shall be paid to Mortgagee to satisfy any deficiency remaining after
such foreclosure. Mortgagee shall retain its interest in the proceeds of any tax
claim during any redemption period. The amount of any such proceeds in excess of
any deficiency claim of Mortgagee shall be released to Mortgagor.
SECTION 1.6 Certain Tax Law Changes. In the event of the passage after the
date of this Mortgage of any law deducting from the value of real property, for
the purpose of taxation, amounts in respect of any Lien thereon or changing in
any way the laws for the taxation of mortgages or debts secured by mortgages for
state or local purposes or the manner of the collection of any such taxes, and
imposing a tax, either directly or indirectly, on this Mortgage, the Indenture
or any other Collateral Document, Mortgagor shall promptly pay to Mortgagee such
amount or amounts as may be necessary from time to time to pay such tax or
otherwise take such action as reasonably required by Mortgagee.
SECTION 1.7 Required Insurance Policies.
1.7.1 Mortgagor shall maintain in respect of the Premises and the Equipment
the following insurance coverages:
(i) Physical hazard insurance on an "all risk" basis covering, without
limitation, hazards commonly covered by fire and extended coverage,
lightning, windstorm, civil commotion, hail, riot, strike, water damage,
sprinkler leakage, collapse and malicious mischief, in an amount equal to
the full replacement cost of the Improvements and all Equipment, with such
deductibles as Mortgagee may from time to time require, and, if Mortgagee
shall not have imposed any such requirements, with such deductibles as
would be maintained by a Prudent Operator. "Full replacement cost" means
the Cost of Construction (as hereinafter defined) to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time (but not less
frequently than once every twelve (12) months) by a Person selected by
Mortgagor and reasonably acceptable to Mortgagee;
(ii) Commercial general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Premises and
any adjoining streets, sidewalks and passageways, and covering any and all
claims, including, without limitation, all legal liability to the extent
insurable imposed upon Mortgagee and all court costs and attorneys' fees,
arising out of or connected with
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the possession, use, leasing, operation or condition of the Premises with
policy limits and deductibles in such amounts as Mortgagee may from time to
time require, and, if Mortgagee shall not have imposed such requirements,
in such amounts as from time to time would be maintained by a Prudent
Operator;
(iii) Worker's compensation insurance as required by the laws of the
applicable state to protect Mortgagor and Mortgagee against claims for
injuries sustained in the course of employment at the Premises;
(iv) Explosion insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Mortgagee may from time to time
require, and, if Mortgagee shall not have imposed any such requirements, in
such amounts as would be maintained by a Prudent Operator;
(v) Business interruption insurance and/or loss of "rental value"
insurance covering one year of loss, the term "rental value" to mean the
sum of (a) the total estimated gross rental income from tenant occupation
of the Improvements as furnished and equipped under Leases and (b) the
total amount of all other charges which are the legal obligation of the
tenants, lessees and sublessees of the Premises under Leases or in such
amounts as would be maintained by a Prudent Operator;
(vi) If the Premises are located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards
pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973, each as amended, or any successor laws, flood
insurance with policy limits and deductibles in such amounts as Mortgagee
may from time to time reasonably require, and, if Mortgagee shall not have
imposed any such requirements, in such amounts as would be maintained by a
Prudent Operator ; and
(vii) Such other insurance, against such risks and with policy limits
and deductibles in such amounts as Mortgagee may from time to time
reasonably require, and, if no such requirements shall have been imposed,
in such amounts as would be maintained by a Prudent Operator.
1.7.2 All insurance policies required by this Section 1.7 shall be in form
reasonably satisfactory to Mortgagee and may be covered under master or blanket
policies covering other assets and/or activities. All insurance policies in
respect of the coverages required by subsections 1.7.1(i), 1.7.1(iv), 1.7.1(v),
1.7.1(vi) and, if applicable, 1.7.1(vii), shall be in amounts at least
sufficient to prevent coinsurance liability, and all losses thereunder shall be
payable to Mortgagee, as loss payee, pursuant to a standard non-contributory New
York (or similar) mortgagee endorsement. All insurance policies in respect of
the coverages required by subsections 1.7.1(ii), (1.7.1 (iii) and, if
applicable, 1.7.1(vii) shall name Mortgagee as an additional insured. Each
policy of insurance required under this Section 1.7 shall provide that it may
not be modified, reduced, cancelled or otherwise terminated without at least
thirty (30) days' prior written notice to Mortgagee and shall permit Mortgagee
to pay any premium therefor within ten (10) days after receipt of any notice
stating that such premium has not been paid when due. All insurance policies
required hereunder shall provide that all losses thereunder shall be payable
notwithstanding any act or negligence of Mortgagor or its agents or employees
which otherwise might have resulted in a forfeiture of all or a part of such
insurance payments. The policy or policies of such insurance or certificates of
insurance evidencing the required coverages, and all renewals or extensions
thereof, shall be delivered to Mortgagee. Settlement of any claim under any of
the insurance policies referred to in this Section 1.7, if such claim involves
(in the reasonable judgment of Mortgagee) loss in excess of $500,000, shall
require the prior written approval of Mortgagee (which written approval shall
not be unreasonably withheld or delayed), and Mortgagor shall use reasonable
efforts to cause each such policy to contain a provision to such effect.
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1.7.3 At least thirty(30) days prior to the expiration of any insurance
policy required by this Section 1.7, a policy or policies renewing or extending
such expiring policy or renewal or extension certificates or other reasonable
evidence of renewal or extension and that the applicable policies are in full
force and effect shall be delivered to Mortgagee.
1.7.4 Mortgagor shall not purchase separate insurance policies concurrent
in form or contributing in the event of loss with those policies required to be
maintained under this Section 1.7, unless Mortgagee is included thereon as a
named insured as its interest may appear and, if applicable, with loss payable
to Mortgagee under an endorsement containing the provisions described in
subsection 1.7.2. Mortgagor shall immediately notify Mortgagee whenever any such
separate insurance policy is obtained and shall promptly deliver to Mortgagee
the policy or certificate evidencing such insurance.
1.7.5 Mortgagor shall, immediately upon receipt of any written notice of
any failure by Mortgagor to pay any insurance premium in respect of any
insurance policy required to be maintained under this Section 1.7, furnish a
copy of such notice to Mortgagee.
SECTION 1.8 Failure To Make Certain Payments. If Mortgagor shall fail to
perform any of the covenants contained in this Mortgage, including, without
limitation, Mortgagor's covenants to (i) pay the premiums in respect of all
required insurance coverages, (ii) pay taxes and assessments, (iii) make
repairs, (iv) discharge liens and encumbrances or (v) pay or perform any
obligations of Mortgagor under the Leases, Mortgagee may, but shall not be
obligated to, make advances to perform such covenant on Mortgagor's behalf, and
all sums so advanced shall be included in the Secured Obligations and, to the
extent permitted by applicable law, shall be secured hereby. Mortgagor shall
repay on demand all sums so advanced by Mortgagee on behalf of Mortgagor, with
interest at the Default Rate from the date of payment by Mortgagee to the date
of reimbursement. Neither the provisions of this Section 1.8 nor any action
taken by Mortgagee pursuant to the provisions of this Section 1.8 shall prevent
any such failure to observe any covenant contained in this Mortgage from
constituting an Event of Default. Mortgagee shall not be bound to inquire into
the validity of any tax, lien or imposition which Mortgagor fails to pay as and
when required hereby and which Mortgagor does not contest in accordance with the
terms hereof.
SECTION 1.9 Inspection. Mortgagor shall permit Mortgagee, by its agents,
accountants and attorneys, to visit and inspect the Premises and any Equipment
located thereon at such reasonable times as may be requested by Mortgagee,
subject to reasonable notice and confidentiality requirements which are not more
restrictive than those maintained by Mortgagor as a matter of general policy.
SECTION 1.10 Mortgagor To Maintain Improvements. Mortgagor shall not commit
or suffer any waste on the Premises or with respect to any Equipment or make any
change in the use of the Premises or any Equipment. Mortgagor represents and
warrants that, to the extent the same would be required by a Prudent Operator
(i) the Premises are served by all utilities required or necessary for the
current use thereof, (ii) all streets necessary to serve the Premises are
completed and serviceable and have been dedicated and accepted as such by the
appropriate Governmental Authorities and (iii) Mortgagor has access to the
Premises from public roads sufficient to allow Mortgagor and its tenants and
invitees to conduct its and their businesses at the Premises in accordance with
sound commercial practices. Mortgagor shall, at all times and to the extent the
same would be maintained or made by a Prudent Operator (i) maintain the Premises
and on-site Equipment in safe and insurable operating order, condition and
repair and (ii) shall make all repairs, structural or nonstructural, when
necessary. Mortgagor shall (i) not alter the occupancy or use of all or any part
of the Premises without the prior written consent of Mortgagee and (ii) to the
extent the same would be done by a Prudent Operator, do all other acts which
from the character or use of the Premises and Equipment may be necessary or
appropriate to maintain and preserve their value.
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SECTION 1.11 Mortgagor's Obligations with Respect to Leases.
1.11.1 Subject to the provisions of subsection 1.11.2 herein, Mortgagor
will manage and operate the Mortgaged Property in a reasonably prudent manner
and will not without the prior written consent of Mortgagee enter into any Lease
of all or any part of the Premises.
1.11.2 Mortgagor shall not:
(i) subject to the provisions of the Indenture, receive or collect, or
permit the receipt or collection of, any rental or other payments under any
Lease more than one month in advance of the respective period in respect of
which they are to accrue, except that (a) in connection with the execution
and delivery of any Lease or of any amendment to any Lease, rental payments
thereunder may be collected and received in advance in an amount not in
excess of one month's rent and/or a reasonable security deposit may be
required thereunder and (b) Mortgagor may receive and collect escalation
and other charges in accordance with the terms of each Lease;
(ii) assign, transfer or hypothecate (other than to Mortgagee
hereunder or in accordance with the terms of the applicable Intercreditor
Agreement) any rental or other payment under any Lease whether then due or
to accrue in the future, the interest of Mortgagor as lessor under any
Lease or the rents, issues, revenues, profits or other income of the
Mortgaged Property;
(iii) enter into any Lease after the date hereof that does not contain
terms to the effect as follows:
(a) such Lease and the rights of the tenant thereunder
(including, without limitation, any options to purchase or rights of
first offer or refusal) shall be subject and subordinate to the rights
of Mortgagee under and the Lien of this Mortgage;
(b) such Lease has been assigned as collateral security by
Mortgagor as landlord thereunder to Mortgagee under this Mortgage;
(c) in the case of any foreclosure hereunder, the rights and
remedies of the tenant in respect of any obligations of any successor
landlord thereunder shall be limited to the equity interest of such
successor landlord in the Premises and any successor landlord shall
not (1) be liable for any act, omission or default of any prior
landlord under the Lease, (2) be required to make or complete any
tenant improvements or capital improvements or repair, restore,
rebuild or replace the demised premises or any part thereof in the
event of damage, casualty or condemnation or (3) be required to pay
any amounts to tenant arising under the Lease prior to such successor
landlord taking possession;
(d) the tenant's obligation to pay rent and any additional rent
shall not be subject to any abatement, deduction, counterclaim or
setoff as against any mortgagee or purchaser upon the foreclosure of
any of the Premises or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to such
foreclosure or delivery of such deed and such mortgagee or purchaser
will not be bound by any advance payments of rent in excess of one
month or any security deposits unless such security was actually
received by Mortgagee (or in the case of a letter of credit, was
properly transferred in negotiable form);
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(e) the tenant agrees to attorn, at the option of Mortgagee or
any purchaser of the Premises, upon a foreclosure of the Premises or
the giving or granting of a deed in lieu thereof; and
(f) the tenant agrees to give notice to Mortgagee of any default
by landlord under the Lease and Mortgagee shall have a reasonable time
to cure, should Mortgagee so elect, any default of landlord prior to
tenant exercising any rights of tenant to terminate or cancel such
Lease.
(iv) enter into any amendment or modification of any Lease which would
materially and adversely change the unexpired term thereof or decrease the
amount of the rents or other amounts payable thereunder or which would
impair the value or utility of the Mortgaged Property or the security
provided by this Mortgage;
(v) enter into any further lease or sublease of the property subject
to any Lease without the prior written consent of Mortgagee, unless such
Lease is not amended in any respect and the primary obligor under such
Lease is not released in any respect from its responsibilities and
liabilities under such Lease as a result of such lease or sublease;
(vi) terminate (whether by exercising any contractual right of
Mortgagor to recapture leased space or otherwise) or permit the termination
of any Lease or accept surrender of all or any portion of the space demised
under any Lease prior to the end of the term thereof or accept assignment
of any Lease to Mortgagor unless:
(a) the tenant under such Lease has not paid the equivalent of
two months' rent and Mortgagor has made reasonable efforts to collect
such rent; or
(b) Mortgagor shall deliver to Mortgagee an Officer's Certificate
to the effect that Mortgagor has entered into a new Lease (or Leases)
for the space covered by the terminated or assigned Lease with a term
(or terms) which expire(s) no earlier than the date on which the
terminated or assigned Lease was to expire (excluding renewal
options), and with a tenant (or tenants) having a creditworthiness (as
reasonably determined by Mortgagor) sufficient to pay the rent and
other charges due under the new Lease (or Leases), and the tenant(s)
shall have commenced paying rent, including all operating expenses and
other amounts payable under the new Lease (or Leases) without any
abatement or concession; or
(vii) waive, excuse, condone or in any manner discharge or release any
tenants of or from the obligations of such tenants under their respective
Leases or guarantors of tenants from obligations under any guarantees of
the Leases except in the ordinary and prudent course of business with due
regard for the security afforded Mortgagee thereby.
1.11.3 Mortgagor shall timely perform and observe all the terms, covenants
and conditions required to be performed and observed by Mortgagor under each
Lease and shall at all times do all things necessary to require performance by
the lessee, franchisee, licensee or grantee under each Lease of all obligations,
covenants and agreements by such party to be performed thereunder. Mortgagor
shall promptly notify Mortgagee of the receipt of any notice from any lessee
under any Lease claiming that Mortgagor is in default in the performance or
observance of any of the terms, covenants or conditions thereof to be performed
or observed by Mortgagor and will cause a copy of each such notice to be
promptly delivered to Mortgagee.
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1.11.4 Mortgagor shall furnish to Mortgagee, within thirty (30) days after
each reasonable request by Mortgagee to do so, a written statement in respect of
any or all of the Leases setting forth the space occupied, if any, the property
affected thereby, the rentals or other amounts payable thereunder, and such
other information as Mortgagee may reasonably request.
SECTION 1.12 Transfer Restrictions. Except as provided in Sections 1.3.1 or
1.11 hereof or permitted by and in accordance with the provisions of the
Indenture, Mortgagor may not, without the prior written consent of Mortgagee,
further mortgage, encumber, hypothecate, sell, convey or assign all or any part
of the Mortgaged Property or suffer any of the foregoing to occur by operation
of law or otherwise. Notwithstanding the provisions of the foregoing sentence,
so long as no Event of Default shall have occurred and be continuing, Mortgagor
shall have the right to suffer, in respect of the Mortgaged Property:
(i) The Liens in respect of amounts payable or obligations to be performed
by Mortgagor pursuant to subsections 1.3.1(viii), 1.4.1, 1.5.1, 1.5.3,
1.5.4, 1.15.2 and/or 1.16; provided, however, that such amounts are
not yet due and payable or are being contested in accordance with the
provisions of subsection 1.5.5;
(ii) Prior Liens;
(iii) The Lien and security interest granted to Mortgagee pursuant to this
Mortgage;
(iv) As to each category or type of Mortgaged Property, the Liens described
in Section 2.1(b) of the Existing Lien Intercreditor Agreement which
are subject and subordinate to the Lien and security interest
evidenced by this Mortgage in such category or type of Mortgaged
Property and refinancings thereof to the extent permitted under the
Indenture and the Existing Lien Intercreditor Agreement; and
(v) Liens of the type described in clauses (4), (5), (20) and (22) of the
definition of Permitted Liens and refinancings thereof to the extent
permitted under the Indenture and the Intercreditor Agreements and
with respect to any After-Acquired Property, the Liens of the type
described in clause (11) (provided, however, such Lien shall extend
only to After-Acquired Property at any time having a fair market value
not to exceed $5 million) and (28) (provided, however, such Lien shall
extend only After-Acquired Property at any time having a fair market
value not to exceed $10 million) of the definition of Permitted Liens.
Each of the Liens and other transfers permitted by this Section 1.12 shall in
all respects be subject and subordinate in priority to the Lien and security
interests created and evidenced hereby except as provided in the Intercreditor
Agreements or to the extent the law or regulation creating or authorizing such
Lien provides that such Lien must be superior to the Lien and security interest
created and evidenced hereby.
SECTION 1.13 Destruction; Condemnation.
1.13.1 Destruction; Insurance Proceeds. If there shall occur any damage to,
or loss or destruction of, the Improvements, Equipment, or any part of any
thereof (each, a "Destruction"), Mortgagor shall promptly send to Mortgagee a
notice setting forth the nature and extent of such Destruction. Pursuant to the
provisions of the Intercreditor Agreements, the proceeds of any insurance
payable in respect of such Destruction shall constitute Trust Moneys and are
hereby assigned and shall be paid to Mortgagee. All such proceeds, together with
any interest earned thereon, less the amount of any expenses incurred in
litigating, arbitrating, com
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promising or settling any claim arising out of such Destruction (the "Net
Proceeds"), shall, pursuant to the terms of the provisions of the Intercreditor
Agreements, constitute Trust Moneys and be applied in accordance with the
provisions of the Indenture. Mortgagee is hereby authorized and directed to pay
from Trust Moneys any and all such expenses deemed necessary and reasonable by
Mortgagee in connection with the foregoing.
1.13.2 Condemnation; Assignment of Award. If there shall occur any taking
of the Mortgaged Property or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, general or special, or by reason
of the temporary requisition of the use or occupancy of the Mortgaged Property
or any part thereof, by any Governmental Authority, civil or military (each, a
"Taking"), Mortgagor shall immediately notify Mortgagee upon receiving notice of
such Taking or commencement of proceedings therefor. Mortgagee may participate
in any proceedings or negotiations which might result in any Taking, and
Mortgagor shall deliver or cause to be delivered to Mortgagee all instruments
reasonably requested by it to permit such participation. Mortgagee may be
represented by counsel satisfactory to it at the expense of Mortgagor in
connection with any such participation. Mortgagor shall in good faith and with
due diligence file and prosecute what would otherwise be Mortgagor's claim for
any such award or payment and cause the same to be collected and paid over to
Mortgagee, and hereby irrevocably authorizes and empowers Mortgagee, in the name
of Mortgagor as its true and lawful attorney-in-fact or otherwise, to collect
and to receipt for any such award or payment, and in the event Mortgagor fails
so to act or is otherwise in default hereunder beyond any applicable notice and
grace period set forth herein or in the Indenture, to file and prosecute such
claim. Mortgagor shall pay all reasonable fees, costs and expenses incurred by
Mortgagee in connection with any Taking and in seeking and obtaining any award
or payment on account thereof. Any proceeds, award or payment in respect of any
Taking shall constitute Trust Moneys and are hereby assigned and shall be paid
to Mortgagee and shall be applied in accordance with the provisions of the
Indenture. Mortgagor shall take all steps necessary to notify the condemning
authority of such assignment. Such proceeds, award or payment, together with any
interest earned thereon, less the amount of any expenses incurred in litigating,
arbitrating, compromising or settling any claim arising out of such Taking (the
"Net Award"), shall constitute Trust Moneys and be applied in accordance with
the provisions of the Indenture. Mortgagee is hereby authorized and directed to
pay from Trust Moneys any and all such expenses deemed necessary and reasonable
by Mortgagee in connection with the foregoing.
SECTION 1.14 Alterations. Mortgagor shall not, without the prior written
consent of Mortgagee, make any addition, modification or change (each, an
"Alteration"), structural or nonstructural, to the Premises that costs more to
effect than $500,000. Whether or not Mortgagee has consented to the making of
any Alteration, Mortgagor shall (i) complete each Alteration promptly, in a good
and workmanlike manner and in compliance with all applicable local laws,
ordinances and requirements and (ii) pay when due all claims for labor performed
and materials furnished in connection with such Alteration, unless contested in
accordance with the provisions of subsection 1.5.5.
SECTION 1.15 Hazardous Material.
1.15.1 Mortgagor represents and warrants that except as disclosed in the
Real Property Officer's Certificate (i) there are in effect all material
permits, licenses and other authorizations which are required with respect to
the ownership and operation of its business and the Mortgaged Property under any
and all applicable Environmental Laws, (ii) in all material respects, it is in
compliance with all terms and conditions of the required permits, licenses and
authorizations, and is also in compliance with Environmental Laws, including,
without limitation, all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws, (iii) there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or violation, investigation,
proceeding, notice of demand letter pending or threatened against it or any
subsidiary under the Environmental Laws which could result in a material fine,
penalty or other material cost or expense and (iv) there are no past or present
events, conditions, circum-
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stances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance with, in each case, in any
material respect, the Environmental Laws, or which may give rise to any material
common law or legal liability, including, without limitation, liability under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or any other Environmental Law or related common law theory or
otherwise form the basis of any claim, action, demand, suit, proceeding, hearing
or notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Materials which could
result in a material fine, penalty or other material cost or expense, unless
contested in accordance with the provisions of subsection 1.5.5.
1.15.2 Mortgagor shall (i) comply with any and all present and future
Environmental Laws, (ii) not release, store, treat, handle, generate, discharge
or dispose of any Hazardous Materials at, on, under or from the Mortgaged
Property in violation of or in a manner that could result in any liability under
any present and future Environmental Law and (iii) take all necessary steps to
initiate and expeditiously complete all remedial, corrective and other action to
eliminate any such effect. In the event Mortgagor fails to comply with the
covenants in the preceding sentence, Mortgagee may, but shall not be obligated
to, in addition to any other remedies set forth herein, as agent for and at
Mortgagor's sole cost and expense, following written notice to Mortgagor and to
Issuer cause any necessary remediation, removal or response action relating to
Hazardous Materials to be taken and Mortgagor shall provide to Mortgagee and its
agents and employees access to the Mortgaged Property for such purpose. Any and
all costs or expenses incurred by Mortgagee for such purpose shall be
immediately due and payable by Mortgagor and shall bear interest at the Default
Rate. Mortgagee shall have during the time that the Secured Obligations are
outstanding, at the sole cost and expense of Mortgagor, the right to conduct an
environmental assessment of the Mortgaged Property (i) annually or (ii)
following an Event of Default, which is continuing, by such persons or firms
appointed by Mortgagee, and Mortgagor shall cooperate in all respects in the
conduct of such environmental assessment, including, without limitation, by
providing access to the Mortgaged Property and to all records relating thereto.
To the extent that any environmental assessment identifies conditions which
violate, or could reasonably be expected to give rise to liability or
obligations under, Environmental Laws, Mortgagor agrees to expeditiously correct
any such violation or respond to conditions giving rise to such liability or
obligations in a manner which complies with the Environmental Laws and mitigates
associated health and environmental risks. Mortgagor shall indemnify and hold
Mortgagee and the Holders harmless from and against all loss, cost, damage
(including, without limitation, consequential damages) and reasonable expense
(including, without limitation, reasonable attorneys' and consultants' fees and
disbursements and the reasonable allocated costs of staff counsel) (collectively
referred to as "Losses") that Mortgagee or the Holders may sustain by reason of
the assertion against Mortgagee or the Holders by any party of any claim
relating to such Hazardous Materials at, on, under or from the Mortgaged
Property or actions taken with respect thereto as authorized hereunder excluding
any such Losses to the extent finally determined by a court of competent
jurisdiction in a final, non-appealable judgment to have arisen from the gross
negligence or willful misconduct of the party seeking indemnification. The
foregoing indemnification shall survive repayment of all Secured Obligations and
any release or assignment of this Mortgage. Nothing contained herein or in any
other document shall result in Mortgagee or the Holders being deemed an "owner",
"operator" or "generator" under applicable Environmental Laws, as hereinafter
defined, including, without limitation, those enacted hereafter. "Environmental
Laws", for the purposes of this Mortgage, means the common law and all (i)
Federal, state, local and foreign laws, regulations, codes or orders, and (ii)
decrees, judgments or injunctions to which Mortgagor or a predecessor in
interest of the Mortgaged Property is a named party, issued, promulgated,
approved or entered thereunder, in each case, relating to pollution or
protection of public or employee health or the environment, including, without
limitation, those relating to handling, use, storage, treatment, disposal,
removal, emission, discharge or release of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes, including, without
limitation, petroleum, including crude oil or any petroleum product or any
fraction thereof, and asbestos and asbestos-containing material (collectively,
"Hazardous Materials") into the environment (including, without limitation,
ambient air,
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surface water, ground water, land surface or subsurface strata and indoor air)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
SECTION 1.16 Asbestos. Mortgagor shall not install nor permit to be
installed in or removed from the Mortgaged Property, asbestos or any
asbestos-containing material (collectively, "ACM") except in compliance with all
applicable present and future Environmental Laws, and with respect to any ACM
currently present in the Mortgaged Property, Mortgagor shall expeditiously
either (i) remove or encapsulate any ACM which such Environmental Laws require
to be removed or (ii) otherwise comply with such Environmental Laws with respect
to such ACM, all at Mortgagor's sole cost and expense. If Mortgagor shall fail
so to remove or encapsulate any ACM or otherwise comply with such Environmental
Laws, Mortgagee may, but shall not be obligated to, in addition to any other
remedies set forth herein, following written notice to Mortgagor and to Issuer,
take whatever steps it deems necessary or appropriate to comply with applicable
Environmental Laws and Mortgagor shall provide to Mortgagee and its agents and
employees access to the Mortgaged Property for such purpose. Any and all costs
or expenses incurred by Mortgagee for such purpose shall be immediately due and
payable by Mortgagor and bear interest at the Default Rate. Mortgagor shall
indemnify and hold Mortgagee and the Holders harmless from and against all loss,
cost, damage (including, without limitation, consequential damages) and
reasonable expense (including, without limitation, reasonable attorneys' and
consultants' fees and disbursements and the reasonable allocated costs of staff
counsel) that Mortgagee or the Holders may sustain, as a result of the presence
of any ACM and any removal or encapsulation thereof or compliance with all
applicable present and future Environmental Laws. The foregoing indemnification
shall survive repayment of all Secured Obligations and any release or assignment
of this Mortgage.
SECTION 1.17 Books and Records, Other Information.
1.17.1 Mortgagor shall keep proper books of record and account in which
full, true and correct entries shall be made of all dealings or transactions of
or in relation to the Mortgaged Property and the business and affairs of
Mortgagor relating to the Mortgaged Property. Mortgagee and its authorized
representatives shall have the right at reasonable times and upon reasonable
notice to examine the books and records of Mortgagor relating to the operation
of the Mortgaged Property.
1.17.2 Mortgagor shall, at any and all times, within a reasonable time
after written request by Mortgagee, furnish or cause to be furnished to
Mortgagee, in such manner and in such detail as may be reasonably requested by
Mortgagee, additional information with respect to the Mortgaged Property.
SECTION 1.18 No Claims Against Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request by Mortgagee, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or any part thereof, nor
as giving Mortgagor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against
Mortgagee in respect thereof or any claim that any Lien based on the performance
of such labor or services or the furnishing of any such materials or other
property is prior to the Lien of this Mortgage.
SECTION 1.19 Utility Services. Mortgagor shall pay, or cause to be paid,
when due all charges for all public or private utility services, all public or
private rail and highway services, all public or private communication services,
all sprinkler systems, all protective services and any other services of
whatever kind or nature at any time rendered to or in connection with the
Premises or any part thereof, shall comply with all contracts relating to any
such services and shall do all other things required for the maintenance and
continuance of all such services to the extent required to fulfill the
obligations set forth in Section 1.10.
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ARTICLE II
ASSIGNMENT OF LEASES; SECURITY AGREEMENT;
ASSIGNMENT AGREEMENT
SECTION 2.1 Assignment of Leases, Rents, Issues and Profits.
2.1.1 Mortgagor absolutely, presently and irrevocably assigns, transfers
and sets over to Mortgagee, and grants to Mortgagee subject to the terms and
conditions hereof, all Mortgagor's estate, right, title, interest, claim and
demand as landlord to collect rent and other sums due under all existing Leases
and any other Leases, including, without limitation, all extensions of the terms
of the Leases (such assigned rights, "Mortgagor's Interest"), as follows:
(i) the immediate and continuing right to receive and collect Rents
payable by all tenants or other parties pursuant to the Leases;
(ii) all claims, rights, powers, privileges and remedies of Mortgagor,
whether provided for in any Lease or arising by statute or at law or in
equity or otherwise, consequent on any failure on the part of any tenant to
perform or comply with any term of any Lease;
(iii) all rights to take all actions upon the happening of a default
under any Lease as shall be permitted by such Lease or by law, including,
without limitation, the commencement, conduct and consummation of
proceedings at law or in equity; and
(iv) the full power and authority, in the name of Mortgagor or
otherwise, to enforce, collect, receive and receipt for any and all of the
foregoing and to do any and all other acts and things whatsoever which
Mortgagor or any landlord is or may be entitled to do under the Leases.
2.1.2 Any Rents receivable by Mortgagee hereunder, after payment of all
proper costs and charges, shall be applied to all amounts due and owing under
and as provided in this Mortgage and the Indenture. Mortgagee shall be
accountable to Mortgagor only for Rents actually received by Mortgagee pursuant
to this assignment. The collection of such Rents and the application thereof
shall not cure or waive any Event of Default or waive, modify or affect notice
of Event of Default or invalidate any act done pursuant to such notice.
2.1.3 So long as no Event of Default shall have occurred and be continuing,
Mortgagor shall have a license to collect and apply the Rents and to enforce the
obligations of tenants under the Leases. Immediately upon the occurrence and
during the continuance of any Event of Default, the license granted in the
immediately preceding sentence shall cease and terminate, with or without any
notice, action or proceeding or the intervention of a receiver appointed by a
court. Upon the occurrence of an Event of Default and during the continuance
thereof, Mortgagee may, to the fullest extent permitted by the Leases, (i)
exercise any of Mortgagor's rights under the Leases, (ii) enforce the Leases,
(iii) demand, collect, sue for, attach, levy, recover, receive, compromise and
adjust, and make, execute and deliver receipts and releases for all Rents or
other payments that may then be or may thereafter become due, owing or payable
with respect to the Leases and (iv) generally, do, execute and perform any other
act, deed, matter or thing whatsoever that ought to be done, executed and
performed in and about or with respect to the Leases, as fully as allowed or
authorized by Mortgagor's Interest.
2.1.4 Upon the occurrence and during the continuance of an Event of
Default, Mortgagor shall, at the direction of Mortgagee, further authorize and
direct the tenant under each Lease to pay directly to, or as directed by,
Mortgagee all Rents accruing or due under its Lease without proof to the tenant
of the occurrence
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and continuance of such Event of Default. Mortgagor hereby authorizes the tenant
under each Lease to rely upon and comply with any notice or demand from
Mortgagee for payment of Rents to Mortgagee and Mortgagor shall have no claim
against any tenant for Rents paid by such tenant to Mortgagee pursuant to such
notice or demand.
2.1.5 Mortgagor at its sole cost and expense shall use commercially
reasonable efforts to enforce the Leases in accordance with their terms to the
extent that the same would be enforced by a Prudent Operator. Neither this
Mortgage nor any action or inaction on the part of Mortgagee shall release any
tenant under any Lease, any guarantor of any Lease or Mortgagor from any of
their respective obligations under the Leases or constitute an assumption of any
such obligation on the part of Mortgagee. No action or failure to act on the
part of Mortgagor shall adversely affect or limit the rights of Mortgagee under
this Mortgage or, through this Mortgage, under the Leases.
2.1.6 All rights, powers and privileges of Mortgagee herein set forth are
coupled with an interest and are irrevocable, subject to the terms and
conditions hereof, and Mortgagor shall not take any action under the Leases or
otherwise which is inconsistent with this Mortgage or any of the terms hereof
and any such action inconsistent herewith or therewith shall be void. Mortgagor
shall, from time to time, upon request of Mortgagee, execute all instruments and
further assurances and all supplemental instruments and take all such action as
Mortgagee from time to time may reasonably request in order to perfect, preserve
and protect the interests intended to be assigned to Mortgagee hereby.
2.1.7 Mortgagor shall not, unilaterally or by agreement, subordinate,
amend, modify, extend, discharge, terminate, surrender, waive or otherwise
change any term of any of the Leases in any manner which would violate this
Mortgage. If the Leases shall be amended as permitted hereby, they shall
continue to be subject to the provisions hereof without the necessity of any
further act by any of the parties hereto. To the extent Mortgagor has leased the
Premises or a portion thereof in accordance with the provisions of this
Mortgage, Mortgagee, upon Mortgagor's request, may enter into with any tenant
under such lease a non-disturbance agreement in the form attached as Exhibit H
to the Indenture.
2.1.8 Nothing contained herein shall operate or be construed to (i)
obligate Mortgagee to perform any of the terms, covenants or conditions
contained in the Leases or otherwise to impose any obligation upon Mortgagee
with respect to the Leases (including, without limitation, any obligation
arising out of any covenant of quiet enjoyment contained in the Leases in the
event that any tenant under a Lease shall have been joined as a party defendant
in any action by which the estate of such tenant shall be terminated) or (ii)
place upon Mortgagee any responsibility for the operation, control, care,
management or repair of the Premises.
SECTION 2.2 Security Interest in Personal Property.
2.2.1 This Mortgage shall constitute a security agreement and shall create
and evidence a security interest or common law Lien in all the Equipment and in
all the other items of Mortgaged Property in which a security interest may be
granted or a common law pledge created pursuant to the Uniform Commercial Code
as in effect in the state in which the Premises are located or under the common
law in such state (collectively, "Personal Property").
2.2.2 Upon the occurrence of any Event of Default, in addition to the
remedies set forth in Article III, Mortgagee shall have the power to sell the
Personal Property in accordance with the Uniform Commercial Code as enacted in
the state in which the Premises are located or under other applicable law. It
shall not be necessary that any Personal Property offered be physically present
at any such sale or constructively in the possession of Mortgagee or the person
conducting the sale.
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2.2.3 Upon the occurrence and during the continuance of any Event of
Default, Mortgagee may sell the Personal Property or any part thereof at public
or private sale with notice to Mortgagor as hereinafter provided. The proceeds
of any such sale, after deducting all expenses of Mortgagee in taking, storing,
repairing and selling the Personal Property (including, without limitation,
attorneys' fees and legal expenses), shall be applied in the manner set forth in
subsection 3.3.3. At any sale, public or private, of the Personal Property or
any part thereof, Mortgagee may purchase any or all of the Personal Property
offered at such sale.
2.2.4 Mortgagee shall give Mortgagor reasonable notice of any sale of any
of the Personal Property pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is mailed
at least five (5) days prior to any sale, by first class or certified mail,
postage prepaid, to Mortgagor at its address determined in accordance with the
provisions of Section 5.2.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Events of Default. It shall be an Event of Default hereunder if
there shall have occurred and be continuing an Event of Default under the
Indenture.
SECTION 3.2 Remedies in Case of an Event of Default. If any Event of
Default shall have occurred and be continuing, Mortgagee may at Mortgagee's
option, exercised in accordance with the provisions of the Indenture, in
addition to any other action permitted under this Mortgage or the Indenture or
by law, statute or in equity, take one or more of the following actions:
3.2.1 by written notice to Mortgagor, declare the entire unpaid amount of
the Secured Obligations to be due and payable immediately;
3.2.2 personally, or by its agents or attorneys, (i) enter into and upon
and take possession of all or any part of the Premises together with the books,
records and accounts of Mortgagor relating thereto and, exclude Mortgagor, its
agents and servants wholly therefrom, (ii) use, operate, manage and control the
Premises and the Equipment and conduct the business thereof, (iii) maintain and
restore the Premises and the Equipment, (iv) make all necessary or proper
repairs, renewals and replacements and such useful Alterations thereto and
thereon as Mortgagee may deem advisable, (v) manage, lease and operate the
Premises and carry on the business thereof and exercise all rights and powers of
Mortgagor with respect thereto either in the name of Mortgagor or otherwise or
(vi) collect and receive all earnings, revenues, rents, issues, profits and
income of the Mortgaged Property and every part thereof.
3.2.3 with or without entry, personally or by its agents or attorneys, (i)
sell the Mortgaged Property and all estate, right, title and interest, claim and
demand therein at one or more sales in one or more parcels, in accordance with
the provisions of Section 3.3 or (ii) institute and prosecute proceedings for
the complete or partial foreclosure of the Lien and security interests created
and evidenced hereby; or
3.2.4 take such steps to protect and enforce its rights whether by action,
suit or proceeding at law or in equity for the specific performance of any
covenant, condition or agreement in the Indenture and the other Collateral
Documents, or in aid of the execution of any power granted in this Mortgage, or
for any foreclosure hereunder, or for the enforcement of any other appropriate
legal or equitable remedy or otherwise as Mortgagee shall elect.
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SECTION 3.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds
of Sale.
3.3.1 If any Event of Default shall have occurred and be continuing,
Mortgagee may institute an action to foreclose this Mortgage or take such other
action as may be permitted and available to Mortgagee at law or in equity for
the enforcement of the Indenture and the Notes and realization on the Mortgaged
Property and proceeds thereon through power of sale or to final judgment and
execution thereof for the Secured Obligations, and in furtherance thereof
Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by law or statute or in equity.
Mortgagee may execute and deliver to the purchaser at such sale a conveyance of
the Mortgaged Property in fee simple and an assignment or conveyance of all
Mortgagor's Interest in the Leases and the Mortgaged Property, each of which
conveyances and assignments shall contain recitals as to the Event of Default
upon which the execution of the power of sale herein granted depends, and
Mortgagor hereby constitutes and appoints Mortgagee the true and lawful
attorney-in-fact of Mortgagor to make any such recitals, sale, assignment and
conveyance, and all of the acts of Mortgagee as such attorney-in-fact are hereby
ratified and confirmed. Mortgagor agrees that such recitals shall be binding and
conclusive upon Mortgagor and that any assignment or conveyance to be made by
Mortgagee shall divest Mortgagor of all right, title, interest, equity and right
of redemption, including any statutory redemption, in and to the Mortgaged
Property. The power and agency hereby granted are coupled with an interest and
are irrevocable by death or dissolution, or otherwise, and are in addition to
any and all other remedies which Mortgagee may have hereunder, at law or in
equity. So long as the Secured Obligations, or any part thereof, remain unpaid,
Mortgagor agrees that possession of the Mortgaged Property by Mortgagor, or any
person claiming under Mortgagor, shall be as tenant, and, in case of a sale
under power or upon foreclosure as provided in this Mortgage, Mortgagor and any
person in possession under Mortgagor, as to whose interest such sale was not
made subject, shall, at the option of the purchaser at such sale, then become
and be tenants holding over, and shall forthwith deliver possession to such
purchaser, or be summarily dispossessed in accordance with the laws applicable
to tenants holding over. In case of any sale under this Mortgage by virtue of
the exercise of the powers herein granted, or pursuant to any order in any
judicial proceeding or otherwise, the Mortgaged Property may be sold as an
entirety or in separate parcels in such manner or order as Mortgagee in its sole
discretion may elect. One or more exercises of powers herein granted shall not
extinguish or exhaust such powers, until the entire Mortgaged Property is sold
or all amounts secured hereby are paid in full.
3.3.2 In the event of any sale made under or by virtue of this Article III,
the entire principal of, and interest in respect of the Secured Obligations, if
not previously due and payable, shall, at the option of Mortgagee, immediately
become due and payable, anything in this Mortgage to the contrary
notwithstanding.
3.3.3 The proceeds of any sale made under or by virtue of this Article III,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Article III or otherwise, shall
be applied in accordance with the provisions of the Indenture.
3.3.4 Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof at any sale made under or by virtue of this Article III and, in lieu of
paying cash therefor, may make settlement for the purchase price by crediting
against the purchase price the unpaid amounts (whether or not then due) owing to
Mortgagee in respect of the Secured Obligations, after deducting from the sales
price the expense of the sale and the reasonable costs of the action or
proceedings and any other sums that Mortgagee is authorized to deduct under this
Mortgage.
3.3.5 Mortgagee may adjourn from time to time any sale by it to be made
under or by virtue of this Mortgage by announcement at the time and place
appointed for such sale or for such adjourned sale or sales,
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and, Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.
3.3.6 If the Premises is comprised of more than one parcel of land,
Mortgagee may take any of the actions authorized by this Section 3.3 in respect
of any or a number of individual parcels.
SECTION 3.4 Additional Remedies in Case of an Event of Default.
3.4.1 Mortgagee shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage, and the right of Mortgagee to recover such
judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this Mortgage, or the foreclosure of, or absolute conveyance
pursuant to, this Mortgage. In case of proceedings against Mortgagor in
insolvency or bankruptcy or any proceedings for its reorganization or involving
the liquidation of its assets, Mortgagee shall be entitled to prove the whole
amount of principal and interest and other payments, charges and costs due in
respect of the Secured Obligations to the full amount thereof without deducting
therefrom any proceeds obtained from the sale of the whole or any part of the
Mortgaged Property; provided, however, that in no case shall Mortgagee receive a
greater amount than the aggregate of such principal, interest and such other
payments, charges and costs (with interest at the Default Rate) from the
proceeds of the sale of the Mortgaged Property and the distribution from the
estate of Mortgagor.
3.4.2 Any recovery of any judgment by Mortgagee and any levy of any
execution under any judgment upon the Mortgaged Property shall not affect in any
manner or to any extent the Lien and security interests created and evidenced
hereby upon the Mortgaged Property or any part thereof, or any conveyances,
powers, rights and remedies of Mortgagee hereunder, but such conveyances,
powers, rights and remedies shall continue unimpaired as before.
3.4.3 Any moneys collected by Mortgagee under this Section 3.4 shall be
applied in accordance with the provisions of subsection 3.3.3.
SECTION 3.5 Legal Proceedings After an Event of Default.
3.5.1 Upon the occurrence and during the continuance of any Event of
Default and immediately upon the commencement of any action, suit or legal
proceedings to obtain judgment for the Secured Obligations or any part thereof,
or of any proceedings to foreclose the Lien and security interest created and
evidenced hereby or otherwise enforce the provisions of this Mortgage or of any
other proceedings in aid of the enforcement of this Mortgage, Mortgagor shall
enter its voluntary appearance in such action, suit or proceeding.
3.5.2 Upon the occurrence and during the continuance of an Event of
Default, Mortgagee shall be entitled forthwith as a matter of right,
concurrently or independently of any other right or remedy hereunder either
before or after declaring the Secured Obligations or any part thereof to be due
and payable, to the appointment of a receiver without giving notice to any party
and without regard to the adequacy or inadequacy of any security for the Secured
Obligations or the solvency or insolvency of any person or entity then legally
or equitably liable for the Secured Obligations or any portion thereof.
Mortgagor hereby consents to the appointment of such receiver. Notwithstanding
the appointment of any receiver, Mortgagee shall be entitled as pledgee to the
possession and control of any cash, deposits or instruments at the time held by
or payable or deliverable under the terms of the Indenture to Mortgagee.
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3.5.3 Mortgagor shall not (i) at any time insist upon, or plead, or in any
manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Mortgage, (ii) claim, take or insist on any benefit or advantage of any law
now or hereafter in force providing for the valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or sales of the
Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to
any decree, judgment or order of any court of competent jurisdiction or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. To the extent permitted by applicable law, Mortgagor hereby expressly
(i) waives all benefit or advantage of any such law or laws, including, without
limitation, any statute of limitations applicable to this Mortgage, (ii) waives
any and all rights to trial by jury in any action or proceeding related to the
enforcement of this Mortgage, (iii) waives any objection which it may now or
hereafter have to the laying of venue of any action, suit or proceeding brought
in connection with this Mortgage and further waives and agrees not to plead that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum and (iv) covenants not to hinder, delay or impede the
execution of any power granted or delegated to Mortgagee by this Mortgage but to
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Mortgagee shall not be liable for any incorrect
or improper payment made pursuant to this Article III in the absence of gross
negligence or willful misconduct.
SECTION 3.6 Remedies Not Exclusive. No remedy conferred upon or reserved to
Mortgagee by this Mortgage is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Mortgage or now or hereafter
existing at law or in equity. Any delay or omission of Mortgagee to exercise any
right or power accruing on any Event of Default shall not impair any such right
or power and shall not be construed to be a waiver of or acquiescence in any
such Event of Default. Every power and remedy given by this Mortgage may be
exercised from time to time concurrently or independently, when and as often as
may be deemed expedient by Mortgagee in such order and manner as Mortgagee, in
its sole discretion, may elect. If Mortgagee accepts any moneys required to be
paid by Mortgagor under this Mortgage after the same become due, such acceptance
shall not constitute a waiver of the right either to require prompt payment,
when due, of all other sums secured by this Mortgage or to declare an Event of
Default with regard to subsequent defaults. If Mortgagee accepts any moneys
required to be paid by Mortgagor under this Mortgage in an amount less than the
sum then due, such acceptance shall be deemed an acceptance on account only and
on the condition that it shall not constitute a waiver of the obligation of
Mortgagor to pay the entire sum then due, and Mortgagor's failure to pay the
entire sum then due shall be and continue to be a default hereunder
notwithstanding acceptance of such amount on account.
ARTICLE IV
CERTAIN DEFINITIONS
The following terms shall have the following respective meanings:
"Cost of Construction" shall mean the sum, so far as it relates to the
reconstructing, renewing, restoring or replacing of the Improvements, of (i)
obligations incurred or assumed by Mortgagor or undertaken by tenants pursuant
to the terms of the Leases for labor, materials and other expenses and to
contractors, builders and materialmen; (ii) the cost of contract bonds and of
insurance of all kinds that may reasonably be deemed by Mortgagor to be
desirable or necessary during the course of construction; (iii) the expenses
incurred or assumed by Mortgagor for test borings, surveys, estimates, any Plans
and Specifications and preliminary investigations therefor, and for supervising
construction, as well as for the performance of all other duties required by or
rea
<PAGE>
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sonably necessary for proper construction; (iv) ad valorem property taxes levied
upon the Premises during performance of any Restoration; and (v) any costs or
other charges in connection with obtaining title insurance and counsel opinions
that may be required or necessary in connection with a Restoration.
"Governmental Authority" shall mean any Federal, state, local or foreign
court, agency, authority, board, bureau, commission, department, office or
instrumentality of any nature whatsoever or any governmental or
quasi-governmental unit, whether now or hereafter in existence, or any officer
or official thereof, having jurisdiction over the Mortgagor or the Mortgaged
Property.
"Prudent Operator" shall mean a prudent operator of property similar in use
and configuration to the Premises and the Equipment, as applicable, and located
in the locality where the Premises and Equipment, as applicable, are located.
"Purchase Agreement" shall mean that certain purchase agreement among
Issuer, Mortgagor, Mortgagee and the Donaldson, Lufkin & Jenrette Securities
Corporation and certain other parties, as of July 1, 1999.
"Real Property Officer's Certificate" shall mean that certain officer's
certificate delivered to the Mortgagee pursuant to Section 9(e)(x) of the
Purchase Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Severability of Provisions. Any provision of this Mortgage
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.2 Notices. Unless otherwise provided herein or in the Indenture,
any notice or other communication herein required or permitted to be given shall
be given in the manner set forth in the Indenture, if to Mortgagor or Mortgagee,
addressed to it at the address set forth in the Indenture, or as to any party at
such other address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this Section 5.2;
provided, however, that notices to Mortgagee shall not be effective until
received by Mortgagee.
SECTION 5.3 Covenants To Run with the Land. All of the grants, covenants,
terms, provisions and conditions in this Mortgage shall run with the Land and
shall apply to, and bind the successors and assigns of Mortgagor. If there shall
be more than one mortgagor, the covenants and warranties hereof shall be joint
and several.
SECTION 5.4 Headings. The Section headings used in this Mortgage are for
convenience of reference only and shall not affect the construction of this
Mortgage.
SECTION 5.5 Limitation on Interest Payable. It is the intention of the
parties to conform strictly to the usury laws, whether state or Federal, that
are applicable to the transaction of which this Mortgage is a part. All
agreements between Mortgagor and Mortgagee whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever shall the amount paid
<PAGE>
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or agreed to be paid by Mortgagor for the use, forbearance or detention of the
money to be loaned or advanced under the Indenture or any related document, or
for the payment or performance of any covenant or obligation contained herein or
in the Indenture or any related document, exceeds the maximum amount permissible
under applicable Federal or state usury laws. If under any circumstances
whatsoever fulfillment of any such provision, at the time performance of such
provision shall be due, shall involve exceeding the limit of validity prescribed
by law, then the obligation to be fulfilled shall be reduced to the limit of
such validity. If under any circumstances Mortgagor shall have paid an amount
deemed interest by applicable law, which would exceed the highest lawful rate,
such amount that would be excessive interest under applicable usury laws shall
be applied to the reduction of the principal amount owing in respect of the
Secured Obligations and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal and any other amounts due
hereunder, the excess shall be refunded to Mortgagor. All sums paid or agreed to
be paid for the use, forbearance or detention of the principal under any
extension of credit by Mortgagee shall, to the extent permitted by applicable
law, and to the extent necessary to preclude exceeding the limit of validity
prescribed by law, be amortized, prorated, allocated and spread from the date of
this Mortgage until payment in full of the Secured Obligations so that the
actual rate of interest on account of such principal amounts is uniform
throughout the term hereof.
SECTION 5.6 Indemnity. Mortgagor agrees to indemnify, pay and hold harmless
Mortgagee, the Holders of Notes and each of the Secured Parties and the
officers, directors, employees, agents and Affiliates of Mortgagee, the Holders
of Notes and each of the Secured Parties (collectively called the "Indemnitees")
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs (including, without
limitation, settlement costs), reasonable expenses or disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), which may
be imposed on, incurred by or asserted against that Indemnitee, in any manner
relating to or arising out of this Mortgage, the Indenture or any other
Collateral Document (including, without limitation, any misrepresentation by
Mortgagor in this Mortgage, the Indenture or any other Collateral Document) (the
"Indemnified Liabilities"); provided, however, that Mortgagor shall have no
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities if
it has been determined by a final decision (after all appeals and the expiration
of time to appeal) by a court of competent jurisdiction that such Indemnified
Liability arose from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Mortgagor shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The obligations of Mortgagor contained in this
Section 5.6 shall survive the termination of this Mortgage and the discharge of
Mortgagor's other obligations under this Mortgage, the Indenture and the other
Collateral Documents. Any amount paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured Obligations
secured by the Mortgaged Property.
SECTION 5.7 Governing Law; Terms. THIS MORTGAGE SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN
WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. MORTGAGOR
DESIGNATES AND APPOINTS [______________________________], WITH AN ADDRESS AT
[________________________________] AND SUCH OTHER PERSONS AS MAY HEREAFTER BE
SELECTED BY MORTGAGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT
TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY PROCEEDING BROUGHT
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AGAINST MORTGAGOR WITH RESPECT TO THIS MORTGAGE, SERVICE BEING HEREBY
ACKNOWLEDGED BY MORTGAGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO MORTGAGOR
AT ITS ADDRESS PROVIDED FOR IN SECTION 5.2 HEREOF EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY MORTGAGOR REFUSES TO
ACCEPT SERVICE, MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
MORTGAGEE TO BRING PROCEEDINGS AGAINST MORTGAGOR IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 5.8 No Merger. The rights and estate created by this Mortgage shall
not, under any circumstances, be held to have merged into any other estate or
interest now owned or hereafter acquired by Mortgagee unless Mortgagee shall
have consented to such merger in writing.
SECTION 5.9 Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Mortgage, nor
consent to any departure by Mortgagor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture and unless in
writing and signed by Mortgagee. Any amendment, modification or supplement of or
to any provision of this Mortgage, any waiver of any provision of this Mortgage
and any consent to any departure by Mortgagor from the terms of any provision of
this Mortgage shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Mortgage or any other Collateral Document, no notice to or
demand on Mortgagor in any case shall entitle Mortgagor to any other or further
notice or demand in similar or other circumstances.
SECTION 5.10 No Credit for Payment of Taxes or Impositions. Mortgagor shall
not be entitled to any credit against the principal, premium, if any, or
interest payable under the Indenture or the Notes, and Mortgagor shall not be
entitled to any credit against any other sums which may become payable under the
terms thereof or hereof, by reason of the payment of any tax or other
impositions on the Mortgaged Property or any part thereof.
SECTION 5.11 Stamp and Other Taxes. Subject to the provisions of subsection
1.5.5 relating to permitted contests, Mortgagor shall pay any United States
documentary stamp taxes, with interest and fines and penalties, and any mortgage
recording taxes, with interest and fines and penalties, that may hereafter be
levied, imposed or assessed under or upon or by reason of this Mortgage or the
Secured Obligations or any instrument or transaction affecting or relating to
either thereof and in default thereof Mortgagee may (but shall have no
obligation) advance the same and the amount so advanced shall be payable by
Mortgagor to Mortgagee within ten (10) days after demand therefor, together with
interest thereon at the Default Rate.
SECTION 5.12 Estoppel Certificates. Mortgagor shall, from time to time,
upon twenty (20) days' prior written request of Mortgagee, execute, acknowledge
and deliver to Mortgagee a certificate signed by an authorized officer or
officers stating that this Mortgage, the Indenture and the other Collateral
Documents are unmodified and in full force and effect (or, if there have been
modifications, that this Mortgage is in full force and effect as modified and
setting forth such modifications).
SECTION 5.13 Additional Security. Without notice to or consent of Mortgagor
and without impairment of the Lien and rights created by this Mortgage,
Mortgagee may accept (but Mortgagor shall not be obligated to furnish) from
Mortgagor or from any other Person or Persons, additional security for the
Secured
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Obligations. Neither the giving of this Mortgage nor the acceptance of any such
additional security shall prevent Mortgagee from resorting, first, to such
additional security, and, second, to the security created by this Mortgage
without affecting Mortgagee's Lien and rights under this Mortgage.
SECTION 5.14 Release. The Mortgaged Property shall be released from the
Lien of this Mortgage in accordance with the provisions of the Indenture.
Mortgagee, on the written request and at the expense of Mortgagor, will execute
and deliver such proper instruments of release and satisfaction or assignment as
may reasonably be requested to evidence such release or assignment, and any such
instrument, when duly executed by Mortgagee and duly recorded by Mortgagor in
the places where this Mortgage is recorded, shall conclusively evidence the
release or assignment of this Mortgage.
SECTION 5.15 Certain Expenses of Mortgagee. If any action, suit or other
proceeding affecting the Mortgaged Property or any part thereof be commenced, in
which action, suit or proceeding Mortgagee is made a party or participates or in
which the right to use the Mortgaged Property or any part thereof is threatened,
or in which it becomes necessary in the judgment of Mortgagee to defend or
uphold the Lien of this Mortgage (including, without limitation, any action,
suit or proceeding to establish or uphold the compliance of the Improvements
with any Requirements of Law), then all amounts paid or incurred by Mortgagee
for the expense of any such action, suit or other proceeding or to protect its
rights therein (whether or not it is made or becomes a party thereto) or
otherwise to enforce or defend the rights and Lien created by this Mortgage,
shall be paid by Mortgagor upon demand together with interest at the Default
Rate from the date of the payment or incurring thereof to the date of repayment,
and any such amount and the interest thereon shall be a Lien on the Mortgaged
Property, prior to any right, or right to, interest in, or claim upon the
Mortgaged Property attaching or accruing subsequent to or otherwise subordinate
to the Lien of this Mortgage, and the same shall be deemed to be secured hereby.
All other amounts paid, advanced or incurred by Mortgagee in order to secure and
protect the Lien of this Mortgage or other security provided hereunder shall be
a like Lien on the Mortgaged Property and be deemed to be secured hereby.
SECTION 5.16 Expenses of Collection. Mortgagor will upon demand pay to
Mortgagee the amount of any and all expenses, including the fees and expenses of
its counsel and the fees and expenses of any experts and agents, which Mortgagee
may incur in connection with (i) the collection of the Secured Obligations, (ii)
the enforcement and administration of this Mortgage, (iii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Mortgaged Property, (iv) the exercise or enforcement of any of the rights
of Mortgagee or any Secured Party hereunder or (v) the failure by Mortgagor to
perform or observe any of the provisions hereof. All amounts payable by
Mortgagor under this Section 5.16 shall be due upon demand and shall be part of
the Secured Obligations. Mortgagor's obligations under this Section shall
survive the termination of this Mortgage and the discharge of Mortgagor's other
obligations hereunder.
SECTION 5.17 Business Days. In the event any time period or any date
provided in this Mortgage ends or falls on a day other than a Business Day, then
such time period shall be deemed to end and such date shall be deemed to fall on
the next succeeding Business Day, and performance herein may be made on such
Business Day, with the same force and effect as if made on such other day.
SECTION 5.18 Relationship. The relationship of Mortgagee to Mortgagor
hereunder is strictly and solely that of lender and borrower and mortgagor and
mortgagee and nothing contained in the Indenture, this Mortgage or any other
document or instrument now existing and delivered in connection therewith or
otherwise in connection with the Secured Obligations is intended to create, or
shall in any event or under any circumstance be construed as creating a
partnership, joint venture, tenancy-in-common, joint tenancy or other
relationship of any nature whatsoever between Mortgagee and Mortgagor other than
as lender and borrower and mortgagor and mortgagee.
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SECTION 5.19 Concerning Mortgagee.
5.19.1 Mortgagee shall be entitled to rely upon any written notice,
statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person, and, with respect to all matters pertaining to this
Mortgage and its duties hereunder, upon advice of counsel selected by it.
5.19.2 If any item of Mortgaged Property also constitutes collateral
granted to Mortgagee under any other deed of trust, mortgage, security
agreement, pledge or instrument of any type, in the event of any conflict
between the provisions of this Mortgage and the provisions of such other deed of
trust, mortgage, security agreement, pledge or instrument of any type in respect
of such collateral, Mortgagee, in its sole discretion, shall select which
provision or provisions shall control.
5.19.3 Mortgagee has been appointed as collateral agent pursuant to the
Indenture. The actions of Mortgagee hereunder are subject to the provisions of
the Indenture. Mortgagee shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Mortgaged Property), in accordance with this Mortgage and the
Indenture. Mortgagee may resign and a successor Mortgagee may be appointed in
the manner provided in the Indenture. Mortgagor shall recognize as mortgagee
under this instrument any party who has succeeded the interest of Mortgagee
under the Indenture. Upon the acceptance of any appointment as Mortgagee by a
successor Mortgagee, that successor Mortgagee shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be
discharged from its duties and obligations under this Mortgage. After any
retiring Mortgagee's resignation, the provisions of this Mortgage shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Mortgage while it was Mortgagee.
SECTION 5.20 Waiver of Stay.
5.20.1 Mortgagor agrees that in the event that Mortgagor or any property or
assets of Mortgagor shall hereafter become the subject of a voluntary or
involuntary proceeding under the Bankruptcy Code or Mortgagor shall otherwise be
a party to any Federal or state bankruptcy, insolvency, moratorium or similar
proceeding to which the provisions relating to the automatic stay under Section
362 of the Bankruptcy Code or any similar provision in any such law is
applicable, then, in any such case, whether or not Mortgagee has commenced
foreclosure proceedings under this Mortgage, Mortgagee shall be entitled to
relief from any such automatic stay as it relates to the exercise of any of the
rights and remedies (including, without limitation, any foreclosure proceedings)
available to Mortgagee as provided in this Mortgage or in any other Collateral
Document.
5.20.2 Mortgagee shall have the right to petition or move any court having
jurisdiction over any proceeding described in subsection 5.20.1 for the purposes
provided therein, and Mortgagor agrees (i) not to oppose any such petition or
motion and (ii) at Mortgagor's sole cost and expense, to assist and cooperate
with Mortgagee, as may be requested by Mortgagee from time to time, in obtaining
any relief requested by Mortgagee, including, without limitation, by filing any
such petitions, supplemental petitions, requests for relief, documents,
instruments or other items from time to time requested by Mortgagee or any such
court.
SECTION 5.21 Continuing Security Interest; Assignment. This Mortgage shall
create a continuing security interest in the Mortgaged Property and shall (i) be
binding upon Mortgagor, its successors and assigns and (ii) inure, together with
the rights and remedies of Mortgagee hereunder, to the benefit of Mortgagee, the
Holders of the Notes and the other Secured Parties and each of their respective
successors, transferees and
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assigns; no other Persons (including, without limitation, any other creditor of
Mortgagor) shall have any interest herein or any right or benefit with respect
hereto.
SECTION 5.22 Obligations Absolute. Subject to the Indenture, all
obligations of Mortgagor hereunder shall be absolute and unconditional
irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Mortgagor;
(ii) any lack of validity or enforceability of the Indenture, the
Notes, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
the Notes, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Mortgage, the Indenture, the
Notes or any other agreement or instrument relating thereto except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 5.9 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Mortgagor.
<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed
and delivered under seal the day and year first above written.
[----------------------],
Mortgagor
By:
-----------------------------------
Name:
Title:
[local counsel to confirm signature requirements]
<PAGE>
ACKNOWLEDGMENT
[local counsel to provide]
THE MAXIMUM AMOUNT OF INDEBTEDNESS
SECURED BY THIS MORTGAGE IS $7,470,833. SEE SECTION 5.23
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
BY
GRAND LLC,
as Mortgagor,
TO
THE CHASE MANHATTAN BANK, as trustee,
as Mortgagee,
Relating to Premises located at:
148 Hudson River Road
Waterford, New York
SECTION: 286 BLOCK: 1 LOT: 51 COUNTY: Saratoga
Dated as of: July 9, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
After recording, please return to:
John Schuster, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
--------------------------------
<PAGE>
TABLE OF CONTENTS
Section Heading Page
- ------- ------- ----
INTRODUCTION...................................................................1
RECITALS.......................................................................1
GRANTING CLAUSES...............................................................2
COVENANTS......................................................................3
ARTICLE I WARRANTIES, REPRESENTATIONS AND COVENANTS OF MORTGAGOR..............3
1.1 Payment...............................................................3
1.2 Authority and Validity................................................3
1.3 Good Title............................................................4
1.4 Recording Documentation To Assure Security Interest; Fees and
Expenses...........................................................5
1.5 Payment of Taxes, Insurance Premiums, Assessments; Compliance
with Law and Insurance Requirements................................5
1.6 Certain Tax Law Changes...............................................7
1.7 Required Insurance Policies...........................................8
1.8 Failure To Make Certain Payments.....................................10
1.9 Inspection...........................................................10
1.10 Mortgagor To Maintain Improvements...................................10
1.11 Mortgagor's Obligations with Respect to Subleases....................10
1.12 Transfer Restrictions................................................12
1.13 Destruction; Condemnation............................................13
1.14 Alterations..........................................................14
1.15 Hazardous Material...................................................14
1.16 Asbestos.............................................................16
1.17 Books and Records, Other Information.................................16
1.18 No Claims Against Beneficiary........................................16
1.19 Utility Services.....................................................16
1.20 Mortgaged Lease......................................................17
ARTICLE II ASSIGNMENT OF SUBLEASES; SECURITY AGREEMENT; ASSIGNMENT
AGREEMENT...................................................18
2.1 Assignment of Subleases, Rents, Issues and Profits...................18
2.2 Security Interest in Personal Property...............................20
ARTICLE III EVENTS OF DEFAULT AND REMEDIES...................................20
3.1 Events of Default....................................................20
3.2 Remedies in Case of an Event of Default..............................21
3.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds
of Sale...........................................................21
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<PAGE>
Section Heading Page
- ------- ------- ----
3.4 Additional Remedies in Case of an Event of Default...................23
3.5 Legal Proceedings After an Event of Default..........................23
3.6 Remedies Not Exclusive...............................................24
ARTICLE IV CERTAIN DEFINITIONS...............................................24
ARTICLE V MISCELLANEOUS......................................................25
5.1 Severability of Provisions...........................................25
5.2 Notices..............................................................25
5.3 Covenants To Run with the Land.......................................25
5.4 Headings.............................................................25
5.5 Limitation on Interest Payable.......................................25
5.6 Indemnity............................................................26
5.7 Governing Law; Terms.................................................26
5.8 No Merger............................................................27
5.9 Modification in Writing..............................................27
5.10 No Credit for Payment of Taxes or Impositions........................27
5.11 Stamp and Other Taxes................................................27
5.12 Estoppel Certificates................................................27
5.13 Additional Security..................................................28
5.14 Release..............................................................28
5.15 Certain Expenses of Mortgagee........................................28
5.16 Expenses of Collection...............................................28
5.17 Business Days........................................................28
5.18 Relationship.........................................................29
5.19 Concerning Mortgagee.................................................29
5.20 Waiver of Stay.......................................................29
5.21 Continuing Security Interest; Assignment.............................29
5.22 Obligations Absolute.................................................29
5.23 Maximum Secured Indebtedness ........................................30
5.24 Lien Law Trust Fund .................................................30
SIGNATURES
ACKNOWLEDGMENTS
SCHEDULE A LEGAL DESCRIPTION
SCHEDULE B PRIOR LIENS
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<PAGE>
LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE
FILING ("Mortgage"), dated as of July 9, 1999, made by GRAND LLC, a New York
limited liability company, having an office at 135 Engineers Road, Hauppauge,
New York 11788, as mortgagor, assignor and debtor (in such capacities and
together with any successors in such capacities, "Mortgagor"), to THE CHASE
MANHATTAN BANK, having an office at 450 West 33rd Street, New York, New York
10001, as trustee and collateral agent pursuant to the Indenture (as hereinafter
defined), as mortgagee, assignee and secured party (in such capacities and
together with any successors in such capacities, "Mortgagee").
R E C I T A L S :
A. American Tissue Inc. ("Issuer"), Mortgagor, Mortgagee and certain other
parties are, contemporaneously with the execution and delivery of this Mortgage,
entering into that certain indenture, dated as of the date hereof (as amended,
amended and restated, supplemented, or otherwise modified from time to time, the
"Indenture"; capitalized terms used herein and not defined shall have the
meanings assigned to them in the Indenture), pursuant to which Issuer is issuing
its 12 1/2 % senior secured notes due July 15, 2006 (the "Senior Secured Notes")
in the aggregate principal amount of $165,000,000. It is contemplated that
Issuer may, after the date hereof, issue exchange notes pursuant to the
Indenture ("Exchange Notes"; together with the Senior Secured Notes, the
"Notes"). Mortgagor, a subsidiary of Issuer, is unconditionally guaranteeing the
Issuer's obligations under the Notes.
B. Mortgagor is the owner and holder of the tenant's interest under that
certain lease, dated as of March 20, 1998 (as amended from time to time in
accordance with the provisions of this Mortgage, the "Mortgaged Lease") between
WATERFORD INDUSTRIAL DEVELOPMENT AGENCY, as landlord (together with its
successors and assigns, "Lessor") and Mortgagor, as tenant, which affects the
property described on Schedule A annexed hereto. The Mortgaged Lease was
recorded on March 20, 1998 in Liber 1484 at Page 319, in the real property
records of Saratoga County.
C. Mortgagor is executing and delivering this Mortgage to grant to
Mortgagee for its benefit and the benefit of the Holders (collectively, the
"Secured Parties") liens of the character and priority contemplated herein on
the Mortgaged Property to secure the payment and performance of the Secured
Obligations (as hereinafter defined).
D. This Mortgage is given by Mortgagor in favor of Mortgagee for its
benefit and the benefit of the Holders to secure the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all obligations of Issuer now existing or
hereafter arising under or in respect of the Indenture and the Notes (including,
without limitation, Issuer's obligation to pay principal of, premium if any, and
interest on the Notes when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of the such obligations, (ii) all obligations of
Mortgagor now existing or hereafter arising under or in respect of the Indenture
and the Notes (including, without limitation, Mortgagor's obligation arising
under the applicable Subsidiary Guarantee to pay principal of, premium if any,
and interest on the Notes when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related
<PAGE>
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to or in respect of such obligations and (iii) without duplication of the
amounts described in clauses (i) and (ii), all obligations of Mortgagor now
existing or hereafter arising under or in respect of this Mortgage or any other
Security Document, including, without limitation, with respect to all charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this Mortgage
or in any other Security Document, in each case whether in the regular course of
business or otherwise (the obligations described in clauses (i) and (ii),
collectively, the "Secured Obligations").
G R A N T I N G C L A U S E S :
For and in consideration of the sum of Ten Dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor does hereby pledge, give, grant, bargain, sell, assign,
and convey and transfer to Mortgagee, its successors and assigns, with powers of
sale, a security interest in and mortgage lien upon, all Mortgagor's right,
title and interest in, to and under the following property, whether now owned or
held or hereafter acquired from time to time (collectively, the "Mortgaged
Property"):
A. The tenant's interest and estate in the Mortgaged Lease and in all
recorded and unrecorded extensions, amendments, supplements and restatements
thereof, together with all rights, title and interest of the tenant under the
Mortgaged Lease in and to any and all easements, rights-of-way, sidewalks,
strips and gores of land, drives, roads, curbs, streets, ways, alleys, passages,
passageways, sewer rights, waters, water courses, water rights, and all power,
air, light and other rights, estates, titles, interests, privileges, liberties,
servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in
any way demised under the Mortgaged Lease or belonging, relating or appertaining
to the land affected by the Mortgaged Lease, or any part thereof, or which
hereafter shall in any way be demised under the Mortgaged Lease or belong,
relate or be appurtenant thereto (collectively, the "Land");
B. Any and all estates or interests of Mortgagor in the buildings,
structures and other improvements and any and all Alterations (as hereinafter
defined) now or hereafter located or erected on the Land, including, without
limitation, attachments, walks and ways (collectively, the "Improvements";
together with the Land, the "Premises");
C. Any and all permits, certificates, licenses, franchises, consents,
approvals and authorizations, however characterized, issued or in any way
furnished in connection with the Premises, whether necessary or not for the
operation and use of the Premises, including, without limitation, building
permits, certificates of occupancy, environmental certificates, industrial
permits or licenses and certificates of operation;
D. Any and all interest of Mortgagor in all machinery, apparatus,
equipment, fittings, fixtures, improvements and articles of personal property of
every kind and nature whatsoever now or hereafter attached or affixed to the
Premises or used in connection with the use and enjoyment of the Premises or the
maintenance or preservation thereof, including, without limitation, all utility
systems, fire sprinkler and alarm systems, HVAC equipment, boilers, electronic
data processing, telecommunications or computer equipment, refrigeration,
electronic monitoring, water or lighting systems, power, sanitation, waste
removal, elevators, maintenance or other systems or equipment, and all other
articles used or useful in connection with the use or operation of any part of
the Premises (collectively, the "Equipment");
E. All Mortgagor's right, title and interest as landlord, franchisor,
licensor or grantor, in all subleases of space, oil, gas and mineral leases,
franchise agreements, licenses, occupancy or concession agreements now existing
or hereafter entered into relating in any manner to the Premises or the
Equipment and any and all amendments, modifications, supplements and renewals of
any thereof (each such lease, license or
<PAGE>
-3-
agreement, together with any such amendment, modification, supplement or
renewal, a "Sublease"), whether now in effect or hereafter coming into effect,
including, without limitation, all rents, additional rents, cash, guaranties,
letters of credit, bonds, sureties or securities deposited thereunder to secure
performance of the sublessee's, franchisee's, licensee's or obligee's
obligations thereunder, revenues, earnings, profits and income, advance rental
payments, payments incident to assignment, sublease or surrender of a Sublease,
claims for forfeited deposits and claims for damages, now due or hereafter to
become due, with respect to any Sublease, any indemnification against, or
reimbursement for, sums paid and costs and expenses incurred by Mortgagor under
any Sublease or otherwise, and any award in the event of the bankruptcy of any
tenant under or guarantor of a Sublease (collectively, the "Rents");
F. All drawings, surveys, title insurance policies, construction contracts,
plans, specifications, file materials, operating and maintenance records,
catalogues, tenant lists, correspondence, advertising materials, operating
manuals, warranties, guaranties, appraisals, studies and data relating to the
Premises or the Equipment or the construction of any Alteration or the
maintenance of any Permit (as hereinafter defined); and
G.All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation or other awards or payments and refunds
of real estate taxes and assessments, including interest thereon (collectively,
"Proceeds");
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee for the purpose
of securing payment and performance of the Secured Obligations, and Mortgagor
hereby binds itself and its successors and assigns to warrant and forever defend
the Mortgaged Property unto Mortgagee, its substitutes, successors and assigns,
as the case may be, against the claim or claims of all persons claiming or to
claim the same or any party thereof.
Notwithstanding the foregoing, the Mortgaged Property shall not include
property or assets hereafter acquired by Mortgagor which is subject to any
Purchase Money Lien (as defined in the Indenture); provided, however, that at
such time as such property or asset is no longer subject to such Purchase Money
Lien, such property or asset shall (without any act or delivery by any Person)
constitute Mortgaged Property hereunder.
C O V E N A N T S :
Mortgagor warrants, represents and covenants to and for the benefit of
Mortgagee as follows:
ARTICLE I
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF MORTGAGOR
SECTION 1.1 Payment. Mortgagor shall pay as and when the same shall become
due, whether at its stated maturity, by acceleration or otherwise, each and
every amount payable by Mortgagor under the Secured Obligations and shall
perform, at or prior to the same time such performance shall be due all other
obligations of Mortgagor which constitute Secured Obligations.
SECTION 1.2 Authority and Validity. Mortgagor represents, warrants and
covenants that (i) Mortgagor is duly authorized to execute and deliver this
Mortgage and all corporate and governmental consents, authorizations and
approvals necessary or required therefor have been duly and effectively taken or
obtained,
<PAGE>
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(ii) this Mortgage is a legal, valid, binding and enforceable obligation of
Mortgagor and (iii) Mortgagor has full corporate power and lawful authority to
execute and deliver this Mortgage and to mortgage and grant a security interest
in the Mortgaged Property as contemplated herein.
SECTION 1.3 Good Title.
1.3.1 Mortgagor represents, warrants and covenants that (i) Mortgagor owns
the tenant's interest in the Mortgaged Lease and has good and legal title to the
Premises and the landlord's interest, if any, and estate under or in respect of
the Subleases and good title to the interest it purports to own, if any, in and
to each of the Permits, the Equipment and the Contract Rights, in each case
subject to no deed of trust, mortgage, pledge, security interest, encumbrance,
lien, lease, sublease, license, easement, assignment, collateral assignment or
charge of any kind, including, without limitation, any conditional sale or other
title retention agreement or lease or sublease in the nature thereof, any filing
or agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute or any subordination arrangement in favor
of any party other than Mortgagor (collectively, "Liens"; each, a "Lien"),
except for those Liens identified on Schedule B (collectively, the "Prior
Liens"), (ii) (a) the Mortgaged Lease is a valid and subsisting lease, superior
and paramount to all other leases respecting the property to which such
Mortgaged Lease relates, (b) the Mortgaged Lease is in full force and effect and
no default (nor any event which, with notice or lapse of time or both, would
constitute such a default) has occurred or is continuing under the Mortgaged
Lease, and (c) the Mortgaged Lease is not subject to any defenses, offsets or
counterclaims and there have been no renewals or extensions of or supplements,
modifications or amendments to the Mortgaged Lease not previously disclosed to
Mortgagee, (iii) with respect to each Sublease relating to the Mortgaged
Property, each such Sublease is in full force and effect and no default (nor any
event which, with notice or lapse of time or both, would constitute such a
default) has occurred or is continuing thereunder, (iv) it is in actual
possession of the Premises, (v) Mortgagor will keep in effect all rights and
appurtenances to or that constitute a part of the Mortgaged Property, (vi)
Mortgagor will protect, preserve and defend its interest in the Mortgaged
Property and title thereto, (vii) Mortgagor will comply with each of the terms,
conditions and provisions of any obligation of Mortgagor which is secured by the
Mortgaged Property or the noncompliance with which may result in the imposition
of a Lien on the Mortgaged Property, (viii) Mortgagor will appear and defend the
Lien and security interests created and evidenced hereby and the validity and
priority of this Mortgage in any action or proceeding affecting or purporting to
affect the Mortgaged Property or any of the rights of Mortgagee hereunder, (ix)
this Mortgage creates and constitutes a valid and enforceable Lien on the
Mortgaged Property, and, to the extent any of the Mortgaged Property shall
consist of personalty, a security interest in the Mortgaged Property, which Lien
and security interest are and will be subject only to (a) Prior Liens (but not
to extensions, amendments, supplements or replacements of Prior Liens unless
consented to by Mortgagee) and (b) Liens hereafter created and which, pursuant
to the provisions of Section 1.12, are superior to the Lien and security
interests created and evidenced hereby, and Mortgagor does now and will forever
warrant and defend to Mortgagee and all its successors and assigns such title
and the validity and priority of the Lien and security interests created and
evidenced hereby against the claims of all persons and parties whomsoever, (x)
there has been issued and there remain in effect each and every certificate of
occupancy or use or other Permit currently required (except where the same is
being contested in accordance with the provisions of subsection 1.5.5) for the
existing use and occupancy by Mortgagor and its tenants, if any, of the Premises
and (xi) no notice of violation (other than a notice which has previously been
delivered to the Mortgagee or disclosed in the Real Property Officer's
Certificate) has been received by Mortgagor and remains outstanding (except
where the same is being contested in accordance with the provisions of
subsection 1.5.5) with respect to the Premises in connection with local zoning,
land use, set back or other development and use requirements of Governmental
Authorities (as hereinafter defined), other than a violation which would be
acceptable to a Prudent Operator.
<PAGE>
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1.3.2 Mortgagor, immediately upon obtaining knowledge of the pendency of
any proceedings for the eviction of Mortgagor from the Mortgaged Property or any
part thereof by paramount title or otherwise questioning Mortgagor's title to
the Mortgaged Property as warranted in this Mortgage, or of any condition that
might reasonably be expected to give rise to any such proceedings, shall notify
Mortgagee thereof. Mortgagee may participate in such proceedings, and Mortgagor
will deliver or cause to be delivered to Mortgagee all instruments requested by
Mortgagee to permit such participation. In any such proceedings Mortgagee may be
represented by counsel satisfactory to Mortgagee at the expense of Mortgagor.
If, upon the resolution of such proceedings, Mortgagor shall suffer a loss of
the Mortgaged Property or any part thereof or interest therein and title
insurance proceeds shall be payable in connection therewith, such proceeds are
hereby assigned to and shall be paid to Mortgagee to be applied as Net Cash
Proceeds to the payment of the Secured Obligations in accordance with the
provisions of Section 4.04 of the Indenture.
SECTION 1.4 Recording Documentation To Assure Security Interest; Fees and
Expenses.
1.4.1 Mortgagor shall, forthwith after the execution and delivery of this
Mortgage and thereafter, from time to time, cause this Mortgage and any
financing statement, continuation statement or similar instrument relating to
any thereof or to any property intended to be subject to the Lien of this
Mortgage to be filed, registered and recorded in such manner and in such places
as may be required by any present or future law in order to publish notice of
and fully to protect the validity and priority thereof or the Lien hereof
purported to be created upon the Mortgaged Property and the interest and rights
of Mortgagee therein. Mortgagor shall (if it has not already done so), at its
sole cost and expense, properly, duly and validly record an appropriate
memorandum of the Mortgaged Lease and any amendments, or supplements thereto in
each jurisdiction in which any of the Land may be situated. Mortgagor shall pay
or cause to be paid all taxes and fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and
acknowledgment thereof, and of any instrument of further assurance, and all
Federal or state stamp taxes or other taxes, duties and charges arising out of
or in connection with the execution and delivery of such instruments.
1.4.2 Mortgagor shall, at the sole cost and expense of Mortgagor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers, financing
statements, continuation statements and assurances as Mortgagee shall from time
to time reasonably request, which may be necessary in the reasonable judgment of
Mortgagee from time to time to assure, perfect, convey, assign, mortgage,
transfer and confirm unto Mortgagee, the property and rights hereby conveyed or
assigned or which Mortgagor may be or may hereafter become bound to convey or
assign to Mortgagee or for carrying out the intention or facilitating the
performance of the terms of this Mortgage or the filing, registering or
recording of this Mortgage. In the event Mortgagor shall fail after demand to
execute any instrument required to be executed by Mortgagor under this
subsection 1.4.2, Mortgagee may execute the same as the attorney-in-fact for
Mortgagor, such power of attorney being coupled with an interest and
irrevocable.
SECTION 1.5 Payment of Taxes, Insurance Premiums, Assessments; Compliance
with Law and Insurance Requirements.
1.5.1 Unless and to the extent contested by Mortgagor in accordance with
the provisions of subsection 1.5.5 hereof, Mortgagor shall pay and discharge, or
cause to be paid and discharged, from time to time when the same shall become
due and payable by Mortgagor, to the extent such payment and discharge shall be
due from Mortgagor pursuant to the terms of the Mortgaged Lease, all ground
rent, all real estate and other taxes, special assessments, levies, permits,
inspection and license fees, all premiums for insurance, all water and sewer
rents and charges and all other public charges imposed upon or assessed against
the Mortgaged Property or any part thereof or upon the Rents. Mortgagor shall,
upon Mortgagee's request, deliver to Mortgagee, receipts
<PAGE>
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evidencing the payment of all such taxes, assessments, levies, fees, rents and
other public charges imposed upon or assessed against the Mortgaged Property or
any part thereof or the Rents.
1.5.2 From and after the occurrence and during the continuance of an Event
of Default, at the option and upon the request of Mortgagee, Mortgagor shall
deposit with Mortgagee, on the first day of each month, an amount estimated by
Mortgagee to be equal to one-twelfth of the annual taxes, assessments and other
items required to be discharged by Mortgagor under subsection 1.5.1. Such
amounts shall be held by Mortgagee without interest to Mortgagor and applied to
the payment of the obligations in respect of which such amounts were deposited,
in such priority as Mortgagee shall determine, on or before the respective dates
on which such obligations or any part thereof would become delinquent. Nothing
contained in this Section 1.5 shall (i) affect any right or remedy of Mortgagee
under any provision of this Mortgage or of any statute or rule of law to pay any
such amount as provided above from its own funds and to add the amount so paid,
together with interest at a rate per annum (the "Default Rate") equal to the
highest rate then payable under the Notes during such time that any amount
remains outstanding, to the Secured Obligations or (ii) relieve Mortgagor of its
obligations to make or provide for the payment of the annual taxes, assessments
and other charges required to be discharged by Mortgagor under subsection 1.5.1.
Mortgagor hereby grants to Mortgagee a security interest in all sums held
pursuant to this subsection 1.5.2 to secure payment and performance of the
Secured Obligations. During the continuance of any Event of Default, Mortgagee
may, at its option, apply all or any part of the sums held pursuant to this
subsection 1.5.2 to payment and performance of the Secured Obligations.
Mortgagor shall redeposit with Mortgagee an amount equal to all amounts so
applied as a condition to the cure, if any, of such Event of Default in addition
to fulfillment of any other required conditions. Notwithstanding the foregoing
provisions of this subsection 1.5.2, no deposit with Mortgagee in respect of any
item contemplated by this subsection 1.5.2 shall be required if and for so long
as deposits in respect of such item are made by Mortgagor to Lessor under the
Mortgaged Lease.
1.5.3 Unless and to the extent contested by Mortgagor in accordance with
the provisions of subsection 1.5.5, Mortgagor shall timely pay, or cause to be
paid, all lawful claims and demands of mechanics, materialmen, laborers,
government agencies administering worker's compensation insurance, old age
pensions and social security benefits and all other claims, judgments, demands
or amounts of any nature which, if unpaid or not bonded, might result in, or
permit the creation of, a Lien on the Mortgaged Property or any part thereof, or
on the Rents or which might result in forfeiture of all or any part of the
Mortgaged Property.
1.5.4 Except as disclosed in the Real Property Officer's Certificate,
Mortgagor shall maintain, or cause to be maintained, in full force and effect
all permits, certificates, authorizations, consents, approvals, licenses,
franchises or other instruments now or hereafter required by any Governmental
Authority to operate or use and occupy the Premises and the Equipment for its
intended uses (collectively, "Permits"; each, a "Permit"). Except as disclosed
in the Real Property Officer's Certificate, and unless and to the extent
contested by Mortgagor in accordance with the provisions of subsection 1.5.5
hereof, Mortgagor shall comply with all requirements set forth in the Permits
and all requirements of any law, ordinance, rule, regulation or similar statute
or case law (collectively, "Requirements of Law") of any Governmental Authority
applicable to all or any part of the Mortgaged Property or the condition, use or
occupancy of all or any part thereof or any recorded deed of restriction,
declaration, covenant running with the land or otherwise, now or hereafter in
force. Mortgagor shall not initiate, join in, or consent to any change in the
zoning or any other permitted use classification of the Premises without the
prior written consent of Mortgagee, which shall not be unreasonably withheld or
delayed.
1.5.5 To the extent permitted by the Mortgaged Lease, Mortgagor may at its
own expense contest the amount or applicability of any of the obligations
described in subsections 1.3.1 (viii), 1.4.1, 1.5.1, 1.5.3, 1.5.4, 1.15.2 and/or
1.16 by appropriate legal proceedings, prosecution of which operates to prevent
the collection or enforcement thereof and the sale or forfeiture of the
Mortgaged Property or any part thereof to satisfy such obligations; provided,
however, that (i) any such contest shall be conducted in good faith by
appropriate
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proceedings promptly instituted and diligently conducted and (ii) in connection
with such contest, Mortgagor shall, (A) have made provision for the payment or
performance of such contested obligation on Mortgagor's books if and to the
extent required by GAAP or (B) deposited with Mortgagee or with Lessor if so
required by the Mortgaged Lease to hold for the benefit of Mortgagor a sum
sufficient to pay and discharge such obligation and Mortgagee's estimate of all
interest and penalties related thereto or property bonded for such amount or (C)
in the case of any contested judgment, delivered to Trustee an instrument in
which an appropriate insurance carrier shall have agreed in writing that full
insurance coverage (subject to customary deductible) exists in respect of such
contested judgment . Any such deposit (and any income earned thereon) not
otherwise used to pay such obligation, interest or penalties shall be promptly
returned to Mortgagor. Notwithstanding the foregoing provisions of this
subsection 1.5.5, (i) no contest of any such obligations may be pursued by
Mortgagor if such contest would expose Mortgagee or any Holder of Notes to any
possible criminal liability or, unless Mortgagor shall have furnished a bond or
other security therefor reasonably satisfactory to Mortgagee, any additional
civil liability for failure to comply with such obligations and (ii) if at any
time payment or performance of any obligation contested by Mortgagor pursuant to
this subsection 1.5.5 shall become necessary to prevent the delivery of a tax or
similar deed conveying the Mortgaged Property or any portion thereof because of
nonpayment or nonperformance, or to prevent the occurrence of a default (or a
condition which, with the giving of notice or lapse of time or both, may become
a default) under the Mortgaged Lease, Mortgagor shall pay or perform the same,
in sufficient time to prevent the delivery of such tax or similar deed or such
termination or forfeiture.
1.5.6 Mortgagor shall not take any action that could be the basis for
termination, revocation or denial of any insurance coverage required to be
maintained under this Mortgage or that could be the basis for a defense to any
claim under any insurance policy maintained in respect of the Premises or the
Equipment and Mortgagor shall otherwise comply in all respects with the
requirements of any insurer that issues a policy of insurance in respect of the
Premises or the Equipment; provided, however, that Mortgagor may, at its own
expense and after notice to Mortgagee, (i) contest the applicability or
enforceability of any such requirements by appropriate legal proceedings,
prosecution of which does not constitute a basis for cancellation or revocation
of any insurance coverage required under Section 1.7 hereof or (ii) cause the
insurance policy containing any such requirement to be replaced by a new policy
or included in a different policy complying with the provisions of Section 1.7.
1.5.7 Mortgagor shall, promptly upon receipt of any written notice
regarding any failure by Mortgagor to pay or discharge any of the obligations
described in subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a copy of such
notice to Mortgagee.
1.5.8 In the event that the proceeds of any tax claim are paid after
Mortgagee has exercised its right to foreclose the Lien of this Mortgage, such
proceeds shall be paid to Mortgagee to satisfy any deficiency remaining after
such foreclosure. Mortgagee shall retain its interest in the proceeds of any tax
claim during any redemption period. The amount of any such proceeds in excess of
any deficiency claim of Mortgagee shall be released to Mortgagor.
SECTION 1.6 Certain Tax Law Changes. In the event of the passage after the
date of this Mortgage of any law deducting from the value of real property, for
the purpose of taxation, amounts in respect of any Lien thereon or changing in
any way the laws for the taxation of mortgages or debts secured by mortgages for
state or local purposes or the manner of the collection of any such taxes, and
imposing a tax, either directly or indirectly, on this Mortgage, the Indenture
or any other Collateral Document, Mortgagor shall promptly pay to Mortgagee such
amount or amounts as may be necessary from time to time to pay such tax or
otherwise take such action as reasonably required by Mortgagee.
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SECTION 1.7 Required Insurance Policies.
1.7.1 Mortgagor shall comply with all provisions, representations,
warranties, conditions and covenants of the Mortgaged Lease pertaining to
insurance. Mortgagor shall maintain in full force and effect the greater of the
following insurance coverages or the insurance coverages required pursuant to
the terms of the Mortgaged Lease in respect of the Premises and the Equipment;
provided, however, that to the extent that the terms of this Mortgage and the
Mortgaged Lease require identical coverage, Mortgagor need only maintain one
policy or group of policies providing such coverage:
(i) Physical hazard insurance on an "all risk" basis covering, without
limitation, hazards commonly covered by fire and extended coverage,
lightning, windstorm, civil commotion, hail, riot, strike, water damage,
sprinkler leakage, collapse and malicious mischief, in an amount equal to
the full replacement cost of the Improvements and all Equipment, with such
deductibles as Mortgagee may from time to time require, and, if Mortgagee
shall not have imposed any such requirements, with such deductibles as
would be maintained by a Prudent Operator. "Full replacement cost" means
the Cost of Construction (as hereinafter defined) to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time (but not less
frequently than once every twelve (12) months) by a Person selected by
Mortgagor and reasonably acceptable to Mortgagee;
(ii) Commercial general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Premises and
any adjoining streets, sidewalks and passageways, and covering any and all
claims, including, without limitation, all legal liability to the extent
insurable imposed upon Mortgagee and all court costs and attorneys' fees,
arising out of or connected with the possession, use, leasing, operation or
condition of the Premises with policy limits and deductibles in such
amounts as from time to time would be maintained by a Prudent Operator ;
(iii) Worker's compensation insurance as required by the laws of the
state where the Premises are located to protect Mortgagor and Mortgagee
against claims for injuries sustained in the course of employment at the
Premises;
(iv) Explosion insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Mortgagee may from time to time
require, and, if Mortgagee shall not have imposed any such requirements, in
such amounts as would be maintained by a Prudent Operator;
(v) Business interruption insurance and/or loss of "rental value"
insurance covering one year of loss, the term "rental value" to mean the
sum of (a) the total estimated gross rental income from tenant occupation
of the Improvements as furnished and equipped under Subleases and (b) the
total amount of all other charges which are the legal obligation of the
tenants, lessees and sublessees of the Premises under Subleases or in such
amounts as would be maintained by a Prudent Operator;
(vi) If the Premises are located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards
pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973, each as amended, or any successor laws, flood
insurance with policy limits and deductibles in such amounts as Mortgagee
may from time to time reasonably require, and, if Mortgagee shall not have
imposed any such requirements, in such amounts as would be maintained by a
Prudent Operator; and
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(vii) Such other insurance, against such risks and with policy limits
and deductibles in such amounts as Mortgagee may from time to time
reasonably require, and, if no such requirements shall have been imposed,
in such amounts as would be maintained by a Prudent Operator.
1.7.2 All insurance policies required by this Section 1.7 shall be in form
reasonably satisfactory to Mortgagee and may be covered under master or blanket
policies covering other assets and/or activities. All insurance policies in
respect of the coverages required by subsections 1.7.1(i), 1.7.1(iv), 1.7.1(v),
1.7.1(vi) and, if applicable, 1.7.1(vii), shall be in amounts at least
sufficient to prevent coinsurance liability, and all losses thereunder shall be
payable to Mortgagee, as loss payee, pursuant to a standard non-contributory New
York (or similar) mortgagee endorsement. All insurance policies in respect of
the coverages required by subsections 1.7.1(ii), (1.7.1 (iii) and, if
applicable, 1.7.1(vii) shall name Mortgagee as an additional insured in addition
to any additional insureds required to be named under the Mortgaged Lease. Each
policy of insurance required under this Section 1.7 shall provide that it may
not be modified, reduced, cancelled or otherwise terminated without at least
thirty (30) days' prior written notice to Mortgagee and shall permit Mortgagee
to pay any premium therefor within ten (10) days after receipt of any notice
stating that such premium has not been paid when due. All insurance policies
required hereunder shall provide that all losses thereunder shall be payable
notwithstanding any act or negligence of Mortgagor or its agents or employees
which otherwise might have resulted in a forfeiture of all or a part of such
insurance payments. The policy or policies of such insurance or certificates of
insurance evidencing the required coverages, and all renewals or extensions
thereof, shall be delivered to Mortgagee. Settlement of any claim under any of
the insurance policies referred to in this Section 1.7, if such claim involves
(in the reasonable judgment of Mortgagee) loss in excess of $500,000, shall
require the prior written approval of Mortgagee (which written approval shall
not be unreasonably withheld or delayed), and Mortgagor shall use reasonable
efforts to cause each such policy to contain a provision to such effect.
1.7.3 At least thirty(30) days prior to the expiration of any insurance
policy required by this Section 1.7, a policy or policies renewing or extending
such expiring policy or renewal or extension certificates or other reasonable
evidence of renewal or extension and that the applicable policies are in full
force and effect shall be delivered to Mortgagee.
1.7.4 Mortgagor shall not purchase separate insurance policies concurrent
in form or contributing in the event of loss with those policies required to be
maintained under this Section 1.7, unless Mortgagee is included thereon as a
named insured as its interest may appear and, if applicable, with loss payable
to Mortgagee under an endorsement containing the provisions described in
subsection 1.7.2. Mortgagor shall immediately notify Mortgagee whenever any such
separate insurance policy is obtained and shall promptly deliver to Mortgagee
the policy or certificate evidencing such insurance.
1.7.5 Mortgagor shall, immediately upon receipt of any written notice of
any failure by Mortgagor to pay any insurance premium in respect of any
insurance policy required to be maintained under this Section 1.7, furnish a
copy of such notice to Mortgagee.
SECTION 1.8 Failure To Make Certain Payments. If Mortgagor shall fail to
perform any of the covenants contained in this Mortgage, including, without
limitation, Mortgagor's covenants to (i) pay the premiums in respect of all
required insurance coverages, (ii) pay taxes and assessments, (iii) make
repairs, (iv) discharge liens and encumbrances or (v) pay or perform any
obligations of Mortgagor under the Leases, Mortgagee may, but shall not be
obligated to, make advances to perform such covenant on Mortgagor's behalf, and
all sums so advanced shall be included in the Secured Obligations and, to the
extent permitted by applicable law, shall be secured hereby. Mortgagor shall
repay on demand all sums so advanced by Mortgagee on behalf of Mortgagor, with
interest at the Default Rate from the date of payment by Mortgagee to the date
of reimbursement. Neither the provisions of this Section 1.8 nor any action
taken by Mortgagee pursuant to the provisions of
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this Section 1.8 shall prevent any such failure to observe any covenant
contained in this Mortgage from constituting an Event of Default. Mortgagee
shall not be bound to inquire into the validity of any tax, lien or imposition
which Mortgagor fails to pay as and when required hereby and which Mortgagor
does not contest in accordance with the terms hereof.
SECTION 1.9 Inspection. Mortgagor shall permit Mortgagee, by its agents,
accountants and attorneys, to visit and inspect the Premises and any Equipment
located thereon at such reasonable times as may be requested by Mortgagee,
subject to reasonable notice and confidentiality requirements which are not more
restrictive than those maintained by Mortgagor as a matter of general policy.
SECTION 1.10 Mortgagor To Maintain Improvements. Mortgagor shall not commit
or suffer any waste on the Premises or with respect to any Equipment or make any
change in the use of the Premises or any Equipment. Mortgagor represents and
warrants that, to the extent the same would be required by a Prudent Operator
(i) the Premises are served by all utilities required or necessary for the
current use thereof, (ii) all streets necessary to serve the Premises are
completed and serviceable and have been dedicated and accepted as such by the
appropriate Governmental Authorities and (iii) Mortgagor has access to the
Premises from public roads sufficient to allow Mortgagor and its tenants and
invitees to conduct its and their businesses at the Premises in accordance with
sound commercial practices. Mortgagor shall, at all times and to the extent the
same would be maintained or made by a Prudent Operator (i) maintain the Premises
and on-site Equipment in safe and insurable operating order, condition and
repair and (ii) shall make all repairs, structural or nonstructural, when
necessary. Mortgagor shall (i) not alter the occupancy or use of all or any part
of the Premises without the prior written consent of Mortgagee and (ii) to the
extent the same would be done by a Prudent Operator, do all other acts which
from the character or use of the Premises and Equipment may be necessary or
appropriate to maintain and preserve their value.
SECTION 1.11 Mortgagor's Obligations with Respect to Subleases.
1.11.1 Subject to the provisions of subsection 1.11.2 herein, Mortgagor
will manage and operate the Mortgaged Property in a reasonably prudent manner
and will not without the prior written consent of Mortgagee enter into any Lease
of all or any part of the Premises.
1.11.2 Mortgagor shall not:
(i) subject to the provisions of the Indenture, receive or collect, or
permit the receipt or collection of, any rental or other payments under any
Sublease more than one month in advance of the respective period in respect
of which they are to accrue, except that (a) in connection with the
execution and delivery of any Sublease or of any amendment to any Sublease,
rental payments thereunder may be collected and received in advance in an
amount not in excess of one month's rent and/or a reasonable security
deposit may be required thereunder and (b) Mortgagor may receive and
collect escalation and other charges in accordance with the terms of each
Sublease;
(ii) assign, transfer or hypothecate (other than to Mortgagee
hereunder or in accordance with the terms of the applicable Intercreditor
Agreement) any rental or other payment under any Lease whether then due or
to accrue in the future, the interest of Mortgagor as lessor under any
Lease or the rents, issues, revenues, profits or other income of the
Mortgaged Property;
(iii) enter into any Sublease after the date hereof that does not
contain terms to the effect as follows:
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(a) such Sublease and the rights of the tenant thereunder
(including, without limitation, any options to purchase or rights of
first offer or refusal) shall be subject and subordinate to the rights
of Mortgagee under and the Lien of this Mortgage;
(b) such Sublease has been assigned as collateral security by
Mortgagor as landlord thereunder to Mortgagee under this Mortgage;
(c) in the case of any foreclosure hereunder, the rights and
remedies of the tenant in respect of any obligations of any successor
landlord thereunder shall be limited to the equity interest of such
successor landlord in the Premises and any successor landlord shall
not (1) be liable for any act, omission or default of any prior
landlord under the Sublease, (2) be required to make or complete any
tenant improvements or capital improvements or repair, restore,
rebuild or replace the demised premises or any part thereof in the
event of damage, casualty or condemnation or (3) be required to pay
any amounts to tenant arising under the Sublease prior to such
successor landlord taking possession;
(d) the tenant's obligation to pay rent and any additional rent
shall not be subject to any abatement, deduction, counterclaim or
setoff as against any mortgagee or purchaser upon the foreclosure of
any of the Premises or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to such
foreclosure or delivery of such deed and such mortgagee or purchaser
will not be bound by any advance payments of rent in excess of one
month or any security deposits unless such security was actually
received by Mortgagee (or in the case of a letter of credit, was
properly transferred in negotiable form);
(e) the tenant agrees to attorn, at the option of Mortgagee or
any purchaser of the Premises, upon a foreclosure of the Premises or
the giving or granting of a deed in lieu thereof; and
(f) the tenant agrees to give notice to Mortgagee of any default
by landlord under the Sublease and Mortgagee shall have a reasonable
time to cure, should Mortgagee so elect, any default of landlord prior
to tenant exercising any rights of tenant to terminate or cancel such
Sublease.
(iv) enter into any amendment or modification of any Sublease which
would materially and adversely change the unexpired term thereof or
decrease the amount of the rents or other amounts payable thereunder or
which would impair the value or utility of the Mortgaged Property or the
security provided by this Mortgage;
(v) enter into any further lease or sublease of the property subject
to any Sublease without the prior written consent of Mortgagee, unless such
Sublease is not amended in any respect and the primary obligor under such
Sublease is not released in any respect from its responsibilities and
liabilities under such Sublease as a result of such lease or sublease;
(vi) terminate (whether by exercising any contractual right of
Mortgagor to recapture leased space or otherwise) or permit the termination
of any Sublease or accept surrender of all or any portion of the space
demised under any Lease prior to the end of the term thereof or accept
assignment of any Sublease to Mortgagor unless:
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(a) the tenant under such Sublease has not paid the equivalent of
two months' rent and Mortgagor has made reasonable efforts to collect
such rent; or
(b) Mortgagor shall deliver to Mortgagee an Officer's Certificate
to the effect that Mortgagor has entered into a new Sublease (or
Subleases) for the space covered by the terminated or assigned
Sublease with a term (or terms) which expire(s) no earlier than the
date on which the terminated or assigned Sublease was to expire
(excluding renewal options), and with a tenant (or tenants) having a
creditworthiness (as reasonably determined by Mortgagor) sufficient to
pay the rent and other charges due under the new Sublease (or
Subleases), and the tenant(s) shall have commenced paying rent,
including all operating expenses and other amounts payable under the
new Lease (or Leases) without any abatement or concession; or
(vii) waive, excuse, condone or in any manner discharge or release any
tenants of or from the obligations of such tenants under their respective
Subleases or guarantors of tenants from obligations under any guarantees of
the Subleases except in the ordinary and prudent course of business with
due regard for the security afforded Mortgagee thereby.
1.11.3 Mortgagor shall timely perform and observe all the terms, covenants
and conditions required to be performed and observed by Mortgagor under each
Sublease and shall at all times do all things necessary to require performance
by the sublessee, franchisee, licensee or grantee under each Sublease of all
obligations, covenants and agreements by such party to be performed thereunder.
Mortgagor shall promptly notify Mortgagee of the receipt of any notice from any
sublessee under any Sublease claiming that Mortgagor is in default in the
performance or observance of any of the terms, covenants or conditions thereof
to be performed or observed by Mortgagor and will cause a copy of each such
notice to be promptly delivered to Mortgagee.
1.11.4 Mortgagor shall furnish to Mortgagee, within thirty (30) days after
each reasonable request by Mortgagee to do so, a written statement in respect of
any or all of the Subleases setting forth the space occupied, if any, the
property affected thereby, the rentals or other amounts payable thereunder, and
such other information as Mortgagee may reasonably request.
SECTION 1.12 Transfer Restrictions. Except as provided in Sections 1.3.1 or
1.11 hereof or permitted by and in accordance with the provisions of the
Indenture, Mortgagor may not, without the prior written consent of Mortgagee,
and the consent of Lessor, if any, as may be required by the Mortgaged Lease
further mortgage, encumber, hypothecate, sell, convey or assign all or any part
of the Mortgaged Property or suffer any of the foregoing to occur by operation
of law or otherwise. Notwithstanding the provisions of the foregoing sentence,
so long as no Event of Default shall have occurred and be continuing, Mortgagor
shall have the right to, subject to any provision in the Mortgaged Lease to the
contrary, suffer, in respect of the Mortgaged Property:
(i) The Liens in respect of amounts payable or obligations to be performed
by Mortgagor pursuant to subsections 1.3.1(viii), 1.4.1, 1.5.1, 1.5.3,
1.5.4, 1.15.2 and/or 1.16; provided, however, that such amounts are
not yet due and payable or are being contested in accordance with the
provisions of subsection 1.5.5;
(ii) Prior Liens;
(iii) The Lien and security interest granted to Mortgagee pursuant to this
Mortgage;
(iv) As to each category or type of Mortgaged Property, the Liens described
in Section 2.1(b) of the Existing Lien Intercreditor Agreement which
are subject and subordinate
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to the Lien and security interest evidenced by this Mortgage in such
category or type of Mortgaged Property and refinancings thereof to the
extent permitted under the Indenture and the Existing Lien
Intercreditor Agreement; and
(v) Liens of the type described in clauses (4), (5), (20) and (22) of the
definition of Permitted Liens and refinancings thereof to the extent
permitted under the Indenture and the Intercreditor Agreements and
with respect to any After-Acquired Property, the Liens of the type
described in clause (11) (provided, however, such Lien shall extend
only to After-Acquired Property at any time having a fair market value
not to exceed $5 million) and (28) (provided, however, such Lien shall
extend only After-Acquired Property at any time having a fair market
value not to exceed $10 million) of the definition of Permitted Liens.
Each of the Liens and other transfers permitted by this Section 1.12 shall in
all respects be subject and subordinate in priority to the Lien and security
interests created and evidenced hereby except as provided in the Intercreditor
Agreements or to the extent the law or regulation creating or authorizing such
Lien provides that such Lien must be superior to the Lien and security interest
created and evidenced hereby.
SECTION 1.13 Destruction; Condemnation.
1.13.1 Destruction; Insurance Proceeds. If there shall occur any damage to,
or loss or destruction of, the Improvements, Equipment, or any part of any
thereof (each, a "Destruction"), Mortgagor shall, in addition to any notices
required under the Mortgaged Lease, promptly send to Mortgagee a notice setting
forth the nature and extent of such Destruction. Pursuant to the provisions of
the Intercreditor Agreements, the proceeds of any insurance payable in respect
of such Destruction shall constitute Trust Moneys and are hereby assigned and,
subject to the provisions of and to the greatest extent permitted by the
Mortgaged Lease, shall be paid to Mortgagee. All such proceeds, together with
any interest earned thereon, less the amount of any expenses incurred in
litigating, arbitrating, compromising or settling any claim arising out of such
Destruction (the "Net Proceeds"), shall, pursuant to the terms and provisions of
the Intercreditor Agreements, constitute Trust Moneys and be applied in
accordance with the provisions of the Indenture. Mortgagee is hereby authorized
and directed to pay from Trust Moneys any and all such expenses deemed necessary
and reasonable by Mortgagee in connection with the foregoing.
1.13.2 Condemnation; Assignment of Award. If there shall occur any taking
of the Mortgaged Property or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, general or special, or by reason
of the temporary requisition of the use or occupancy of the Mortgaged Property
or any part thereof, by any Governmental Authority, civil or military (each, a
"Taking"), Mortgagor shall, in addition to any notices required under the
Mortgaged Lease, immediately notify Mortgagee upon receiving notice of such
Taking or commencement of proceedings therefor. Mortgagee may participate in any
proceedings or negotiations which might result in any Taking, and Mortgagor
shall deliver or cause to be delivered to Mortgagee all instruments reasonably
requested by it to permit such participation. Mortgagee may be represented by
counsel satisfactory to it at the expense of Mortgagor in connection with any
such participation. Mortgagor shall in good faith and with due diligence file
and prosecute what would otherwise be Mortgagor's claim for any such award or
payment and cause the same to be collected and paid over to Mortgagee, and
hereby irrevocably authorizes and empowers Mortgagee, in the name of Mortgagor
as its true and lawful attorney-in-fact or otherwise, to collect and to receipt
for any such award or payment, and in the event Mortgagor fails so to act or is
otherwise in default hereunder beyond any applicable notice and grace period set
forth herein or in the Indenture, to file and prosecute such claim. Mortgagor
shall pay all reasonable fees, costs and expenses incurred by Mortgagee in
connection with any Taking and in seeking and obtaining any award or payment on
account thereof. Any
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proceeds, award or payment in respect of any Taking shall constitute Trust
Moneys and are hereby assigned and, subject to the provisions of and to the
greatest extent permitted by the Mortgaged Lease, shall be paid to Mortgagee and
shall be applied in accordance with the provisions of the Indenture. Mortgagor
shall take all steps necessary to notify the condemning authority of such
assignment. Such proceeds, award or payment, together with any interest earned
thereon, less the amount of any expenses incurred in litigating, arbitrating,
compromising or settling any claim arising out of such Taking (the "Net Award"),
shall constitute Trust Moneys and be applied in accordance with the provisions
of the Indenture. Mortgagee is hereby authorized and directed to pay from Trust
Moneys any and all such expenses deemed necessary and reasonable by Mortgagee in
connection with the foregoing.
SECTION 1.14 Alterations. Mortgagor shall not, without the prior written
consent of Mortgagee and Lessor (if Lessor's consent is required under the
Mortgaged Lease), make any addition, modification or change (each, an
"Alteration"), structural or nonstructural, to the Premises that costs more to
effect than $500,000. Upon the making of any Alteration permitted under the
Mortgaged Lease, whether or not Mortgagee has consented to the making of any
Alteration, Mortgagor shall (i) complete each Alteration promptly, in a good and
workmanlike manner and in compliance with all applicable local laws, ordinances
and requirements and (ii) pay when due all claims for labor performed and
materials furnished in connection with such Alteration, unless contested in
accordance with the provisions of subsection 1.5.5.
SECTION 1.15 Hazardous Material.
1.15.1 Mortgagor represents and warrants that except as disclosed in the
Real Property Officer's Certificate (i) there are in effect all material
permits, licenses and other authorizations which are required with respect to
the ownership and operation of its business and the Mortgaged Property under any
and all applicable Environmental Laws, (ii) in all material respects, it is in
compliance with all terms and conditions of the required permits, licenses and
authorizations, and is also in compliance with Environmental Laws, including,
without limitation, all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws, (iii) there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or violation, investigation,
proceeding, notice of demand letter pending or threatened against it or any
subsidiary under the Environmental Laws which could result in a material fine,
penalty or other material cost or expense and (iv) there are no past or present
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance with, in each case, in any
material respect, the Environmental Laws, or which may give rise to any material
common law or legal liability, including, without limitation, liability under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or any other Environmental Law or related common law theory or
otherwise form the basis of any claim, action, demand, suit, proceeding, hearing
or notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Materials which could
result in a material fine, penalty or other material cost or expense, unless
contested in accordance with the provisions of subsection 1.5.5.
1.15.2 Mortgagor shall (i) comply with any and all present and future
Environmental Laws, (ii) not release, store, treat, handle, generate, discharge
or dispose of any Hazardous Materials at, on, under or from the Mortgaged
Property in violation of or in a manner that could result in any liability under
any present and future Environmental Law and (iii) take all necessary steps to
initiate and expeditiously complete all remedial, corrective and other action to
eliminate any such effect. In the event Mortgagor fails to comply with the
covenants in the preceding sentence, Mortgagee may, but shall not be obligated
to, in addition to any other remedies set forth herein, as agent for and at
Mortgagor's sole cost and expense, following written notice to Mortgagor and to
Issuer cause any necessary remediation, removal or response action relating to
Hazardous Materials to be
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taken and Mortgagor shall provide to Mortgagee and its agents and employees
access to the Mortgaged Property for such purpose. Any and all costs or expenses
incurred by Mortgagee for such purpose shall be immediately due and payable by
Mortgagor and shall bear interest at the Default Rate. Mortgagee shall have
during the time that the Secured Obligations are outstanding, at the sole cost
and expense of Mortgagor, the right to conduct an environmental assessment of
the Mortgaged Property (i) annually or (ii) following an Event of Default, which
is continuing, by such persons or firms appointed by Mortgagee, and Mortgagor
shall cooperate in all respects in the conduct of such environmental assessment,
including, without limitation, by providing access to the Mortgaged Property and
to all records relating thereto. To the extent that any environmental assessment
identifies conditions which violate, or could reasonably be expected to give
rise to liability or obligations under, Environmental Laws, Mortgagor agrees to
expeditiously correct any such violation or respond to conditions giving rise to
such liability or obligations in a manner which complies with the Environmental
Laws and mitigates associated health and environmental risks. Mortgagor shall
indemnify and hold Mortgagee and the Holders harmless from and against all loss,
cost, damage (including, without limitation, consequential damages) and
reasonable expense (including, without limitation, reasonable attorneys' and
consultants' fees and disbursements and the reasonable allocated costs of staff
counsel) (collectively referred to as "Losses") that Mortgagee or the Holders
may sustain by reason of the assertion against Mortgagee or the Holders by any
party of any claim relating to such Hazardous Materials at, on, under or from
the Mortgaged Property or actions taken with respect thereto as authorized
hereunder excluding any such Losses to the extent finally determined by a court
of competent jurisdiction in a final, non-appealable judgment to have arisen
from the gross negligence or willful misconduct of the party seeking
indemnification. The foregoing indemnification shall survive repayment of all
Secured Obligations and any release or assignment of this Mortgage. Nothing
contained herein or in any other document shall result in Mortgagee or the
Holders being deemed an "owner", "operator" or "generator" under applicable
Environmental Laws, as hereinafter defined, including, without limitation, those
enacted hereafter. "Environmental Laws", for the purposes of this Mortgage,
means the common law and all (i) Federal, state, local and foreign laws,
regulations, codes or orders, and (ii) decrees, judgments or injunctions to
which Mortgagor or a predecessor in interest of the Mortgaged Property is a
named party, issued, promulgated, approved or entered thereunder, in each case,
relating to pollution or protection of public or employee health or the
environment, including, without limitation, those relating to handling, use,
storage, treatment, disposal, removal, emission, discharge or release of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes, including, without limitation, petroleum, including crude
oil or any petroleum product or any fraction thereof, and asbestos and
asbestos-containing material (collectively, "Hazardous Materials") into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and indoor air) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
SECTION 1.16 Asbestos. Mortgagor shall not install nor permit to be
installed in or removed from the Mortgaged Property, asbestos or any
asbestos-containing material (collectively, "ACM") except in compliance with all
applicable present and future Environmental Laws, and with respect to any ACM
currently present in the Mortgaged Property, Mortgagor shall expeditiously
either (i) remove or encapsulate any ACM which such Environmental Laws require
to be removed or (ii) otherwise comply with such Environmental Laws with respect
to such ACM, all at Mortgagor's sole cost and expense. If Mortgagor shall fail
so to remove or encapsulate any ACM or otherwise comply with such Environmental
Laws, Mortgagee may, but shall not be obligated to, in addition to any other
remedies set forth herein, following written notice to Mortgagor and to Issuer,
take whatever steps it deems necessary or appropriate so comply with applicable
Environmental Laws and Mortgagor shall provide to Mortgagee and its agents and
employees access to the Mortgaged Property for such purpose. Any and all costs
or expenses incurred by Mortgagee for such purpose shall be immediately due and
payable by Mortgagor and bear interest at the Default Rate. Mortgagor shall
indemnify and hold Mortgagee and the Holders harmless from and against all loss,
cost, damage (including, without limitation, consequential damages) and
reasonable expense (including, without limitation, reasonable attorneys' and
consultants' fees and disbursements and the reasonable allocated costs of staff
counsel) that Mortgagee or the Holders may sustain, as a result
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of the presence of any ACM and any removal or encapsulation thereof or
compliance with all applicable present and future Environmental Laws. The
foregoing indemnification shall survive repayment of all Secured Obligations and
any release or assignment of this Mortgage.
SECTION 1.17 Books and Records, Other Information.
1.17.1 Mortgagor shall keep proper books of record and account in which
full, true and correct entries shall be made of all dealings or transactions of
or in relation to the Mortgaged Property and the business and affairs of
Mortgagor relating to the Mortgaged Property. Mortgagee and its authorized
representatives shall have the right at reasonable times and upon reasonable
notice to examine the books and records of Mortgagor relating to the operation
of the Mortgaged Property.
1.17.2 Mortgagor shall, at any and all times, within a reasonable time
after written request by Mortgagee, furnish or cause to be furnished to
Mortgagee, in such manner and in such detail as may be reasonably requested by
Mortgagee, additional information with respect to the Mortgaged Property.
SECTION 1.18 No Claims Against Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request by Mortgagee, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or any part thereof, nor
as giving Mortgagor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against
Mortgagee in respect thereof or any claim that any Lien based on the performance
of such labor or services or the furnishing of any such materials or other
property is prior to the Lien of this Mortgage.
SECTION 1.19 Utility Services. Mortgagor shall pay, or cause to be paid,
when due all charges for all public or private utility services, all public or
private rail and highway services, all public or private communication services,
all sprinkler systems, all protective services and any other services of
whatever kind or nature at any time rendered to or in connection with the
Premises or any part thereof, shall comply with all contracts relating to any
such services and shall do all other things required for the maintenance and
continuance of all such services to the extent required to fulfill the
obligations set forth in Section 1.10.
SECTION 1.20 Mortgaged Lease.
1.20.1 Mortgagor shall punctually and properly perform, observe and
otherwise comply with each and every covenant, agreement, requirement and
condition set forth in the Mortgaged Lease and do or cause to be done all things
necessary or appropriate to keep the Mortgaged Lease in full force and effect
and to preserve and keep unimpaired the rights of Mortgagor thereunder. Upon
request of Mortgagee, Mortgagor shall, subject to the terms of the Mortgaged
Lease, request from Lessor an estoppel certificate, addressed to Mortgagee,
stating that there is no default under the Mortgaged Lease, or any state of
facts which, with the passage of time or notice or both, would constitute a
default thereunder, or if there be any default under the Mortgaged Lease, giving
the details thereof.
1.20.2 In the event Mortgagor acquires the fee simple title or any other
estate or interest in the property subject to the Mortgaged Lease, such
acquisition will not merge with the leasehold estate created by the Mortgaged
Lease, but such other estate or interest will remain discrete and immediately
become subject to the Lien of this Mortgage, and Mortgagor shall execute,
acknowledge and deliver any instruments requested by Mortgagee to confirm the
coverage of the Lien evidenced hereby upon such other estate or interest.
Mortgagor shall pay any and all conveyance or mortgage taxes and filing or
similar fees in connection with the execution, delivery, filing or recording of
any such instrument.
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1.20.3 Mortgagor shall promptly notify Mortgagee in writing of the
occurrence of any default (or any event which, with the lapse of time or notice
or both, would constitute a default) on the part of or caused by any party to
the Mortgaged Lease. If for any reason Mortgagor cannot timely make any payment
under the Mortgaged Lease or perform or comply with any of its obligations under
the Mortgaged Lease, Mortgagor shall notify Mortgagee in sufficient time to
enable Mortgagee (but Mortgagee shall not be obligated) timely to make such
payments and/or to perform or comply with such other obligations. On receipt by
Mortgagee from Mortgagor pursuant to this subsection 1.20.3, or from Lessor
under the Mortgaged Lease, of any such notice of default by, or inability to
make any payment by, Mortgagor thereunder, Mortgagee may rely thereon and, after
notice to Mortgagor, take such action as Mortgagee deems necessary or desirable
to cure such default, even though the existence of such default or the nature
thereof is denied by Mortgagor or by any other person.
1.20.4 Mortgagor shall not surrender the leasehold estate created by the
Mortgaged Lease, or terminate or cancel the Mortgaged Lease. Mortgagor shall
not, without the prior written consent of Mortgagee, amend, modify, surrender,
impair, forfeit, cancel, or terminate, or permit the amendment, modification,
surrender, impairment, forfeiture, cancellation, or termination of the Mortgaged
Lease in whole or in part, whether or not a default shall have occurred and
shall be continuing under either thereof. Any such termination, cancellation,
modification, change, supplement, alteration, amendment or extension without the
prior written consent contemplated by this subsection 1.20.4 shall be void and
of no force or effect.
1.20.5 No release or forbearance of any of Mortgagor's obligations under
the Mortgaged Lease, pursuant to the terms thereof, by agreement, operation of
law or otherwise, shall release Mortgagor from any of Mortgagor's obligations
under this Mortgage, including, without limitation, Mortgagor's obligations with
respect to the payment of rent as provided in the Mortgaged Lease and the
performance of all of the other terms, provisions, covenants, conditions and
agreements contained in the Mortgaged Lease to be performed by Mortgagor
thereunder.
1.20.6 The leasehold estate of Mortgagor created by the Mortgaged Lease and
the estate of Lessor under the Mortgaged Lease shall each at all times remain
separate and apart and retain their separate identities, and no merger of the
leasehold or easement estate of Mortgagor with the estate of Lessor will result
with respect to Mortgagee or with respect to any purchaser acquiring the
Mortgaged Property at any sale on foreclosure of the Lien of this Mortgage
without the written consent of Mortgagee.
1.20.7 Mortgagor covenants and agrees that the Mortgaged Lease now is and
shall at all times be subject in each and every respect to the terms, conditions
and Lien of this Mortgage. Mortgagor shall execute, acknowledge and deliver any
instruments requested by Mortgagee to confirm the foregoing.
1.20.8 Mortgagor covenants and agrees that if it shall be the subject to a
proceeding under the Federal Bankruptcy Code, it shall not elect to treat the
Mortgaged Lease as terminated (pursuant to Section 365 of the Federal Bankruptcy
Code or any similar statute or law) without the prior written consent of
Mortgagee. Mortgagor hereby irrevocably assigns to Mortgagee the right to
exercise such election.
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ARTICLE II
ASSIGNMENT OF SUBLEASES; SECURITY AGREEMENT;
ASSIGNMENT AGREEMENT
SECTION 2.1 Assignment of Subleases, Rents, Issues and Profits.
2.1.1 Mortgagor absolutely, presently and irrevocably assigns, transfers
and sets over to Mortgagee, and grants to Mortgagee subject to the terms and
conditions hereof, all Mortgagor's estate, right, title, interest, claim and
demand as landlord to collect rent and other sums due under all existing
Subleases and any other Sublease, including, without limitation, all extensions
of the terms of the Subleases (such assigned rights, "Mortgagor's Interest"), as
follows:
(i) the immediate and continuing right to receive and collect Rents
payable by all tenants or other parties pursuant to the Sublease;
(ii) all claims, rights, powers, privileges and remedies of Mortgagor,
whether provided for in any Lease or arising by statute or at law or in
equity or otherwise, consequent on any failure on the part of any tenant to
perform or comply with any term of any Sublease;
(iii) all rights to take all actions upon the happening of a default
under any Sublease as shall be permitted by such Sublease or by law,
including, without limitation, the commencement, conduct and consummation
of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Mortgagor or
otherwise, to enforce, collect, receive and receipt for any and all of the
foregoing and to do any and all other acts and things whatsoever which
Mortgagor or any landlord is or may be entitled to do under the Subleases.
2.1.2 Any Rents receivable by Mortgagee hereunder, after payment of all
proper costs and charges, shall be applied to all amounts due and owing under
and as provided in this Mortgage and the Indenture. Mortgagee shall be
accountable to Mortgagor only for Rents actually received by Mortgagee pursuant
to this assignment. The collection of such Rents and the application thereof
shall not cure or waive any Event of Default or waive, modify or affect notice
of Event of Default or invalidate any act done pursuant to such notice.
2.1.3 So long as no Event of Default shall have occurred and be continuing,
Mortgagor shall have a license to collect and apply the Rents and to enforce the
obligations of tenants under the Subleases. Immediately upon the occurrence and
during the continuance of any Event of Default, the license granted in the
immediately preceding sentence shall cease and terminate, with or without any
notice, action or proceeding or the intervention of a receiver appointed by a
court. Upon the occurrence of an Event of Default and during the continuance
thereof, Mortgagee may, to the fullest extent permitted by the Subleases, (i)
exercise any of Mortgagor's rights under the Subleases, (ii) enforce the
Subleases, (iii) demand, collect, sue for, attach, levy, recover, receive,
compromise and adjust, and make, execute and deliver receipts and releases for
all Rents or other payments that may then be or may thereafter become due, owing
or payable with respect to the Subleases and (iv) generally, do, execute and
perform any other act, deed, matter or thing whatsoever that ought to be done,
executed and performed in and about or with respect to the Subleases, as fully
as allowed or authorized by Mortgagor's Interest.
2.1.4 Upon the occurrence and during the continuance of an Event of
Default, Mortgagor shall, at the direction of Mortgagee, further authorize and
direct the tenant under each Sublease to pay directly to, or as directed by,
Mortgagee all Rents accruing or due under its Sublease without proof to the
tenant of the
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occurrence and continuance of such Event of Default. Mortgagor hereby authorizes
the tenant under each Sublease to rely upon and comply with any notice or demand
from Mortgagee for payment of Rents to Mortgagee and Mortgagor shall have no
claim against any tenant for Rents paid by such tenant to Mortgagee pursuant to
such notice or demand.
2.1.5 Mortgagor at its sole cost and expense shall use commercially
reasonable efforts to enforce the Subleases in accordance with their terms to
the extent that the same would be enforced by a Prudent Operator. Neither this
Mortgage nor any action or inaction on the part of Mortgagee shall release any
tenant under any Sublease, any guarantor of any Sublease or Mortgagor from any
of their respective obligations under the Subleases or constitute an assumption
of any such obligation on the part of Mortgagee. No action or failure to act on
the part of Mortgagor shall adversely affect or limit the rights of Mortgagee
under this Mortgage or, through this Mortgage, under the Subleases.
2.1.6 All rights, powers and privileges of Mortgagee herein set forth are
coupled with an interest and are irrevocable, subject to the terms and
conditions hereof, and Mortgagor shall not take any action under the Leases or
otherwise which is inconsistent with this Mortgage or any of the terms hereof
and any such action inconsistent herewith or therewith shall be void. Mortgagor
shall, from time to time, upon request of Mortgagee, execute all instruments and
further assurances and all supplemental instruments and take all such action as
Mortgagee from time to time may reasonably request in order to perfect, preserve
and protect the interests intended to be assigned to Mortgagee hereby.
2.1.7 Mortgagor shall not, unilaterally or by agreement, subordinate,
amend, modify, extend, discharge, terminate, surrender, waive or otherwise
change any term of any of the Subleases in any manner which would violate this
Mortgage. If the Subleases shall be amended as permitted hereby, they shall
continue to be subject to the provisions hereof without the necessity of any
further act by any of the parties hereto. To the extent Mortgagor has subleased
the Premises or a portion thereof in accordance with the provisions of this
Mortgage, Mortgagee, upon Mortgagor's request, may enter into with any subtenant
under such sublease a non-disturbance agreement in the form attached as Exhibit
H to the Indenture.
2.1.8 Nothing contained herein shall operate or be construed to (i)
obligate Mortgagee to perform any of the terms, covenants or conditions
contained in the Subleases or otherwise to impose any obligation upon Mortgagee
with respect to the Subleases (including, without limitation, any obligation
arising out of any covenant of quiet enjoyment contained in the Subleases in the
event that any tenant under a Lease shall have been joined as a party defendant
in any action by which the estate of such tenant shall be terminated) or (ii)
place upon Mortgagee any responsibility for the operation, control, care,
management or repair of the Premises.
SECTION 2.2 Security Interest in Personal Property.
2.2.1 This Mortgage shall constitute a security agreement and shall create
and evidence a security interest or common law Lien in all the Equipment and in
all the other items of Mortgaged Property in which a security interest may be
granted or a common law pledge created pursuant to the Uniform Commercial Code
as in effect in the state in which the Premises are located or under the common
law in such state (collectively, "Personal Property").
2.2.2 Upon the occurrence of any Event of Default, in addition to the
remedies set forth in Article III, Mortgagee shall have the power to sell the
Personal Property in accordance with the Uniform Commercial Code as enacted in
the state in which the Premises are located or under other applicable law. It
shall not be necessary that any Personal Property offered be physically present
at any such sale or constructively in the possession of Mortgagee or the person
conducting the sale.
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2.2.3 Upon the occurrence and during the continuance of any Event of
Default, Mortgagee may sell the Personal Property or any part thereof at public
or private sale with notice to Mortgagor as hereinafter provided. The proceeds
of any such sale, after deducting all expenses of Mortgagee in taking, storing,
repairing and selling the Personal Property (including, without limitation,
attorneys' fees and legal expenses), shall be applied in the manner set forth in
subsection 3.3.3. At any sale, public or private, of the Personal Property or
any part thereof, Mortgagee may purchase any or all of the Personal Property
offered at such sale.
2.2.4 Mortgagee shall give Mortgagor reasonable notice of any sale of any
of the Personal Property pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is mailed
at least five (5) days prior to any sale, by first class or certified mail,
postage prepaid, to Mortgagor at its address determined in accordance with the
provisions of Section 5.2.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Events of Default. It shall be an Event of Default hereunder if
there shall have occurred and be continuing an Event of Default under the
Indenture.
SECTION 3.2 Remedies in Case of an Event of Default. If any Event of
Default shall have occurred and be continuing, Mortgagee may at Mortgagee's
option, exercised in accordance with the provisions of the Indenture, in
addition to any other action permitted under this Mortgage or the Indenture or
by law, statute or in equity, take one or more of the following actions:
3.2.1 by written notice to Mortgagor, declare the entire unpaid amount of
the Secured Obligations to be due and payable immediately;
3.2.2 personally, or by its agents or attorneys, (i) give notice of such
Event of Deault to Lessor, (ii) to the extent permitted by the Mortgaged Lease,
act in all respects as lessee in respect of Mortgaged Lease and perform, on
behalf of and for the account of Mortgagor, any of the obligations of lessee
thereunder, (iii) enter into and upon and take possession of all or any part of
the Premises together with the books, records and accounts of Mortgagor relating
thereto and, exclude Mortgagor, its agents and servants wholly therefrom, (iv)
use, operate, manage and control the Premises and the Equipment and conduct the
business thereof, (v) maintain and restore the Premises and the Equipment, (vi)
make all necessary or proper repairs, renewals and replacements and such useful
Alterations thereto and thereon as Mortgagee may deem advisable, (vii) manage,
lease and operate the Premises and carry on the business thereof and exercise
all rights and powers of Mortgagor with respect thereto either in the name of
Mortgagor or otherwise or (viii) collect and receive all earnings, revenues,
rents, issues, profits and income of the Mortgaged Property and every part
thereof.
3.2.3 with or without entry, personally or by its agents or attorneys, (i)
sell the Mortgaged Property and all estate, right, title and interest, claim and
demand therein at one or more sales in one or more parcels, in accordance with
the provisions of Section 3.3 or (ii) institute and prosecute proceedings for
the complete or partial foreclosure of the Lien and security interests created
and evidenced hereby; or
3.2.4 take such steps to protect and enforce its rights whether by action,
suit or proceeding at law or in equity for the specific performance of any
covenant, condition or agreement in the Indenture and the other Collateral
Documents, or in aid of the execution of any power granted in this Mortgage, or
for any foreclosure
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hereunder, or for the enforcement of any other appropriate legal or equitable
remedy or otherwise as Mortgagee shall elect.
SECTION 3.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds
of Sale.
3.3.1 If any Event of Default shall have occurred and be continuing,
Mortgagee may institute an action to foreclose this Mortgage or take such other
action as may be permitted and available to Mortgagee at law or in equity for
the enforcement of the Indenture and the Notes and realization on the Mortgaged
Property and proceeds thereon through power of sale or to final judgment and
execution thereof for the Secured Obligations, and in furtherance thereof
Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety
or in parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by law or statute or in equity.
Mortgagee may execute and deliver to the purchaser at such sale a conveyance of
the Mortgaged Property in fee simple and an assignment or conveyance of all
Mortgagor's Interest in the Leases and the Mortgaged Property, each of which
conveyances and assignments shall contain recitals as to the Event of Default
upon which the execution of the power of sale herein granted depends, and
Mortgagor hereby constitutes and appoints Mortgagee the true and lawful
attorney-in-fact of Mortgagor to make any such recitals, sale, assignment and
conveyance, and all of the acts of Mortgagee as such attorney-in-fact are hereby
ratified and confirmed. Mortgagor agrees that such recitals shall be binding and
conclusive upon Mortgagor and that any assignment or conveyance to be made by
Mortgagee shall divest Mortgagor of all right, title, interest, equity and right
of redemption, including any statutory redemption, in and to the Mortgaged
Property. The power and agency hereby granted are coupled with an interest and
are irrevocable by death or dissolution, or otherwise, and are in addition to
any and all other remedies which Mortgagee may have hereunder, at law or in
equity. So long as the Secured Obligations, or any part thereof, remain unpaid,
Mortgagor agrees that possession of the Mortgaged Property by Mortgagor, or any
person claiming under Mortgagor, shall be as tenant, and, in case of a sale
under power or upon foreclosure as provided in this Mortgage, Mortgagor and any
person in possession under Mortgagor, as to whose interest such sale was not
made subject, shall, at the option of the purchaser at such sale, then become
and be tenants holding over, and shall forthwith deliver possession to such
purchaser, or be summarily dispossessed in accordance with the laws applicable
to tenants holding over. In case of any sale under this Mortgage by virtue of
the exercise of the powers herein granted, or pursuant to any order in any
judicial proceeding or otherwise, the Mortgaged Property may be sold as an
entirety or in separate parcels in such manner or order as Mortgagee in its sole
discretion may elect. One or more exercises of powers herein granted shall not
extinguish or exhaust such powers, until the entire Mortgaged Property is sold
or all amounts secured hereby are paid in full.
3.3.2 In the event of any sale made under or by virtue of this Article III,
the entire principal of, and interest in respect of the Secured Obligations, if
not previously due and payable, shall, at the option of Mortgagee, immediately
become due and payable, anything in this Mortgage to the contrary
notwithstanding.
3.3.3 The proceeds of any sale made under or by virtue of this Article III,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this Article III or otherwise, shall
be applied in accordance with the provisions of the Indenture.
3.3.4 Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof at any sale made under or by virtue of this Article III and, in lieu of
paying cash therefor, may make settlement for the purchase price by crediting
against the purchase price the unpaid amounts (whether or not then due) owing to
Mortgagee in respect of the Secured Obligations, after deducting from the sales
price the expense of the sale and the reasonable costs of the action or
proceedings and any other sums that Mortgagee is authorized to deduct under this
Mortgage.
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3.3.5 Mortgagee may adjourn from time to time any sale by it to be made
under or by virtue of this Mortgage by announcement at the time and place
appointed for such sale or for such adjourned sale or sales, and, Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
3.3.6 If the Premises is comprised of more than one parcel of land,
Mortgagee may take any of the actions authorized by this Section 3.3 in respect
of any or a number of individual parcels.
3.3.7 The word "sale" as used in this Section 3.3 with respect to the
Mortgaged Lease shall mean the sale, transfer, assignment or conveyance for
value of the leasehold interest of Mortgagor in the Mortgaged Lease, together
with all Mortgagor's right, title and interest in and to the other items
comprising the Mortgaged Property.
SECTION 3.4 Additional Remedies in Case of an Event of Default.
3.4.1 Mortgagee shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage, and the right of Mortgagee to recover such
judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this Mortgage, or the foreclosure of, or absolute conveyance
pursuant to, this Mortgage. In case of proceedings against Mortgagor in
insolvency or bankruptcy or any proceedings for its reorganization or involving
the liquidation of its assets, Mortgagee shall be entitled to prove the whole
amount of principal and interest and other payments, charges and costs due in
respect of the Secured Obligations to the full amount thereof without deducting
therefrom any proceeds obtained from the sale of the whole or any part of the
Mortgaged Property; provided, however, that in no case shall Mortgagee receive a
greater amount than the aggregate of such principal, interest and such other
payments, charges and costs (with interest at the Default Rate) from the
proceeds of the sale of the Mortgaged Property and the distribution from the
estate of Mortgagor.
3.4.2 Any recovery of any judgment by Mortgagee and any levy of any
execution under any judgment upon the Mortgaged Property shall not affect in any
manner or to any extent the Lien and security interests created and evidenced
hereby upon the Mortgaged Property or any part thereof, or any conveyances,
powers, rights and remedies of Mortgagee hereunder, but such conveyances,
powers, rights and remedies shall continue unimpaired as before.
3.4.3 Any moneys collected by Mortgagee under this Section 3.4 shall be
applied in accordance with the provisions of subsection 3.3.3.
SECTION 3.5 Legal Proceedings After an Event of Default.
3.5.1 Upon the occurrence and during the continuance of any Event of
Default and immediately upon the commencement of any action, suit or legal
proceedings to obtain judgment for the Secured Obligations or any part thereof,
or of any proceedings to foreclose the Lien and security interest created and
evidenced hereby or otherwise enforce the provisions of this Mortgage or of any
other proceedings in aid of the enforcement of this Mortgage, Mortgagor shall
enter its voluntary appearance in such action, suit or proceeding.
3.5.2 Upon the occurrence and during the continuance of an Event of
Default, Mortgagee shall be entitled forthwith as a matter of right,
concurrently or independently of any other right or remedy hereunder either
before or after declaring the Secured Obligations or any part thereof to be due
and payable, to the appointment of a receiver without giving notice to any party
and without regard to the adequacy or inadequacy of
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any security for the Secured Obligations or the solvency or insolvency of any
person or entity then legally or equitably liable for the Secured Obligations or
any portion thereof. Mortgagor hereby consents to the appointment of such
receiver. Notwithstanding the appointment of any receiver, Mortgagee shall be
entitled as pledgee to the possession and control of any cash, deposits or
instruments at the time held by or payable or deliverable under the terms of the
Indenture to Mortgagee.
3.5.3 Mortgagor shall not (i) at any time insist upon, or plead, or in any
manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Mortgage, (ii) claim, take or insist on any benefit or advantage of any law
now or hereafter in force providing for the valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or sales of the
Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to
any decree, judgment or order of any court of competent jurisdiction or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. To the extent permitted by applicable law, Mortgagor hereby expressly
(i) waives all benefit or advantage of any such law or laws, including, without
limitation, any statute of limitations applicable to this Mortgage, (ii) waives
any and all rights to trial by jury in any action or proceeding related to the
enforcement of this Mortgage, (iii) waives any objection which it may now or
hereafter have to the laying of venue of any action, suit or proceeding brought
in connection with this Mortgage and further waives and agrees not to plead that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum and (iv) covenants not to hinder, delay or impede the
execution of any power granted or delegated to Mortgagee by this Mortgage but to
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Mortgagee shall not be liable for any incorrect
or improper payment made pursuant to this Article III in the absence of gross
negligence or willful misconduct.
SECTION 3.6 Remedies Not Exclusive. No remedy conferred upon or reserved to
Mortgagee by this Mortgage is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Mortgage or now or hereafter
existing at law or in equity. Any delay or omission of Mortgagee to exercise any
right or power accruing on any Event of Default shall not impair any such right
or power and shall not be construed to be a waiver of or acquiescence in any
such Event of Default. Every power and remedy given by this Mortgage may be
exercised from time to time concurrently or independently, when and as often as
may be deemed expedient by Mortgagee in such order and manner as Mortgagee, in
its sole discretion, may elect. If Mortgagee accepts any moneys required to be
paid by Mortgagor under this Mortgage after the same become due, such acceptance
shall not constitute a waiver of the right either to require prompt payment,
when due, of all other sums secured by this Mortgage or to declare an Event of
Default with regard to subsequent defaults. If Mortgagee accepts any moneys
required to be paid by Mortgagor under this Mortgage in an amount less than the
sum then due, such acceptance shall be deemed an acceptance on account only and
on the condition that it shall not constitute a waiver of the obligation of
Mortgagor to pay the entire sum then due, and Mortgagor's failure to pay the
entire sum then due shall be and continue to be a default hereunder
notwithstanding acceptance of such amount on account.
ARTICLE IV
CERTAIN DEFINITIONS
The following terms shall have the following respective meanings:
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"Cost of Construction" shall mean the sum, so far as it relates to the
reconstructing, renewing, restoring or replacing of the Improvements, of (i)
obligations incurred or assumed by Mortgagor or undertaken by tenants pursuant
to the terms of the Leases for labor, materials and other expenses and to
contractors, builders and materialmen; (ii) the cost of contract bonds and of
insurance of all kinds that may reasonably be deemed by Mortgagor to be
desirable or necessary during the course of construction; (iii) the expenses
incurred or assumed by Mortgagor for test borings, surveys, estimates, any Plans
and Specifications and preliminary investigations therefor, and for supervising
construction, as well as for the performance of all other duties required by or
reasonably necessary for proper construction; (iv) ad valorem property taxes
levied upon the Premises during performance of any Restoration; and (v) any
costs or other charges in connection with obtaining title insurance and counsel
opinions that may be required or necessary in connection with a Restoration.
"Governmental Authority" shall mean any Federal, state, local or foreign
court, agency, authority, board, bureau, commission, department, office or
instrumentality of any nature whatsoever or any governmental or
quasi-governmental unit, whether now or hereafter in existence, or any officer
or official thereof, having jurisdiction over the Mortgagor or the Mortgaged
Property.
"Prudent Operator" shall mean a prudent operator of property similar in use
and configuration to the Premises and the Equipment, as applicable, and located
in the locality where the Premises and Equipment, as applicable, are located.
"Purchase Agreement" shall mean that certain purchase agreement among
Issuer, Mortgagor, Mortgagee and the Donaldson, Lufkin & Jenrette Securities
Corporation and certain other parties, as of July 1, 1999.
"Real Property Officer's Certificate" shall mean that certain officer's
certificate delivered to the Mortgagee pursuant to Section 9(e)(x) of the
Purchase Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Severability of Provisions. Any provision of this Mortgage
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.2 Notices. Unless otherwise provided herein or in the Indenture,
any notice or other communication herein required or permitted to be given shall
be given in the manner set forth in the Indenture, if to Mortgagor or Mortgagee,
addressed to it at the address set forth in the Indenture, or as to any party at
such other address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this Section 5.2;
provided, however, that notices to Mortgagee shall not be effective until
received by Mortgagee.
SECTION 5.3 Covenants To Run with the Land. All of the grants, covenants,
terms, provisions and conditions in this Mortgage shall run with the Land and
shall apply to, and bind the successors and assigns of Mortgagor. If there shall
be more than one mortgagor, the covenants and warranties hereof shall be joint
and several.
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SECTION 5.4 Headings. The Section headings used in this Mortgage are for
convenience of reference only and shall not affect the construction of this
Mortgage.
SECTION 5.5 Limitation on Interest Payable. It is the intention of the
parties to conform strictly to the usury laws, whether state or Federal, that
are applicable to the transaction of which this Mortgage is a part. All
agreements between Mortgagor and Mortgagee whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever shall the amount paid or agreed to be paid by
Mortgagor for the use, forbearance or detention of the money to be loaned or
advanced under the Indenture or any related document, or for the payment or
performance of any covenant or obligation contained herein or in the Indenture
or any related document, exceeds the maximum amount permissible under applicable
Federal or state usury laws. If under any circumstances whatsoever fulfillment
of any such provision, at the time performance of such provision shall be due,
shall involve exceeding the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the limit of such validity. If
under any circumstances Mortgagor shall have paid an amount deemed interest by
applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable usury laws shall be applied to the
reduction of the principal amount owing in respect of the Secured Obligations
and not to the payment of interest, or if such excessive interest exceeds the
unpaid balance of principal and any other amounts due hereunder, the excess
shall be refunded to Mortgagor. All sums paid or agreed to be paid for the use,
forbearance or detention of the principal under any extension of credit by
Mortgagee shall, to the extent permitted by applicable law, and to the extent
necessary to preclude exceeding the limit of validity prescribed by law, be
amortized, prorated, allocated and spread from the date of this Mortgage until
payment in full of the Secured Obligations so that the actual rate of interest
on account of such principal amounts is uniform throughout the term hereof.
SECTION 5.6 Indemnity. Mortgagor agrees to indemnify, pay and hold harmless
Mortgagee, the Holders of Notes and each of the Secured Parties and the
officers, directors, employees, agents and Affiliates of Mortgagee, the Holders
of Notes and each of the Secured Parties (collectively called the "Indemnitees")
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs (including, without
limitation, settlement costs), reasonable expenses or disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), which may
be imposed on, incurred by or asserted against that Indemnitee, in any manner
relating to or arising out of this Mortgage, the Indenture or any other
Collateral Document (including, without limitation, any misrepresentation by
Mortgagor in this Mortgage, the Indenture or any other Collateral Document) (the
"Indemnified Liabilities"); provided, however, that Mortgagor shall have no
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities if
it has been determined by a final decision (after all appeals and the expiration
of time to appeal) by a court of competent jurisdiction that such Indemnified
Liability arose from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Mortgagor shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The obligations of Mortgagor contained in this
Section 5.6 shall survive the termination of this Mortgage and the discharge of
Mortgagor's other obligations under this Mortgage, the Indenture and the other
Collateral Documents. Any amount paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured Obligations
secured by the Mortgaged Property.
SECTION 5.7 Governing Law; Terms. THIS MORTGAGE SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN
WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
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LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. MORTGAGOR
DESIGNATES AND APPOINTS [______________________________], WITH AN ADDRESS AT
[_________________________________________] AND SUCH OTHER PERSONS AS MAY
HEREAFTER BE SELECTED BY MORTGAGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE,
AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY PROCEEDING
BROUGHT AGAINST MORTGAGOR WITH RESPECT TO THIS MORTGAGE, SERVICE BEING HEREBY
ACKNOWLEDGED BY MORTGAGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO MORTGAGOR
AT ITS ADDRESS PROVIDED FOR IN SECTION 5.2 HEREOF EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY MORTGAGOR REFUSES TO
ACCEPT SERVICE, MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
MORTGAGEE TO BRING PROCEEDINGS AGAINST MORTGAGOR IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 5.8 No Merger. The rights and estate created by this Mortgage shall
not, under any circumstances, be held to have merged into any other estate or
interest now owned or hereafter acquired by Mortgagee unless Mortgagee shall
have consented to such merger in writing.
SECTION 5.9 Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Mortgage, nor
consent to any departure by Mortgagor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture and unless in
writing and signed by Mortgagee. Any amendment, modification or supplement of or
to any provision of this Mortgage, any waiver of any provision of this Mortgage
and any consent to any departure by Mortgagor from the terms of any provision of
this Mortgage shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Mortgage or any other Collateral Document, no notice to or
demand on Mortgagor in any case shall entitle Mortgagor to any other or further
notice or demand in similar or other circumstances.
SECTION 5.10 No Credit for Payment of Taxes or Impositions. Mortgagor shall
not be entitled to any credit against the principal, premium, if any, or
interest payable under the Indenture or the Notes, and Mortgagor shall not be
entitled to any credit against any other sums which may become payable under the
terms thereof or hereof, by reason of the payment of any tax or other
impositions on the Mortgaged Property or any part thereof.
SECTION 5.11 Stamp and Other Taxes. Subject to the provisions of subsection
1.5.5 relating to permitted contests, Mortgagor shall pay any United States
documentary stamp taxes, with interest and fines and penalties, and any mortgage
recording taxes, with interest and fines and penalties, that may hereafter be
levied, imposed or assessed under or upon or by reason of this Mortgage or the
Secured Obligations or any instrument or transaction affecting or relating to
either thereof and in default thereof Mortgagee may (but shall have no
obligation) advance the same and the amount so advanced shall be payable by
Mortgagor to Mortgagee within ten (10) days after demand therefor, together with
interest thereon at the Default Rate.
SECTION 5.12 Estoppel Certificates. Mortgagor shall, from time to time,
upon twenty (20) days' prior written request of Mortgagee, execute, acknowledge
and deliver to Mortgagee a certificate signed by
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an authorized officer or officers stating that this Mortgage, the Indenture and
the other Collateral Documents are unmodified and in full force and effect (or,
if there have been modifications, that this Mortgage is in full force and effect
as modified and setting forth such modifications).
SECTION 5.13 Additional Security. Without notice to or consent of Mortgagor
and without impairment of the Lien and rights created by this Mortgage,
Mortgagee may accept (but Mortgagor shall not be obligated to furnish) from
Mortgagor or from any other Person or Persons, additional security for the
Secured Obligations. Neither the giving of this Mortgage nor the acceptance of
any such additional security shall prevent Mortgagee from resorting, first, to
such additional security, and, second, to the security created by this Mortgage
without affecting Mortgagee's Lien and rights under this Mortgage.
SECTION 5.14 Release. The Mortgaged Property shall be released from the
Lien of this Mortgage in accordance with the provisions of the Indenture.
Mortgagee, on the written request and at the expense of Mortgagor, will execute
and deliver such proper instruments of release and satisfaction or assignment as
may reasonably be requested to evidence such release or assignment, and any such
instrument, when duly executed by Mortgagee and duly recorded by Mortgagor in
the places where this Mortgage is recorded, shall conclusively evidence the
release or assignment of this Mortgage.
SECTION 5.15 Certain Expenses of Mortgagee. If any action, suit or other
proceeding affecting the Mortgaged Property or any part thereof be commenced, in
which action, suit or proceeding Mortgagee is made a party or participates or in
which the right to use the Mortgaged Property or any part thereof is threatened,
or in which it becomes necessary in the judgment of Mortgagee to defend or
uphold the Lien of this Mortgage (including, without limitation, any action,
suit or proceeding to establish or uphold the compliance of the Improvements
with any Requirements of Law), then all amounts paid or incurred by Mortgagee
for the expense of any such action, suit or other proceeding or to protect its
rights therein (whether or not it is made or becomes a party thereto) or
otherwise to enforce or defend the rights and Lien created by this Mortgage,
shall be paid by Mortgagor upon demand together with interest at the Default
Rate from the date of the payment or incurring thereof to the date of repayment,
and any such amount and the interest thereon shall be a Lien on the Mortgaged
Property, prior to any right, or right to, interest in, or claim upon the
Mortgaged Property attaching or accruing subsequent to or otherwise subordinate
to the Lien of this Mortgage, and the same shall be deemed to be secured hereby.
All other amounts paid, advanced or incurred by Mortgagee in order to secure and
protect the Lien of this Mortgage or other security provided hereunder shall be
a like Lien on the Mortgaged Property and be deemed to be secured hereby.
SECTION 5.16 Expenses of Collection. Mortgagor will upon demand pay to
Mortgagee the amount of any and all expenses, including the fees and expenses of
its counsel and the fees and expenses of any experts and agents, which Mortgagee
may incur in connection with (i) the collection of the Secured Obligations, (ii)
the enforcement and administration of this Mortgage, (iii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Mortgaged Property, (iv) the exercise or enforcement of any of the rights
of Mortgagee or any Secured Party hereunder or (v) the failure by Mortgagor to
perform or observe any of the provisions hereof. All amounts payable by
Mortgagor under this Section 5.16 shall be due upon demand and shall be part of
the Secured Obligations. Mortgagor's obligations under this Section shall
survive the termination of this Mortgage and the discharge of Mortgagor's other
obligations hereunder.
SECTION 5.17 Business Days. In the event any time period or any date
provided in this Mortgage ends or falls on a day other than a Business Day, then
such time period shall be deemed to end and such date shall be deemed to fall on
the next succeeding Business Day, and performance herein may be made on such
Business Day, with the same force and effect as if made on such other day.
<PAGE>
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SECTION 5.18 Relationship. The relationship of Mortgagee to Mortgagor
hereunder is strictly and solely that of lender and borrower and mortgagor and
mortgagee and nothing contained in the Indenture, this Mortgage or any other
document or instrument now existing and delivered in connection therewith or
otherwise in connection with the Secured Obligations is intended to create, or
shall in any event or under any circumstance be construed as creating a
partnership, joint venture, tenancy-in-common, joint tenancy or other
relationship of any nature whatsoever between Mortgagee and Mortgagor other than
as lender and borrower and mortgagor and mortgagee.
SECTION 5.19 Concerning Mortgagee.
5.19.1 Mortgagee shall be entitled to rely upon any written notice,
statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person, and, with respect to all matters pertaining to this
Mortgage and its duties hereunder, upon advice of counsel selected by it.
5.19.2 If any item of Mortgaged Property also constitutes collateral
granted to Mortgagee under any other deed of trust, mortgage, security
agreement, pledge or instrument of any type, in the event of any conflict
between the provisions of this Mortgage and the provisions of such other deed of
trust, mortgage, security agreement, pledge or instrument of any type in respect
of such collateral, Mortgagee, in its sole discretion, shall select which
provision or provisions shall control.
5.19.3 Mortgagee has been appointed as collateral agent pursuant to the
Indenture. The actions of Mortgagee hereunder are subject to the provisions of
the Indenture. Mortgagee shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Mortgaged Property), in accordance with this Mortgage and the
Indenture. Mortgagee may resign and a successor Mortgagee may be appointed in
the manner provided in the Indenture. Mortgagor shall recognize as mortgagee
under this instrument any party who has succeeded the interest of Mortgagee
under the Indenture. Upon the acceptance of any appointment as Mortgagee by a
successor Mortgagee, that successor Mortgagee shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be
discharged from its duties and obligations under this Mortgage. After any
retiring Mortgagee's resignation, the provisions of this Mortgage shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Mortgage while it was Mortgagee.
SECTION 5.20 Waiver of Stay.
5.20.1 Mortgagor agrees that in the event that Mortgagor or any property or
assets of Mortgagor shall hereafter become the subject of a voluntary or
involuntary proceeding under the Bankruptcy Code or Mortgagor shall otherwise be
a party to any Federal or state bankruptcy, insolvency, moratorium or similar
proceeding to which the provisions relating to the automatic stay under Section
362 of the Bankruptcy Code or any similar provision in any such law is
applicable, then, in any such case, whether or not Mortgagee has commenced
foreclosure proceedings under this Mortgage, Mortgagee shall be entitled to
relief from any such automatic stay as it relates to the exercise of any of the
rights and remedies (including, without limitation, any foreclosure proceedings)
available to Mortgagee as provided in this Mortgage or in any other Collateral
Document.
5.20.2 Mortgagee shall have the right to petition or move any court having
jurisdiction over any proceeding described in subsection 5.20.1 for the purposes
provided therein, and Mortgagor agrees (i) not to oppose any such petition or
motion and (ii) at Mortgagor's sole cost and expense, to assist and cooperate
with Mortgagee, as may be requested by Mortgagee from time to time, in obtaining
any relief requested by Mortgagee,
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including, without limitation, by filing any such petitions, supplemental
petitions, requests for relief, documents, instruments or other items from time
to time requested by Mortgagee or any such court.
SECTION 5.21 Continuing Security Interest; Assignment. This Mortgage shall
create a continuing security interest in the Mortgaged Property and shall (i) be
binding upon Mortgagor, its successors and assigns and (ii) inure, together with
the rights and remedies of Mortgagee hereunder, to the benefit of Mortgagee, the
Holders of the Notes and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Mortgagor) shall have any interest herein or
any right or benefit with respect hereto.
SECTION 5.22 Obligations Absolute. Subject to the Indenture, all
obligations of Mortgagor hereunder shall be absolute and unconditional
irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Mortgagor;
(ii) any lack of validity or enforceability of the Indenture, the
Notes, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
the Notes, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Mortgage, the Indenture, the
Notes or any other agreement or instrument relating thereto except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 5.9 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Mortgagor.
<PAGE>
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SECTION 5.23 Maximum Secured Indebtedness. Mortgagor and Mortgagee agree
that notwithstanding the aggregate sums which may be or become payable by
Mortgagor to Mortgagee from time to time, and notwithstanding anything contained
herein to the contrary, the maximum principal amount of obligations of Mortgagor
to Mortgagee secured by this Mortgage shall not at any time exceed $[ALLOCATED
AMOUNT] plus interest, costs and expenses (including reasonable attorneys fees)
and other charges and fees as provided in this Mortgage or the Security
Documents to protect or preserve the Mortgaged Property, any part thereof, or
the interest of Mortgagee therein for payment of taxes, assessments, insurance
premiums and other amounts as provided herein and therein. It is expressly
understood that the Secured Obligations of Mortgagor under its credit
arrangements with Mortgagee may at any time or from time to time be an amount
greater than the maximum mortgage-secured indebtedness without affecting the
validity of this Mortgage. It is specifically understood and agreed, moreover,
that if and to the extent the Secured Obligations at any time or from time to
time exceed the maximum mortgage-secured indebtedness, any payments made upon
the Secured Obligations shall be first considered payments upon that amount of
the Secured Obligations to Mortgagee which exceed the maximum mortgage-secured
indebtedness and shall affect neither the maximum mortgage-secured indebtedness
nor the validity of this Mortgage.
Mortgagor covenants, warrants and agrees in favor of Mortgagee that the
foregoing limitation on the indebtedness secured hereby shall not, in any
manner, limit or waive any of Mortgagee's rights and remedies under the other
Security Documents nor limit the amount of any obligations, liabilities or
indebtedness secured by any of the other Security Documents or other collateral
granted thereunder, nor affect the priority thereof.
SECTION 5.24 Lien Law Trust Fund. The Mortgagor will, in compliance with
Section 13 of the Lien Law, receive the advances secured hereby and will hold
the right to receive such advances as a trust fund to be applied first for the
purposes of paying the cost of improvement and will apply the same first to the
payment of the cost of improvement before using any part of the total of the
same for any other purpose.
<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed
and delivered under seal the day and year first above written.
GRAND LLC,
Mortgagor
By: /s/ Nourollah Elghanayan
--------------------------------
Name: Nourollah Elghanayan
Title: Manager
By: /s/ Mehdi Gabayzadeh
--------------------------------
Name: Mehdi Gabayzadeh
Title: Manager
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LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
BY
AMERICAN TISSUE MILLS OF OREGON, INC.
as Grantor,
TO
TICOR TITLE INSURANCE COMPANY,
as Trustee for the Benefit of
THE CHASE MANHATTAN BANK, as trustee,
as Beneficiary,
Securing Principal Indebtedness of $165,000,000;
Relating to Premises in:
1300 Kaster Road
St. Helens, Oregon 97051
Dated as of: July 9, 1999
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This instrument prepared by and,
after recording, please return to:
John Schuster, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
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TABLE OF CONTENTS
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INTRODUCTION...........................................................................
RECITALS...............................................................................
GRANTING CLAUSES.......................................................................
COVENANTS..............................................................................
ARTICLE I WARRANTIES, REPRESENTATIONS AND COVENANTS OF GRANTOR........................4
1.1 Payment.......................................................................4
1.2 Authority and Validity........................................................4
1.3 Good Title....................................................................4
1.4 Recording Documentation To Assure Security Interest; Fees and
Expenses...................................................................5
1.5 Payment of Taxes, Insurance Premiums, Assessments; Compliance
with Law and Insurance Requirements........................................6
1.6 Certain Tax Law Changes.......................................................8
1.7 Required Insurance Policies...................................................8
1.8 Failure To Make Certain Payments.............................................10
1.9 Inspection...................................................................10
1.10 Grantor To Maintain Improvements.............................................10
1.11 Grantor's Obligations with Respect to Subleases..............................11
1.12 Transfer Restrictions........................................................13
1.13 Destruction; Condemnation....................................................14
1.14 Alterations..................................................................14
1.15 Hazardous Material...........................................................15
1.16 Asbestos.....................................................................16
1.17 Books and Records, Other Information.........................................16
1.18 No Claims Against Beneficiary................................................17
1.19 Utility Services.............................................................17
1.20 Mortgaged Lease..............................................................17
ARTICLE II ASSIGNMENT OF SUBLEASES; SECURITY AGREEMENT; ASSIGNMENT
AGREEMENT...........................................................18
2.1 Assignment of Leases, Rents, Issues and Profits..............................18
2.2 Security Interest in Personal Property.......................................20
ARTICLE III EVENTS OF DEFAULT AND REMEDIES...........................................21
3.1 Events of Default............................................................21
3.2 Remedies in Case of an Event of Default......................................21
3.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds
of Sale...................................................................22
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3.4 Additional Remedies in Case of an Event of Default...........................23
3.5 Legal Proceedings After an Event of Default..................................23
3.6 Remedies Not Exclusive.......................................................24
ARTICLE IV CERTAIN DEFINITIONS.......................................................25
ARTICLE V MISCELLANEOUS..............................................................25
5.1 Severability of Provisions...................................................25
5.2 Notices......................................................................25
5.3 Covenants To Run with the Land...............................................26
5.4 Headings.....................................................................26
5.5 Limitation on Interest Payable...............................................26
5.6 Indemnity....................................................................26
5.7 Governing Law; Terms.........................................................27
5.8 No Merger....................................................................27
5.9 Modification in Writing......................................................27
5.10 No Credit for Payment of Taxes or Impositions................................28
5.11 Stamp and Other Taxes........................................................28
5.12 Estoppel Certificates........................................................28
5.13 Additional Security..........................................................28
5.14 Release......................................................................28
5.15 Certain Expenses of Beneficiary and Trustee..................................28
5.16 Expenses of Collection.......................................................29
5.17 Business Days................................................................29
5.18 Relationship.................................................................29
5.19 Reconveyance Upon Payment of Secured Obligations.............................29
5.20 Concerning Beneficiary.......................................................29
5.21 Concerning Trustee...........................................................30
5.22 Waiver of Stay...............................................................30
5.23 Continuing Security Interest; Assignment.....................................30
5.24 Obligations Absolute.........................................................31
5.25 Notice Under ORS 746.201 - Warning...........................................31
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SIGNATURES
ACKNOWLEDGMENTS
SCHEDULE A LEGAL DESCRIPTION
SCHEDULE B PRIOR LIENS
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LEASEHOLD DEED OF TRUST,
ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND
FIXTURE FILING ("Deed of Trust"), dated as of July 9, 1999, made by AMERICAN
TISSUE MILLS OF OREGON, INC., a New York Corporation, having an office at 135
Engineers Road, Hauppauge, New York 11788, as grantor, assignor and debtor (in
such capacities and together with any successors in such capacities, "Grantor"),
to TICOR TITLE INSURANCE COMPANY, an Oregon corporation (the "Trustee") for the
use and benefit of THE CHASE MANHATTAN BANK, having an office at 450 West 33rd
Street, New York, New York 10001, as trustee and collateral agent pursuant to
the Indenture (as hereinafter defined), as beneficiary, assignee and secured
party (in such capacities and together with any successors in such capacities,
"Beneficiary").
R E C I T A L S :
A. American Tissue Inc. ("Issuer"), Grantor, Beneficiary and certain other
parties are, contemporaneously with the execution and delivery of this Deed of
Trust, entering into that certain indenture, dated as of the date hereof (as
amended, amended and restated, supplemented, or otherwise modified from time to
time, the "Indenture"; capitalized terms used herein and not defined shall have
the meanings assigned to them in the Indenture), pursuant to which Issuer is
issuing its 12 1/2 % senior secured notes due July 15, 2006 (the "Senior Secured
Notes") in the aggregate principal amount of $165,000,000. It is contemplated
that Issuer may, after the date hereof, issue exchange notes pursuant to the
Indenture ("Exchange Notes"; together with the Senior Secured Notes, the
"Notes"). Grantor, a subsidiary of Issuer, is unconditionally guaranteeing the
Issuer's obligations under the Notes.
B. Grantor is the owner and holder of the tenant's interest under that
certain lease, dated as of November 23, 1992 (as amended from time to time in
accordance with the provisions of this Deed of Trust, the "Mortgaged Lease")
between Boise Cascade Corporation, as landlord (together with its successors and
assigns, "Lessor") and Grantor, as tenant, which affects the property described
on Schedule A annexed hereto. A memorandum of lease relating to the Mortgaged
Lease was recorded November 30, 1992 as instrument number 92-8531, in the real
property records of Columbia County, Oregon.
C. Grantor is executing and delivering this Deed of Trust to grant to
Beneficiary for its benefit and the benefit of the Holders (collectively, the
"Secured Parties") liens of the character and priority contemplated herein on
the Mortgaged Property to secure the payment and performance of the Secured
Obligations (as hereinafter defined).
D. This Deed of Trust is given by Grantor in favor of Beneficiary for its
benefit and the benefit of the Holders to secure the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss. 362(a)), of (i) all obligations of Issuer now existing or
hereafter arising under or in respect of the Indenture and the Notes (including,
without limitation, Issuer's obligation to pay principal of, premium if any, and
interest on the Notes when due and payable) and all other
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charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
other payments related to or in respect of such obligations, (ii) all
obligations of Grantor now existing or hereafter arising under or in respect of
the Indenture and the Notes (including, without limitation, Grantor's obligation
arising under the applicable Subsidiary Guarantee to pay principal of, premium
if any, and interest on the Notes when due and payable) and all other charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of such obligations and (iii) without
duplication of the amounts described in clauses (i) and (ii), all obligations of
Grantor now existing or hereafter arising under or in respect of this Deed of
Trust or any other Security Document, including, without limitation, with
respect to all charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the obligations
contained in this Deed of Trust or in any other Security Document, in each case
whether in the regular course of business or otherwise (the obligations
described in clauses (i) and (ii), collectively, the "Secured Obligations").
G R A N T I N G C L A U S E S :
For and in consideration of the sum of Ten Dollars ($10.00) and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor does hereby pledge, give, grant, bargain, sell, assign,
and convey and transfer to Trustee, its successors and assigns, in trust, with
powers of sale, for the use and benefit of Beneficiary, a security interest in
and deed of trust lien upon, all Grantor's right, title and interest in, to and
under the following property, whether now owned or held or hereafter acquired
from time to time (collectively, the "Mortgaged Property"):
A. The tenant's interest and estate in the Mortgaged Lease and in all
recorded and unrecorded extensions, amendments, supplements and restatements
thereof, together with all rights, title and interest of the tenant under the
Mortgaged Lease in and to any and all easements, rights-of-way, sidewalks,
strips and gores of land, drives, roads, curbs, streets, ways, alleys, passages,
passageways, sewer rights, waters, water courses, water rights, and all power,
air, light and other rights, estates, titles, interests, privileges, liberties,
servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in
any way demised under the Mortgaged Lease or belonging, relating or appertaining
to the land affected by the Mortgaged Lease, or any part thereof, or which
hereafter shall in any way be demised under the Mortgaged Lease or belong,
relate or be appurtenant thereto (collectively, the "Land");
B. Any and all estates or interests of Grantor in the buildings, structures
and other improvements and any and all Alterations (as hereinafter defined) now
or hereafter located or erected on the Land, including, without limitation,
attachments, walks and ways (collectively, the "Improvements"; together with the
Land, the "Premises");
C. Any and all permits, certificates, licenses, franchises, consents,
approvals and authorizations, however characterized, issued or in any way
furnished in connection with the Premises, whether necessary or not for the
operation and use of the Premises, including, without limitation, building
permits, certificates of occupancy, environmental certificates, industrial
permits or licenses and certificates of operation;
D. Any and all interest of Grantor in all machinery, apparatus, equipment,
fittings, fixtures, improvements and articles of personal property of every kind
and nature whatsoever now or hereafter attached or affixed to the Premises or
used in connection with the use and enjoyment of the Premises or the maintenance
or preservation thereof, including, without limitation, all utility systems,
fire sprinkler and alarm systems, HVAC equipment, boilers, electronic data
processing, telecommunications or computer equipment, refrigeration, electronic
monitoring, water or lighting systems, power, sanitation, waste removal,
elevators, maintenance or other systems or equipment, and all other articles
used or useful in connection with the use or operation of any part of the
Premises (collectively, the "Equipment");
E. All Grantor's right, title and interest as landlord, sublandlord,
franchisor, licensor or grantor, in all subleases of space, oil, gas and mineral
leases, franchise agreements, licenses, occupancy or concession agreements now
existing or hereafter entered into relating in any manner to the Premises or the
Equipment
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and any and all amendments, modifications, supplements and renewals of any
thereof (each such lease, license or agreement, together with any such
amendment, modification, supplement or renewal, a "Sublease"), whether now in
effect or hereafter coming into effect, including, without limitation, all
rents, additional rents, cash, guaranties, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the sublessee's,
franchisee's, licensee's or obligee's obligations thereunder, revenues,
earnings, profits and income, advance rental payments, payments incident to
assignment, sublease or surrender of a Sublease, claims for forfeited deposits
and claims for damages, now due or hereafter to become due, with respect to any
Sublease, any indemnification against, or reimbursement for, sums paid and costs
and expenses incurred by Grantor under any Sublease or otherwise, and any award
in the event of the bankruptcy of any tenant under or guarantor of a Sublease
(collectively, the "Rents");
F. All drawings, surveys, title insurance policies, construction contracts,
plans, specifications, file materials, operating and maintenance records,
catalogues, tenant lists, correspondence, advertising materials, operating
manuals, warranties, guaranties, appraisals, studies and data relating to the
Premises or the Equipment or the construction of any Alteration or the
maintenance of any Permit (as hereinafter defined); and
G. All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation or other awards or payments and refunds
of real estate taxes and assessments, including interest thereon (collectively,
"Proceeds");
TO HAVE AND TO HOLD the Mortgaged Property together with the rights,
privileges and appurtenances thereto belonging unto (i) Trustee, his substitutes
or successors, forever, to the extent the same constitutes real property or an
interest therein and (ii) Beneficiary, to the extent the same does not
constitute real property or an interest therein, in either case for the benefit
of Beneficiary and Beneficiary's successors and assigns forever, for the purpose
of securing payment and performance of the Secured Obligations, and Grantor
hereby binds itself and its successors and assigns to warrant and forever defend
the Mortgaged Property unto each of the Trustee and Beneficiary, their
substitutes, successors and assigns, as the case may be, against the claim or
claims of all persons claiming or to claim the same or any party thereof.
Notwithstanding the foregoing, the Mortgaged Property shall not include
property or assets hereafter acquired by Grantor which is subject to any
Purchase Money Lien (as defined in the Indenture); provided, however, that at
such time as such property or asset is no longer subject to such Purchase Money
Lien, such property or asset shall (without any act or delivery by any Person)
constitute Mortgaged Property hereunder.
C O V E N A N T S :
Grantor warrants, represents and covenants to and for the benefit of
Beneficiary as follows:
ARTICLE I
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF GRANTOR
SECTION 1.1 Payment. Grantor shall pay as and when the same shall become
due, whether at its stated maturity, by acceleration or otherwise, each and
every amount payable by Grantor under the Secured Obligations and shall perform,
at or prior to the same time such performance shall be due all other obligations
of Grantor which constitute Secured Obligations.
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SECTION 1.2 Authority and Validity. Grantor represents, warrants and
covenants that (i) Grantor is duly authorized to execute and deliver this Deed
of Trust and all corporate and governmental consents, authorizations and
approvals necessary or required therefor have been duly and effectively taken or
obtained, (ii) this Deed of Trust is a legal, valid, binding and enforceable
obligation of Grantor and (iii) Grantor has full corporate power and lawful
authority to execute and deliver this Deed of Trust and to mortgage and grant a
security interest in the Mortgaged Property as contemplated herein.
SECTION 1.3 Good Title.
1.3.1 Grantor represents, warrants and covenants that (i) Grantor owns the
tenant's interest in the Mortgaged Lease and has good and legal title to the
Premises and the landlord's interest, if any, and estate under or in respect of
the Subleases and good title to the interest it purports to own, if any, in and
to each of the Permits, the Equipment and the Contract Rights, in each case
subject to no deed of trust, mortgage, pledge, security interest, encumbrance,
lien, lease, sublease, license, easement, assignment, collateral assignment or
charge of any kind, including, without limitation, any conditional sale or other
title retention agreement or lease or sublease in the nature thereof, any filing
or agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute or any subordination arrangement in favor
of any party other than Grantor (collectively, "Liens"; each, a "Lien"), except
for those Liens identified on Schedule B (collectively, the "Prior Liens"), (ii)
(a) the Mortgaged Lease is a valid and subsisting lease, superior and paramount
to all other leases respecting the property to which such Mortgaged Lease
relates, (b) the Mortgaged Lease is in full force and effect and no default (nor
any event which, with notice or lapse of time or both, would constitute such a
default) has occurred or is continuing under the Mortgaged Lease, and (c) the
Mortgaged Lease is not subject to any defenses, offsets or counterclaims and
there have been no renewals or extensions of or supplements, modifications or
amendments to the Mortgaged Lease not previously disclosed to Beneficiary, (iii)
with respect to each Sublease relating to the Mortgaged Property, each such
Sublease is in full force and effect and no default (nor any event which, with
notice or lapse of time or both, would constitute such a default) has occurred
or is continuing thereunder, (iv) it is in actual possession of the Premises,
(v) Grantor will keep in effect all rights and appurtenances to or that
constitute a part of the Mortgaged Property, (vi) Grantor will protect, preserve
and defend its interest in the Mortgaged Property and title thereto, (vii)
Grantor will comply with each of the terms, conditions and provisions of any
obligation of Grantor which is secured by the Mortgaged Property or the
noncompliance with which may result in the imposition of a Lien on the Mortgaged
Property, (viii) Grantor will appear and defend the Lien and security interests
created and evidenced hereby and the validity and priority of this Deed of Trust
in any action or proceeding affecting or purporting to affect the Mortgaged
Property or any of the rights of Beneficiary hereunder, (ix) this Deed of Trust
creates and constitutes a valid and enforceable Lien on the Mortgaged Property,
and, to the extent any of the Mortgaged Property shall consist of personalty, a
security interest in the Mortgaged Property, which Lien and security interest
are and will be subject only to (a) Prior Liens (but not to extensions,
amendments, supplements or replacements of Prior Liens unless consented to by
Beneficiary) and (b) Liens hereafter created and which, pursuant to the
provisions of Section 1.12, are superior to the Lien and security interests
created and evidenced hereby, and Grantor does now and will forever warrant and
defend to Beneficiary and all its successors and assigns such title and the
validity and priority of the Lien and security interests created and evidenced
hereby against the claims of all persons and parties whomsoever, (x) there has
been issued and there remain in effect each and every certificate of occupancy
or use or other Permit currently required (except where the same is being
contested in accordance with the provisions of subsection 1.5.5) for the
existing use and occupancy by Grantor and its tenants, if any, of the Premises
and (xi) no notice of violation (other than a notice which has previously been
delivered to the Beneficiary or disclosed in the Real Property Officer's
Certificate) has been received by Grantor and remains outstanding (except where
the same is being contested in accordance with the provisions of subsection
1.5.5) with respect to the Premises in connection with local zoning, land use,
set back or other development and use requirements of Governmental Authorities
(as hereinafter defined), other than a violation which would be acceptable to a
Prudent Operator.
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1.3.2 Grantor, immediately upon obtaining knowledge of the pendency of any
proceedings for the eviction of Grantor from the Mortgaged Property or any part
thereof by paramount title or otherwise questioning Grantor's title to the
Mortgaged Property as warranted in this Deed of Trust, or of any condition that
might reasonably be expected to give rise to any such proceedings, shall notify
Beneficiary thereof. Beneficiary may participate in such proceedings, and
Grantor will deliver or cause to be delivered to Beneficiary all instruments
requested by Beneficiary to permit such participation. In any such proceedings
Beneficiary may be represented by counsel satisfactory to Beneficiary at the
expense of Grantor. If, upon the resolution of such proceedings, Grantor shall
suffer a loss of the Mortgaged Property or any part thereof or interest therein
and title insurance proceeds shall be payable in connection therewith, such
proceeds are hereby assigned to and shall be paid to Beneficiary to be applied
as Net Cash Proceeds to the payment of the Secured Obligations in accordance
with the provisions of Section 4.04 of the Indenture.
SECTION 1.4 Recording Documentation To Assure Security Interest; Fees and
Expenses.
1.4.1 Grantor shall, forthwith after the execution and delivery of this
Deed of Trust and thereafter, from time to time, cause this Deed of Trust and
any financing statement, continuation statement or similar instrument relating
to any thereof or to any property intended to be subject to the Lien of this
Deed of Trust to be filed, registered and recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the validity and priority thereof or the Lien
hereof purported to be created upon the Mortgaged Property and the interest and
rights of Trustee and Beneficiary therein. Grantor shall (if it has not already
done so), at its sole cost and expense, properly, duly and validly record an
appropriate memorandum of the Mortgaged Lease and any amendments or supplements
thereto in each jurisdiction in which any of the Land may be situated. Grantor
shall pay or cause to be paid all taxes and fees incident to such filing,
registration and recording, and all expenses incident to the preparation,
execution and acknowledgment thereof, and of any instrument of further
assurance, and all Federal or state stamp taxes or other taxes, duties and
charges arising out of or in connection with the execution and delivery of such
instruments.
1.4.2 Grantor shall, at the sole cost and expense of Grantor, do, execute,
acknowledge and deliver all and every such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment, transfers, financing statements,
continuation statements and assurances as Trustee or Beneficiary shall from time
to time reasonably request, which may be necessary in the reasonable judgment of
Trustee or Beneficiary from time to time to assure, perfect, convey, assign,
mortgage, transfer and confirm unto Trustee and Beneficiary, the property and
rights hereby conveyed or assigned or which Grantor may be or may hereafter
become bound to convey or assign to Trustee or Beneficiary or for carrying out
the intention or facilitating the performance of the terms of this Deed of Trust
or the filing, registering or recording of this Deed of Trust. In the event
Grantor shall fail after demand to execute any instrument required to be
executed by Grantor under this subsection 1.4.2, Trustee or Beneficiary may
execute the same as the attorney-in-fact for Grantor, such power of attorney
being coupled with an interest and irrevocable.
SECTION 1.5 Payment of Taxes, Insurance Premiums, Assessments; Compliance
with Law and Insurance Requirements.
1.5.1 Unless and to the extent contested by Grantor in accordance with the
provisions of subsection 1.5.5 hereof, Grantor shall pay and discharge, or cause
to be paid and discharged, from time to time when the same shall become due and
payable by Grantor, to the extent such payment and discharge shall be due from
Grantor pursuant to the terms of the Mortgaged Lease, all ground rent, all real
estate and other taxes, special assessments, levies, permits, inspection and
license fees, all premiums for insurance, all water and sewer rents and charges
and all other public charges imposed upon or assessed against the Mortgaged
Property or any part thereof or upon the Rents. Grantor shall, upon
Beneficiary's request, deliver to Beneficiary, receipts evidencing
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the payment of all such taxes, assessments, levies, fees, rents and other public
charges imposed upon or assessed against the Mortgaged Property or any part
thereof or the Rents.
1.5.2 From and after the occurrence and during the continuance of an Event
of Default, at the option and upon the request of Beneficiary, Grantor shall
deposit with Beneficiary, on the first day of each month, an amount estimated by
Beneficiary to be equal to one-twelfth of the annual taxes, assessments and
other items required to be discharged by Grantor under subsection 1.5.1. Such
amounts shall be held by Beneficiary without interest to Grantor and applied to
the payment of the obligations in respect of which such amounts were deposited,
in such priority as Beneficiary shall determine, on or before the respective
dates on which such obligations or any part thereof would become delinquent.
Nothing contained in this Section 1.5 shall (i) affect any right or remedy of
Beneficiary under any provision of this Deed of Trust or of any statute or rule
of law to pay any such amount as provided above from its own funds and to add
the amount so paid, together with interest at a rate per annum (the "Default
Rate") equal to the highest rate then payable under the Notes during such time
that any amount remains outstanding, to the Secured Obligations or (ii) relieve
Grantor of its obligations to make or provide for the payment of the annual
taxes, assessments and other charges required to be discharged by Grantor under
subsection 1.5.1. Grantor hereby grants to Beneficiary a security interest in
all sums held pursuant to this subsection 1.5.2 to secure payment and
performance of the Secured Obligations. During the continuance of any Event of
Default, Beneficiary may, at its option, apply all or any part of the sums held
pursuant to this subsection 1.5.2 to payment and performance of the Secured
Obligations. Grantor shall redeposit with Beneficiary an amount equal to all
amounts so applied as a condition to the cure, if any, of such Event of Default
in addition to fulfillment of any other required conditions. Notwithstanding the
foregoing provisions of this subsection 1.5.2, no deposit with Beneficiary in
respect of any item contemplated by this subsection 1.5.2 shall be required if
and for so long as deposits in respect of such item are made by Grantor to
Lessor under the Mortgaged Lease.
1.5.3 Unless and to the extent contested by Grantor in accordance with the
provisions of subsection 1.5.5, Grantor shall timely pay, or cause to be paid,
all lawful claims and demands of mechanics, materialmen, laborers, government
agencies administering worker's compensation insurance, old age pensions and
social security benefits and all other claims, judgments, demands or amounts of
any nature which, if unpaid or not bonded, might result in, or permit the
creation of, a Lien on the Mortgaged Property or any part thereof, or on the
Rents or which might result in forfeiture of all or any part of the Mortgaged
Property.
1.5.4 Except as disclosed in the Real Property Officer's Certificate,
Grantor shall maintain, or cause to be maintained, in full force and effect all
permits, certificates, authorizations, consents, approvals, licenses, franchises
or other instruments now or hereafter required by any Governmental Authority to
operate or use and occupy the Premises and the Equipment for its intended uses
(collectively, "Permits"; each, a "Permit"). Except as disclosed in the Real
Property Officer's Certificate, and unless and to the extent contested by
Grantor in accordance with the provisions of subsection 1.5.5 hereof, Grantor
shall comply with all requirements set forth in the Permits and all requirements
of any law, ordinance, rule, regulation or similar statute or case law
(collectively, "Requirements of Law") of any Governmental Authority applicable
to all or any part of the Mortgaged Property or the condition, use or occupancy
of all or any part thereof or any recorded deed of restriction, declaration,
covenant running with the land or otherwise, now or hereafter in force. Grantor
shall not initiate, join in, or consent to any change in the zoning or any other
permitted use classification of the Premises without the prior written consent
of Beneficiary, which shall not be unreasonably withheld or delayed.
1.5.5 To the extent permitted by the Mortgaged Lease, Grantor may at its
own expense contest the amount or applicability of any of the obligations
described in subsections 1.3.1 (viii), 1.4.1, 1.5.1, 1.5.3, 1.5.4, 1.15.2 and/or
1.16 by appropriate legal proceedings, prosecution of which operates to prevent
the collection or enforcement thereof and the sale or forfeiture of the
Mortgaged Property or any part thereof to satisfy such obligations; provided,
however, that (i) any such contest shall be conducted in good faith by
appropriate
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proceedings promptly instituted and diligently conducted and (ii) in connection
with such contest, Grantor shall, (A) have made provision for the payment or
performance of such contested obligation on Grantor's books if and to the extent
required by GAAP or (B) deposited with Beneficiary, or with Lessor if so
required by the Mortgaged Lease to hold for the benefit of Grantor a sum
sufficient to pay and discharge such obligation and Beneficiary's estimate of
all interest and penalties related thereto or property bonded for such amount or
(C) in the case of any contested judgment, delivered to Beneficiary an
instrument in which an appropriate insurance carrier shall have agreed in
writing that full insurance coverage (subject to customary deductible) exists in
respect of such contested judgment. Any such deposit (and any income earned
thereon) not otherwise used to pay such obligation, interest or penalties shall
be promptly returned to Grantor. Notwithstanding the foregoing provisions of
this subsection 1.5.5, (i) no contest of any such obligations may be pursued by
Grantor if such contest would expose Beneficiary or any Holder of Notes to any
possible criminal liability or, unless Grantor shall have furnished a bond or
other security therefor reasonably satisfactory to Beneficiary, any additional
civil liability for failure to comply with such obligations and (ii) if at any
time payment or performance of any obligation contested by Grantor pursuant to
this subsection 1.5.5 shall become necessary to prevent the delivery of a tax or
similar deed conveying the Mortgaged Property or any portion thereof because of
nonpayment or nonperformance, or to prevent the occurrence of a default (or a
condition which, with the giving of notice or lapse of time or both, may become
a default) under the Mortgaged Lease, Grantor shall pay or perform the same, in
sufficient time to prevent the delivery of such tax or similar deed or such
termination or forfeiture.
1.5.6 Grantor shall not take any action that could be the basis for
termination, revocation or denial of any insurance coverage required to be
maintained under this Deed of Trust or that could be the basis for a defense to
any claim under any insurance policy maintained in respect of the Premises or
the Equipment and Grantor shall otherwise comply in all respects with the
requirements of any insurer that issues a policy of insurance in respect of the
Premises or the Equipment; provided, however, that Grantor may, at its own
expense and after notice to Beneficiary, (i) contest the applicability or
enforceability of any such requirements by appropriate legal proceedings,
prosecution of which does not constitute a basis for cancellation or revocation
of any insurance coverage required under Section 1.7 hereof or (ii) cause the
insurance policy containing any such requirement to be replaced by a new policy
or included in a different policy complying with the provisions of Section 1.7.
1.5.7 Grantor shall, promptly upon receipt of any written notice regarding
any failure by Grantor to pay or discharge any of the obligations described in
subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a copy of such notice to
Beneficiary.
1.5.8 In the event that the proceeds of any tax claim are paid after
Beneficiary has exercised its right to foreclose the Lien of this Deed of Trust,
such proceeds shall be paid to Beneficiary to satisfy any deficiency remaining
after such foreclosure. Beneficiary shall retain its interest in the proceeds of
any tax claim during any redemption period. The amount of any such proceeds in
excess of any deficiency claim of Beneficiary shall be released to Grantor.
SECTION 1.6 Certain Tax Law Changes. In the event of the passage after the
date of this Deed of Trust of any law deducting from the value of real property,
for the purpose of taxation, amounts in respect of any Lien thereon or changing
in any way the laws for the taxation of mortgages or debts secured by mortgages
for state or local purposes or the manner of the collection of any such taxes,
and imposing a tax, either directly or indirectly, on this Deed of Trust, the
Indenture or any other Collateral Document, Grantor shall promptly pay to
Beneficiary such amount or amounts as may be necessary from time to time to pay
such tax or otherwise take such action as reasonably required by Beneficiary.
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SECTION 1.7 Required Insurance Policies.
1.7.1 Grantor shall comply with all provisions, representations,
warranties, conditions and covenants of the Mortgaged Lease pertaining to
insurance. Grantor shall maintain in full force and effect the greater of the
following insurance coverages or the insurance coverages required pursuant to
the terms of the Mortgaged Lease in respect of the Premises and the Equipment;
provided, however, that to the extent that the terms of this Deed of Trust and
the Mortgaged Lease require identical coverage, Grantor need only maintain one
policy or group of policies providing such coverage:
(i) Physical hazard insurance on an "all risk" basis covering, without
limitation, hazards commonly covered by fire and extended coverage,
lightning, windstorm, civil commotion, hail, riot, strike, water damage,
sprinkler leakage, collapse and malicious mischief, in an amount equal to
the full replacement cost of the Improvements and all Equipment, with such
deductibles as Beneficiary may from time to time require, and, if
Beneficiary shall not have imposed any such requirements, with such
deductibles as would be maintained by a Prudent Operator. "Full replacement
cost" means the Cost of Construction (as hereinafter defined) to replace
the Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time (but not less
frequently than once every twelve (12) months) by a Person selected by
Grantor and reasonably acceptable to Beneficiary;
(ii) Commercial general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Premises and
any adjoining streets, sidewalks and passageways, and covering any and all
claims, including, without limitation, all legal liability to the extent
insurable imposed upon Beneficiary and all court costs and attorneys' fees,
arising out of or connected with the possession, use, leasing, operation or
condition of the Premises with policy limits and deductibles in such
amounts as from time to time would be maintained by a Prudent Operator;
(iii) Worker's compensation insurance as required by the laws of the
state where the Premises are located to protect Grantor and Beneficiary
against claims for injuries sustained in the course of employment at the
Premises;
(iv) Explosion insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Beneficiary may from time to time
require, and, if Beneficiary shall not have imposed any such requirements,
in such amounts as would be maintained by a Prudent Operator;
(v) Business interruption insurance and/or loss of "rental value"
insurance covering one year of loss, the term "rental value" to mean the
sum of (a) the total estimated gross rental income from tenant occupation
of the Improvements as furnished and equipped under Subleases and (b) the
total amount of all other charges which are the legal obligation of the
tenants, lessees and sublessees of the Premises under Subleases or in such
amounts as would be maintained by a Prudent Operator;
(vi) If the Premises are located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards
pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973, each as amended, or any successor laws, flood
insurance with policy limits and deductibles in such amounts as Beneficiary
may from time to time reasonably require, and, if Beneficiary shall not
have imposed any such requirements, in such amounts as would be maintained
by a Prudent Operator; and
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(vii) Such other insurance, against such risks and with policy limits
and deductibles in such amounts as Beneficiary may from time to time
reasonably require, and, if no such requirements shall have been imposed,
in such amounts as would be maintained by a Prudent Operator.
1.7.2 All insurance policies required by this Section 1.7 shall be in form
reasonably satisfactory to Beneficiary and may be covered under master or
blanket policies covering other assets and/or activities. All insurance policies
in respect of the coverages required by subsections 1.7.1(i), 1.7.1(iv),
1.7.1(v), 1.7.1(vi) and, if applicable, 1.7.1(vii), shall be in amounts at least
sufficient to prevent coinsurance liability, and all losses thereunder shall be
payable to Beneficiary, as loss payee, pursuant to a standard non-contributory
New York (or similar) mortgagee endorsement. All insurance policies in respect
of the coverages required by subsections 1.7.1(ii), (1.7.1 (iii) and, if
applicable, 1.7.1(vii) shall name Beneficiary as an additional insured in
addition to any additional insureds required to be named under the Mortgaged
Lease. Each policy of insurance required under this Section 1.7 shall provide
that it may not be modified, reduced, cancelled or otherwise terminated without
at least thirty (30) days' prior written notice to Beneficiary and shall permit
Beneficiary to pay any premium therefor within ten (10) days after receipt of
any notice stating that such premium has not been paid when due. All insurance
policies required hereunder shall provide that all losses thereunder shall be
payable notwithstanding any act or negligence of Grantor or its agents or
employees which otherwise might have resulted in a forfeiture of all or a part
of such insurance payments. The policy or policies of such insurance or
certificates of insurance evidencing the required coverages, and all renewals or
extensions thereof, shall be delivered to Beneficiary. Settlement of any claim
under any of the insurance policies referred to in this Section 1.7, if such
claim involves (in the reasonable judgment of Beneficiary) loss in excess of
$500,000, shall require the prior written approval of Beneficiary (which written
approval shall not be unreasonably withheld or delayed), and Grantor shall use
reasonable efforts to cause each such policy to contain a provision to such
effect.
1.7.3 At least thirty(30) days prior to the expiration of any insurance
policy required by this Section 1.7, a policy or policies renewing or extending
such expiring policy or renewal or extension certificates or other reasonable
evidence of renewal or extension and that the applicable policies are in full
force and effect shall be delivered to Beneficiary.
1.7.4 Grantor shall not purchase separate insurance policies concurrent in
form or contributing in the event of loss with those policies required to be
maintained under this Section 1.7, unless Beneficiary is included thereon as a
named insured as its interest may appear and, if applicable, with loss payable
to Beneficiary under an endorsement containing the provisions described in
subsection 1.7.2. Grantor shall immediately notify Beneficiary whenever any such
separate insurance policy is obtained and shall promptly deliver to Beneficiary
the policy or certificate evidencing such insurance.
1.7.5 Grantor shall, immediately upon receipt of any written notice of any
failure by Grantor to pay any insurance premium in respect of any insurance
policy required to be maintained under this Section 1.7, furnish a copy of such
notice to Beneficiary.
SECTION 1.8 Failure To Make Certain Payments. If Grantor shall fail to
perform any of the covenants contained in this Deed of Trust, including, without
limitation, Grantor's covenants to (i) pay the premiums in respect of all
required insurance coverages, (ii) pay taxes and assessments, (iii) make
repairs, (iv) discharge liens and encumbrances or (v) pay or perform any
obligations of Grantor under the Leases, Beneficiary may, but shall not be
obligated to, make advances to perform such covenant on Grantor's behalf, and
all sums so advanced shall be included in the Secured Obligations and, to the
extent permitted by applicable law, shall be secured hereby. Grantor shall repay
on demand all sums so advanced by Beneficiary on behalf of Grantor, with
interest at the Default Rate from the date of payment by Beneficiary to the date
of reimbursement. Neither the provisions of this Section 1.8 nor any action
taken by Beneficiary pursuant to the provisions of this
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Section 1.8 shall prevent any such failure to observe any covenant contained in
this Deed of Trust from constituting an Event of Default. Beneficiary shall not
be bound to inquire into the validity of any tax, lien or imposition which
Grantor fails to pay as and when required hereby and which Grantor does not
contest in accordance with the terms hereof.
SECTION 1.9 Inspection. Grantor shall permit Beneficiary, by its agents,
accountants and attorneys, to visit and inspect the Premises and any Equipment
located thereon at such reasonable times as may be requested by Beneficiary,
subject to reasonable notice and confidentiality requirements which are not more
restrictive than those maintained by Grantor as a matter of general policy.
SECTION 1.10 Grantor To Maintain Improvements. Grantor shall not commit or
suffer any waste on the Premises or with respect to any Equipment or make any
change in the use of the Premises or any Equipment. Grantor represents and
warrants that, to the extent the same would be required by a Prudent Operator
(i) the Premises are served by all utilities required or necessary for the
current use thereof, (ii) all streets necessary to serve the Premises are
completed and serviceable and have been dedicated and accepted as such by the
appropriate Governmental Authorities and (iii) Grantor has access to the
Premises from public roads sufficient to allow Grantor and its tenants and
invitees to conduct its and their businesses at the Premises in accordance with
sound commercial practices. Grantor shall, at all times and to the extent the
same would be maintained or made by a Prudent Operator (i) maintain the Premises
and on-site Equipment in safe and insurable operating order, condition and
repair and (ii) shall make all repairs, structural or nonstructural, when
necessary. Grantor shall (i) not alter the occupancy or use of all or any part
of the Premises without the prior written consent of Beneficiary and (ii) to the
extent the same would be done by a Prudent Operator, do all other acts which
from the character or use of the Premises and Equipment may be necessary or
appropriate to maintain and preserve their value.
SECTION 1.11 Grantor's Obligations with Respect to Subleases.
1.11.1 Subject to the provisions of subsection 1.11.2 herein, Grantor will
manage and operate the Mortgaged Property in a reasonably prudent manner and
will not without the prior written consent of Beneficiary enter into any Lease
of all or any part of the Premises.
1.11.2 Grantor shall not:
(i) subject to the provisions of the Indenture, receive or collect, or
permit the receipt or collection of, any rental or other payments under any
Sublease more than one month in advance of the respective period in respect
of which they are to accrue, except that (a) in connection with the
execution and delivery of any Sublease or of any amendment to any Sublease,
rental payments thereunder may be collected and received in advance in an
amount not in excess of one month's rent and/or a reasonable security
deposit may be required thereunder and (b) Grantor may receive and collect
escalation and other charges in accordance with the terms of each Sublease;
(ii) assign, transfer or hypothecate (other than to Beneficiary
hereunder or in accordance with the terms of the applicable Intercreditor
Agreement) any rental or other payment under any Lease whether then due or
to accrue in the future, the interest of Grantor as lessor under any Lease
or the rents, issues, revenues, profits or other income of the Mortgaged
Property;
(iii) enter into any Sublease after the date hereof that does not
contain terms to the effect as follows:
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(a) such Sublease and the rights of the tenant thereunder
(including, without limitation, any options to purchase or rights of
first offer or refusal) shall be subject and subordinate to the rights
of Beneficiary under and the Lien of this Deed of Trust;
(b) such Sublease has been assigned as collateral security by
Grantor as landlord thereunder to Beneficiary under this Deed of
Trust;
(c) in the case of any foreclosure hereunder, the rights and
remedies of the tenant in respect of any obligations of any successor
landlord thereunder shall be limited to the equity interest of such
successor landlord in the Premises and any successor landlord shall
not (1) be liable for any act, omission or default of any prior
landlord under the Sublease, (2) be required to make or complete any
tenant improvements or capital improvements or repair, restore,
rebuild or replace the demised premises or any part thereof in the
event of damage, casualty or condemnation or (3) be required to pay
any amounts to tenant arising under the Sublease prior to such
successor landlord taking possession;
(d) the tenant's obligation to pay rent and any additional rent
shall not be subject to any abatement, deduction, counterclaim or
setoff as against any mortgagee or purchaser upon the foreclosure of
any of the Premises or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to such
foreclosure or delivery of such deed and such mortgagee or purchaser
will not be bound by any advance payments of rent in excess of one
month or any security deposits unless such security was actually
received by Beneficiary (or in the case of a letter of credit, was
properly transferred in negotiable form);
(e) the tenant agrees to attorn, at the option of Beneficiary or
any purchaser of the Premises, upon a foreclosure of the Premises or
the giving or granting of a deed in lieu thereof; and
(f) the tenant agrees to give notice to Beneficiary of any
default by landlord under the Sublease and Beneficiary shall have a
reasonable time to cure, should Beneficiary so elect, any default of
landlord prior to tenant exercising any rights of tenant to terminate
or cancel such Sublease.
(iv) enter into any amendment or modification of any Sublease which
would materially and adversely change the unexpired term thereof or
decrease the amount of the rents or other amounts payable thereunder or
which would impair the value or utility of the Mortgaged Property or the
security provided by this Deed of Trust;
(v) enter into any further lease or sublease of the property subject
to any Sublease without the prior written consent of Beneficiary, unless
such Sublease is not amended in any respect and the primary obligor under
such Sublease is not released in any respect from its responsibilities and
liabilities under such Sublease as a result of such lease or sublease;
(vi) terminate (whether by exercising any contractual right of Grantor
to recapture leased space or otherwise) or permit the termination of any
Sublease or accept surrender of all or any portion of the space demised
under any Lease prior to the end of the term thereof or accept assignment
of any Sublease to Grantor unless:
<PAGE>
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(a) the tenant under such Sublease has not paid the equivalent of
two months' rent and Grantor has made reasonable efforts to collect
such rent; or
(b) Grantor shall deliver to Beneficiary an Officer's Certificate
to the effect that Grantor has entered into a new Sublease (or
Subleases) for the space covered by the terminated or assigned
Sublease with a term (or terms) which expire(s) no earlier than the
date on which the terminated or assigned Sublease was to expire
(excluding renewal options), and with a tenant (or tenants) having a
creditworthiness (as reasonably determined by Grantor) sufficient to
pay the rent and other charges due under the new Sublease (or
Subleases), and the tenant(s) shall have commenced paying rent,
including all operating expenses and other amounts payable under the
new Lease (or Leases) without any abatement or concession; or
(vii) waive, excuse, condone or in any manner discharge or release any
tenants of or from the obligations of such tenants under their respective
Subleases or guarantors of tenants from obligations under any guarantees of
the Subleases except in the ordinary and prudent course of business with
due regard for the security afforded Beneficiary thereby.
1.11.3 Grantor shall timely perform and observe all the terms, covenants
and conditions required to be performed and observed by Grantor under each
Sublease and shall at all times do all things necessary to require performance
by the sublessee, franchisee, licensee or grantee under each Sublease of all
obligations, covenants and agreements by such party to be performed thereunder.
Grantor shall promptly notify Beneficiary of the receipt of any notice from any
sublessee under any Sublease claiming that Grantor is in default in the
performance or observance of any of the terms, covenants or conditions thereof
to be performed or observed by Grantor and will cause a copy of each such notice
to be promptly delivered to Beneficiary.
1.11.4 Grantor shall furnish to Beneficiary, within thirty (30) days after
each reasonable request by Beneficiary to do so, a written statement in respect
of any or all of the Subleases setting forth the space occupied, if any, the
property affected thereby, the rentals or other amounts payable thereunder, and
such other information as Beneficiary may reasonably request.
SECTION 1.12 Transfer Restrictions. Except as provided in Sections 1.3.1 or
1.11 hereof or permitted by and in accordance with the provisions of the
Indenture, Grantor may not, without the prior written consent of Beneficiary,
and the consent of Lessor, if any, as may be required by the Mortgaged Lease,
further mortgage, encumber, hypothecate, sell, convey or assign all or any part
of the Mortgaged Property or suffer any of the foregoing to occur by operation
of law or otherwise. Notwithstanding the provisions of the foregoing sentence,
so long as no Event of Default shall have occurred and be continuing, Grantor
shall have the right, subject to any provision in the Mortgaged Lease to the
contrary, to suffer, in respect of the Mortgaged Property:
(i) The Liens in respect of amounts payable or obligations to be performed
by Grantor pursuant to subsections 1.3.1(viii), 1.4.1, 1.5.1, 1.5.3,
1.5.4, 1.15.2 and/or 1.16; provided, however, that such amounts are
not yet due and payable or are being contested in accordance with the
provisions of subsection 1.5.5;
(ii) Prior Liens;
(iii) The Lien and security interest granted to Beneficiary pursuant to
this Deed of Trust;
(iv) As to each category or type of Mortgaged Property, the Liens described
in Section 2.1(b) of the Existing Lien Intercreditor Agreement which
are subject and subordinate
<PAGE>
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to the Lien and security interest evidenced by this Deed of Trust in
such category or type of Mortgaged Property and refinancings thereof
to the extent permitted under the Indenture and the Existing Lien
Intercreditor Agreement; and
(v) Liens of the type described in clauses (4), (5), (20) and (22) of the
definition of Permitted Liens and refinancings thereof to the extent
permitted under the Indenture and the Intercreditor Agreements and
with respect to any After-Acquired Property, the Liens of the type
described in clause (11) (provided, however, such Lien shall extend
only to After-Acquired Property at any time having a fair market value
not to exceed $5 million) and (28) (provided, however, such Lien shall
extend only After-Acquired Property at any time having a fair market
value not to exceed $10 million) of the definition of Permitted Liens.
Each of the Liens and other transfers permitted by this Section 1.12 shall in
all respects be subject and subordinate in priority to the Lien and security
interests created and evidenced hereby except as provided in the Intercreditor
Agreements or to the extent the law or regulation creating or authorizing such
Lien provides that such Lien must be superior to the Lien and security interest
created and evidenced hereby.
SECTION 1.13 Destruction; Condemnation.
1.13.1 Destruction; Insurance Proceeds. If there shall occur any damage to,
or loss or destruction of, the Improvements, Equipment, or any part of any
thereof (each, a "Destruction"), Grantor shall, in addition to any notices
required under the Mortgaged Lease, promptly send to Beneficiary a notice
setting forth the nature and extent of such Destruction. Pursuant to the
provisions of the Intercreditor Agreements, the proceeds of any insurance
payable in respect of such Destruction shall constitute Trust Moneys and are
hereby assigned and, subject to the provisions of and to the greatest extent
permitted by the Mortgaged Lease, shall be paid to Beneficiary. All such
proceeds, together with any interest earned thereon, less the amount of any
expenses incurred in litigating, arbitrating, compromising or settling any claim
arising out of such Destruction (the "Net Proceeds"), shall, pursuant to the
terms of the provisions of the Intercreditor Agreements, constitute Trust Moneys
and be applied in accordance with the provisions of the Indenture. Beneficiary
is hereby authorized and directed to pay from Trust Moneys any and all such
expenses deemed necessary and reasonable by Beneficiary in connection with the
foregoing.
1.13.2 Condemnation; Assignment of Award. If there shall occur any taking
of the Mortgaged Property or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, general or special, or by reason
of the temporary requisition of the use or occupancy of the Mortgaged Property
or any part thereof, by any Governmental Authority, civil or military (each, a
"Taking"), Grantor shall, in addition to any notices required under the
Mortgaged Lease, immediately notify Beneficiary upon receiving notice of such
Taking or commencement of proceedings therefor. Beneficiary may participate in
any proceedings or negotiations which might result in any Taking, and Grantor
shall deliver or cause to be delivered to Beneficiary all instruments reasonably
requested by it to permit such participation. Beneficiary may be represented by
counsel satisfactory to it at the expense of Grantor in connection with any such
participation. Grantor shall in good faith and with due diligence file and
prosecute what would otherwise be Grantor's claim for any such award or payment
and cause the same to be collected and paid over to Beneficiary, and hereby
irrevocably authorizes and empowers Beneficiary, in the name of Grantor as its
true and lawful attorney-in-fact or otherwise, to collect and to receipt for any
such award or payment, and in the event Grantor fails so to act or is otherwise
in default hereunder beyond any applicable notice and grace period set forth
herein or in the Indenture, to file and prosecute
<PAGE>
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such claim. Grantor shall pay all reasonable fees, costs and expenses incurred
by Beneficiary in connection with any Taking and in seeking and obtaining any
award or payment on account thereof. Any proceeds, award or payment in respect
of any Taking shall constitute Trust Moneys and are hereby assigned and, subject
to the provisions of and to the greatest extent permitted by the Mortgaged
Lease, shall be paid to Beneficiary and shall be applied in accordance with the
provisions of the Indenture. Grantor shall take all steps necessary to notify
the condemning authority of such assignment. Such proceeds, award or payment,
together with any interest earned thereon, less the amount of any expenses
incurred in litigating, arbitrating, compromising or settling any claim arising
out of such Taking (the "Net Award"), shall constitute Trust Moneys and be
applied in accordance with the provisions of the Indenture. Beneficiary is
hereby authorized and directed to pay from Trust Moneys any and all such
expenses deemed necessary and reasonable by Beneficiary in connection with the
foregoing.
SECTION 1.14 Alterations. Grantor shall not, without the prior written
consent of Beneficiary and Lessor (if Lessor's consent is required under the
Mortgaged Lease), make any addition, modification or change (each, an
"Alteration"), structural or nonstructural, to the Premises that costs more to
effect than $500,000. Upon the making of any Alteration permitted under the
Mortgaged Lease, whether or not Beneficiary. has consented to the making of any
Alteration, Grantor shall (i) complete each Alteration promptly, in a good and
workmanlike manner and in compliance with all applicable local laws, ordinances
and requirements and (ii) pay when due all claims for labor performed and
materials furnished in connection with such Alteration, unless contested in
accordance with the provisions of subsection 1.5.5.
SECTION 1.15 Hazardous Material.
1.15.1 Grantor represents and warrants that except as disclosed in the Real
Property Officer's Certificate (i) there are in effect all material permits,
licenses and other authorizations which are required with respect to the
ownership and operation of its business and the Mortgaged Property under any and
all applicable Environmental Laws, (ii) in all material respects, it is in
compliance with all terms and conditions of the required permits, licenses and
authorizations, and is also in compliance with Environmental Laws, including,
without limitation, all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws, (iii) there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or violation, investigation,
proceeding, notice of demand letter pending or threatened against it or any
subsidiary under the Environmental Laws which could result in a material fine,
penalty or other material cost or expense and (iv) there are no past or present
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance with, in each case, in any
material respect, the Environmental Laws, or which may give rise to any material
common law or legal liability, including, without limitation, liability under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or any other Environmental Law or related common law theory or
otherwise form the basis of any claim, action, demand, suit, proceeding, hearing
or notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Materials which could
result in a material fine, penalty or other material cost or expense, unless
contested in accordance with the provisions of subsection 1.5.5.
1.15.2 Grantor shall (i) comply with any and all present and future
Environmental Laws, (ii) not release, store, treat, handle, generate, discharge
or dispose of any Hazardous Materials at, on, under or from the Mortgaged
Property in violation of or in a manner that could result in any liability under
any present and future Environmental Law and (iii) take all necessary steps to
initiate and expeditiously complete all remedial, corrective and other action to
eliminate any such effect. In the event Grantor fails to comply with the
covenants in the preceding sentence, Beneficiary may, but shall not be obligated
to, in addition to any other remedies set forth herein, as agent for and at
Grantor's sole cost and expense, following written notice to Grantor and to
Issuer
<PAGE>
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cause any necessary remediation, removal or response action relating to
Hazardous Materials to be taken and Grantor shall provide to Beneficiary and its
agents and employees access to the Mortgaged Property for such purpose. Any and
all costs or expenses incurred by Beneficiary for such purpose shall be
immediately due and payable by Grantor and shall bear interest at the Default
Rate. Beneficiary shall have during the time that the Secured Obligations are
outstanding, at the sole cost and expense of Grantor, the right to conduct an
environmental assessment of the Mortgaged Property (i) annually or (ii)
following an Event of Default, which is continuing, by such persons or firms
appointed by Beneficiary, and Grantor shall cooperate in all respects in the
conduct of such environmental assessment, including, without limitation, by
providing access to the Mortgaged Property and to all records relating thereto.
To the extent that any environmental assessment identifies conditions which
violate, or could reasonably be expected to give rise to liability or
obligations under, Environmental Laws, Grantor agrees to expeditiously correct
any such violation or respond to conditions giving rise to such liability or
obligations in a manner which complies with the Environmental Laws and mitigates
associated health and environmental risks. Grantor shall indemnify and hold
Trustee, Beneficiary and the Holders harmless from and against all loss, cost,
damage (including, without limitation, consequential damages) and reasonable
expense (including, without limitation, reasonable attorneys' and consultants'
fees and disbursements and the reasonable allocated costs of staff counsel)
(collectively referred to as "Losses") that Trustee, Beneficiary or the Holders
may sustain by reason of the assertion against Trustee, Beneficiary or the
Holders by any party of any claim relating to such Hazardous Materials at, on,
under or from the Mortgaged Property or actions taken with respect thereto as
authorized hereunder excluding any such Losses to the extent finally determined
by a court of competent jurisdiction in a final, non-appealable judgment to have
arisen from the gross negligence or willful misconduct of the party seeking
indemnification. The foregoing indemnification shall survive repayment of all
Secured Obligations and any release or assignment of this Deed of Trust. Nothing
contained herein or in any other document shall result in Trustee, Beneficiary
or the Holders being deemed an "owner", "operator" or "generator" under
applicable Environmental Laws, as hereinafter defined, including, without
limitation, those enacted hereafter. "Environmental Laws", for the purposes of
this Deed of Trust, means the common law and all (i) Federal, state, local and
foreign laws, regulations, codes or orders, and (ii) decrees, judgments or
injunctions to which Grantor or a predecessor in interest of the Mortgaged
Property is a named party, issued, promulgated, approved or entered thereunder,
in each case, relating to pollution or protection of public or employee health
or the environment, including, without limitation, those relating to handling,
use, storage, treatment, disposal, removal, emission, discharge or release of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes, including, without limitation, petroleum, including crude
oil or any petroleum product or any fraction thereof, and asbestos and
asbestos-containing material (collectively, "Hazardous Materials") into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and indoor air) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
SECTION 1.16 Asbestos. Grantor shall not install nor permit to be installed
in or removed from the Mortgaged Property, asbestos or any asbestos-containing
material (collectively, "ACM") except in compliance with all applicable present
and future Environmental Laws, and with respect to any ACM currently present in
the Mortgaged Property, Grantor shall expeditiously either (i) remove or
encapsulate any ACM which such Environmental Laws require to be removed or (ii)
otherwise comply with such Environmental Laws with respect to such ACM, all at
Grantor's sole cost and expense. If Grantor shall fail so to remove or
encapsulate any ACM or otherwise comply with such Environmental Laws,
Beneficiary may, but shall not be obligated to, in addition to any other
remedies set forth herein, following written notice to Grantor and to Issuer,
take whatever steps it deems necessary or appropriate so comply with applicable
Environmental Laws and Grantor shall provide to Beneficiary and its agents and
employees access to the Mortgaged Property for such purpose. Any and all costs
or expenses incurred by Beneficiary for such purpose shall be immediately due
and payable by Grantor and bear interest at the Default Rate. Grantor shall
indemnify and hold Trustee, Beneficiary and the Holders harmless from and
against all loss, cost, damage (including, without limitation, consequential
damages) and reasonable
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expense (including, without limitation, reasonable attorneys' and consultants'
fees and disbursements and the reasonable allocated costs of staff counsel) that
Trustee, Baneficiary or the Holders may sustain, as a result of the presence of
any ACM and any removal or encapsulation thereof or compliance with all
applicable present and future Environmental Laws. The foregoing indemnification
shall survive repayment of all Secured Obligations and any release or assignment
of this Deed of Trust.
SECTION 1.17 Books and Records, Other Information.
1.17.1 Grantor shall keep proper books of record and account in which full,
true and correct entries shall be made of all dealings or transactions of or in
relation to the Mortgaged Property and the business and affairs of Grantor
relating to the Mortgaged Property. Beneficiary and its authorized
representatives shall have the right at reasonable times and upon reasonable
notice to examine the books and records of Grantor relating to the operation of
the Mortgaged Property.
1.17.2 Grantor shall, at any and all times, within a reasonable time after
written request by Beneficiary, furnish or cause to be furnished to Beneficiary,
in such manner and in such detail as may be reasonably requested by Beneficiary,
additional information with respect to the Mortgaged Property.
SECTION 1.18 No Claims Against Beneficiary. Nothing contained in this Deed
of Trust shall constitute any consent or request by Beneficiary, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or any part thereof, nor
as giving Grantor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against
Beneficiary in respect thereof or any claim that any Lien based on the
performance of such labor or services or the furnishing of any such materials or
other property is prior to the Lien of this Deed of Trust.
SECTION 1.19 Utility Services. Grantor shall pay, or cause to be paid, when
due all charges for all public or private utility services, all public or
private rail and highway services, all public or private communication services,
all sprinkler systems, all protective services and any other services of
whatever kind or nature at any time rendered to or in connection with the
Premises or any part thereof, shall comply with all contracts relating to any
such services and shall do all other things required for the maintenance and
continuance of all such services to the extent required to fulfill the
obligations set forth in Section 1.10.
SECTION 1.20 Mortgaged Lease.
1.20.1 Grantor shall punctually and properly perform, observe and otherwise
comply with each and every covenant, agreement, requirement and condition set
forth in the Mortgaged Lease and do or cause to be done all things necessary or
appropriate to keep the Mortgaged Lease in full force and effect and to preserve
and keep unimpaired the rights of Grantor thereunder. Upon request of
Beneficiary, Grantor shall, subject to the terms of the Mortgaged Lease, request
from Lessor as estoppel certificate, addressed to Beneficiary, stating that
there is no default under the Mortgaged Lease, or any state of facts which, with
the passage of time or notice or both, would constitute a default thereunder, or
if there be any default under the Mortgaged Lease, giving the details thereof.
1.20.2 In the event Grantor acquires the fee simple title or any other
estate or interest in the property subject to the Mortgaged Lease, such
acquisition will not merge with the leasehold estate created by the Mortgaged
Lease, but such other estate or interest will remain discrete and immediately
become subject to the Lien of this Deed of Trust, and Grantor shall execute,
acknowledge and deliver any instruments requested by Beneficiary to confirm the
coverage of the Lien evidenced hereby upon such other estate or interest.
Grantor
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shall pay any and all conveyance or mortgage taxes and filing or similar fees in
connection with the execution, delivery, filing or recording of any such
instrument.
1.20.3 Grantor shall promptly notify Beneficiary in writing of the
occurrence of any default (or any event which, with the lapse of time or notice
or both, would constitute a default) on the part of or caused by any party to
the Mortgaged Lease. If for any reason Grantor cannot timely make any payment
under the Mortgaged Lease or perform or comply with any of its obligations under
the Mortgaged Lease, Grantor shall notify Beneficiary in sufficient time to
enable Beneficiary (but Beneficiary shall not be obligated) timely to make such
payments and/or to perform or comply with such other obligations. On receipt by
Beneficiary from Grantor pursuant to this subsection 1.20.3, or from Lessor
under the Mortgaged Lease, of any such notice of default by, or inability to
make any payment by, Grantor thereunder, Beneficiary may rely thereon and, after
notice to Grantor, take such action as Beneficiary deems necessary or desirable
to cure such default, even though the existence of such default or the nature
thereof is denied by Grantor or by any other person.
1.20.4 Grantor shall not surrender the leasehold estate created by the
Mortgaged Lease, or terminate or cancel the Mortgaged Lease. Grantor shall not,
without the prior written consent of Beneficiary, amend, modify, surrender,
impair, forfeit, cancel, or terminate, or permit the amendment, modification,
surrender, impairment, forfeiture, cancellation, or termination of the Mortgaged
Lease in whole or in part, whether or not a default shall have occurred and
shall be continuing under either thereof. Any such termination, cancellation,
modification, change, supplement, alteration, amendment or extension without the
prior written consent contemplated by this subsection 1.20.4 shall be void and
of no force or effect.
1.20.5 No release or forbearance of any of Grantor's obligations under the
Mortgaged Lease, pursuant to the terms thereof, by agreement, operation of law
or otherwise, shall release Grantor from any of Grantor's obligations under this
Deed of Trust, including, without limitation, Grantor's obligations with respect
to the payment of rent as provided in the Mortgaged Lease and the performance of
all of the other terms, provisions, covenants, conditions and agreements
contained in the Mortgaged Lease to be performed by Grantor thereunder.
1.20.6 The leasehold estate of Grantor created by the Mortgaged Lease and
the estate of Lessor under the Mortgaged Lease shall each at all times remain
separate and apart and retain their separate identities, and no merger of the
leasehold or easement estate of Grantor with the estate of Lessor will result
with respect to Beneficiary or with respect to any purchaser acquiring the
Mortgaged Property at any sale on foreclosure of the Lien of this Deed of Trust
without the written consent of Beneficiary.
1.20.7 Grantor covenants and agrees that the Mortgaged Lease now is and
shall at all times be subject in each and every respect to the terms, conditions
and Lien of this Deed of Trust. Grantor shall execute, acknowledge and deliver
any instruments requested by Beneficiary to confirm the foregoing.
1.20.8 Grantor covenants and agrees that if it shall be the subject to a
proceeding under the Federal Bankruptcy Code, it shall not elect to treat the
Mortgaged Lease as terminated (pursuant to Section 365 of the Federal Bankruptcy
Code or any similar statute or law) without the prior written consent of
Beneficiary. Grantor hereby irrevocably assigns to Beneficiary the right to
exercise such election.
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ARTICLE II
ASSIGNMENT OF SUBLEASES; SECURITY AGREEMENT;
ASSIGNMENT AGREEMENT
SECTION 2.1 Assignment of Subleases, Rents, Issues and Profits.
2.1.1 Grantor absolutely, presently and irrevocably assigns, transfers and
sets over to Beneficiary, and grants to Beneficiary subject to the terms and
conditions hereof, all Grantor's estate, right, title, interest, claim and
demand as landlord to collect rent and other sums due under all existing
Subleases and any other Subleases, including, without limitation, all extensions
of the terms of the Subleases (such assigned rights, "Grantor's Interest"), as
follows:
(i) the immediate and continuing right to receive and collect Rents
payable by all tenants or other parties pursuant to the Subleases;
(ii) all claims, rights, powers, privileges and remedies of Grantor,
whether provided for in any Lease or arising by statute or at law or in
equity or otherwise, consequent on any failure on the part of any tenant to
perform or comply with any term of any Sublease;
(iii) all rights to take all actions upon the happening of a default
under any Sublease as shall be permitted by such Sublease or by law,
including, without limitation, the commencement, conduct and consummation
of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Grantor or
otherwise, to enforce, collect, receive and receipt for any and all of the
foregoing and to do any and all other acts and things whatsoever which
Grantor or any landlord is or may be entitled to do under the Subleases.
2.1.2 Any Rents receivable by Beneficiary hereunder, after payment of all
proper costs and charges, shall be applied to all amounts due and owing under
and as provided in this Deed of Trust and the Indenture. Beneficiary shall be
accountable to Grantor only for Rents actually received by Beneficiary pursuant
to this assignment. The collection of such Rents and the application thereof
shall not cure or waive any Event of Default or waive, modify or affect notice
of Event of Default or invalidate any act done pursuant to such notice.
2.1.3 So long as no Event of Default shall have occurred and be continuing,
Grantor shall have a license to collect and apply the Rents and to enforce the
obligations of tenants under the Subleases. Immediately upon the occurrence and
during the continuance of any Event of Default, the license granted in the
immediately preceding sentence shall cease and terminate, with or without any
notice, action or proceeding or the intervention of a receiver appointed by a
court. Upon the occurrence of an Event of Default and during the continuance
thereof, Beneficiary may, to the fullest extent permitted by the Subleases, (i)
exercise any of Grantor's rights under the Subleases, (ii) enforce the
Subleases, (iii) demand, collect, sue for, attach, levy, recover, receive,
compromise and adjust, and make, execute and deliver receipts and releases for
all Rents or other payments that may then be or may thereafter become due, owing
or payable with respect to the Subleases and (iv) generally, do, execute and
perform any other act, deed, matter or thing whatsoever that ought to be done,
executed and performed in and about or with respect to the Subleases, as fully
as allowed or authorized by Grantor's Interest.
2.1.4 Upon the occurrence and during the continuance of an Event of
Default, Grantor shall, at the direction of Beneficiary, further authorize and
direct the tenant under each Sublease to pay directly to, or as directed by,
Beneficiary all Rents accruing or due under its Sublease without proof to the
tenant of the occurrence
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and continuance of such Event of Default. Grantor hereby authorizes the tenant
under each Sublease to rely upon and comply with any notice or demand from
Beneficiary for payment of Rents to Beneficiary and Grantor shall have no claim
against any tenant for Rents paid by such tenant to Beneficiary pursuant to such
notice or demand.
2.1.5 Grantor at its sole cost and expense shall use commercially
reasonable efforts to enforce the Subleases in accordance with their terms to
the extent that the same would be enforced by a Prudent Operator. Neither this
Deed of Trust nor any action or inaction on the part of Beneficiary shall
release any tenant under any Sublease, any guarantor of any Sublease or Grantor
from any of their respective obligations under the Subleases or constitute an
assumption of any such obligation on the part of Beneficiary. No action or
failure to act on the part of Grantor shall adversely affect or limit the rights
of Beneficiary under this Deed of Trust or, through this Deed of Trust, under
the Subleases.
2.1.6 All rights, powers and privileges of Beneficiary herein set forth are
coupled with an interest and are irrevocable, subject to the terms and
conditions hereof, and Grantor shall not take any action under the Leases or
otherwise which is inconsistent with this Deed of Trust or any of the terms
hereof and any such action inconsistent herewith or therewith shall be void.
Grantor shall, from time to time, upon request of Beneficiary, execute all
instruments and further assurances and all supplemental instruments and take all
such action as Beneficiary from time to time may reasonably request in order to
perfect, preserve and protect the interests intended to be assigned to
Beneficiary hereby.
2.1.7 Grantor shall not, unilaterally or by agreement, subordinate, amend,
modify, extend, discharge, terminate, surrender, waive or otherwise change any
term of any of the Subleases in any manner which would violate this Deed of
Trust. If the Subleases shall be amended as permitted hereby, they shall
continue to be subject to the provisions hereof without the necessity of any
further act by any of the parties hereto. To the extent Grantor has subleased
the Premises or a portion thereof in accordance with the provisions of this Deed
of Trust, Beneficiary, upon Grantor's request, may enter into with any subtenant
under such sublease a non-disturbance agreement in the form attached to the
Indenture as Exhibit H.
2.1.8 Nothing contained herein shall operate or be construed to (i)
obligate Beneficiary to perform any of the terms, covenants or conditions
contained in the Subleases or otherwise to impose any obligation upon
Beneficiary with respect to the Subleases (including, without limitation, any
obligation arising out of any covenant of quiet enjoyment contained in the
Subleases in the event that any tenant under a Lease shall have been joined as a
party defendant in any action by which the estate of such tenant shall be
terminated) or (ii) place upon Beneficiary any responsibility for the operation,
control, care, management or repair of the Premises.
SECTION 2.2 Security Interest in Personal Property.
2.2.1 This Deed of Trust shall constitute a security agreement and shall
create and evidence a security interest or common law Lien in all the Equipment
and in all the other items of Mortgaged Property in which a security interest
may be granted or a common law pledge created pursuant to the Uniform Commercial
Code as in effect in the state in which the Premises are located or under the
common law in such state (collectively, "Personal Property").
2.2.2 Upon the occurrence of any Event of Default, in addition to the
remedies set forth in Article III, Beneficiary shall have the power to sell the
Personal Property in accordance with the Uniform Commercial Code as enacted in
the state in which the Premises are located or under other applicable law. It
shall not be necessary that any Personal Property offered be physically present
at any such sale or constructively in the possession of Beneficiary or the
person conducting the sale.
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2.2.3 Upon the occurrence and during the continuance of any Event of
Default, Beneficiary may sell the Personal Property or any part thereof at
public or private sale with notice to Grantor as hereinafter provided. The
proceeds of any such sale, after deducting all expenses of Beneficiary in
taking, storing, repairing and selling the Personal Property (including, without
limitation, attorneys' fees and legal expenses), shall be applied in the manner
set forth in subsection 3.3.3. At any sale, public or private, of the Personal
Property or any part thereof, Beneficiary may purchase any or all of the
Personal Property offered at such sale.
2.2.4 Beneficiary shall give Grantor reasonable notice of any sale of any
of the Personal Property pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is mailed
at least five (5) days prior to any sale, by first class or certified mail,
postage prepaid, to Grantor at its address determined in accordance with the
provisions of Section 5.2.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
SECTION 3.1 Events of Default. It shall be an Event of Default hereunder if
there shall have occurred and be continuing an Event of Default under the
Indenture.
SECTION 3.2 Remedies in Case of an Event of Default. If any Event of
Default shall have occurred and be continuing, Beneficiary or Trustee may at
Beneficiary's option, exercised in accordance with the provisions of the
Indenture, in addition to any other action permitted under this Deed of Trust or
the Indenture or by law, statute or in equity, take one or more of the following
actions:
3.2.1 by written notice to Grantor, declare the entire unpaid amount of the
Secured Obligations to be due and payable immediately;
3.2.2 personally, or by its agents or attorneys, (i) give notice of such
Event of Default to Lessor, (ii) to the extent permitted by the Mortgaged Lease,
act in all respects as lessee in respect of Mortgaged Lease and perform, on
behalf of and for the account of Grantor, any of the obligations of lessee
thereunder, (iii) enter into and upon and take possession of all or any part of
the Premises together with the books, records and accounts of Grantor relating
thereto and, exclude Grantor, its agents and servants wholly therefrom, (iv)
use, operate, manage and control the Premises and the Equipment and conduct the
business thereof, (v) maintain and restore the Premises and the Equipment, (vi)
make all necessary or proper repairs, renewals and replacements and such useful
Alterations thereto and thereon as Beneficiary may deem advisable, (vii) manage,
lease and operate the Premises and carry on the business thereof and exercise
all rights and powers of Grantor with respect thereto either in the name of
Grantor or otherwise or (viii) collect and receive all earnings, revenues,
rents, issues, profits and income of the Mortgaged Property and every part
thereof.
3.2.3 with or without entry, personally or by its agents or attorneys, (i)
sell the Mortgaged Property and all estate, right, title and interest, claim and
demand therein at one or more sales in one or more parcels, in accordance with
the provisions of Section 3.3 or (ii) institute and prosecute proceedings for
the complete or partial foreclosure of the Lien and security interests created
and evidenced hereby; or
3.2.4 take such steps to protect and enforce its rights whether by action,
suit or proceeding at law or in equity for the specific performance of any
covenant, condition or agreement in the Indenture and the other Collateral
Documents, or in aid of the execution of any power granted in this Deed of
Trust, or for any
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foreclosure hereunder, or for the enforcement of any other appropriate legal or
equitable remedy or otherwise as Beneficiary shall elect.
SECTION 3.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds
of Sale.
3.3.1 If any Event of Default shall have occurred and be continuing,
Beneficiary or Trustee at the direction of Beneficiary may institute an action
to foreclose this Deed of Trust or take such other action as may be permitted
and available to Beneficiary or Trustee at law or in equity for the enforcement
of the Indenture and the Notes and realization on the Mortgaged Property and
proceeds thereon through power of sale or to final judgment and execution
thereof for the Secured Obligations, and in furtherance thereof Beneficiary or
Trustee may sell the Mortgaged Property at one or more sales, as an entirety or
in parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by law or statute or in equity.
Beneficiary or Trustee may execute and deliver to the purchaser at such sale a
conveyance of the Mortgaged Property in fee simple and an assignment or
conveyance of all Grantor's Interest in the Leases and the Mortgaged Property,
each of which conveyances and assignments shall contain recitals as to the Event
of Default upon which the execution of the power of sale herein granted depends,
and Grantor hereby constitutes and appoints Beneficiary or Trustee the true and
lawful attorney-in-fact of Grantor to make any such recitals, sale, assignment
and conveyance, and all of the acts of Beneficiary or Trustee as such
attorney-in-fact are hereby ratified and confirmed. Grantor agrees that such
recitals shall be binding and conclusive upon Grantor and that any assignment or
conveyance to be made by Beneficiary or Trustee shall divest Grantor of all
right, title, interest, equity and right of redemption, including any statutory
redemption, in and to the Mortgaged Property. The power and agency hereby
granted are coupled with an interest and are irrevocable by death or
dissolution, or otherwise, and are in addition to any and all other remedies
which Beneficiary or Trustee may have hereunder, at law or in equity. So long as
the Secured Obligations, or any part thereof, remain unpaid, Grantor agrees that
possession of the Mortgaged Property by Grantor, or any person claiming under
Grantor, shall be as tenant, and, in case of a sale under power or upon
foreclosure as provided in this Deed of Trust, Grantor and any person in
possession under Grantor, as to whose interest such sale was not made subject,
shall, at the option of the purchaser at such sale, then become and be tenants
holding over, and shall forthwith deliver possession to such purchaser, or be
summarily dispossessed in accordance with the laws applicable to tenants holding
over. In case of any sale under this Deed of Trust by virtue of the exercise of
the powers herein granted, or pursuant to any order in any judicial proceeding
or otherwise, the Mortgaged Property may be sold as an entirety or in separate
parcels in such manner or order as Beneficiary or Trustee in their sole
discretion may elect. One or more exercises of powers herein granted shall not
extinguish or exhaust such powers, until the entire Mortgaged Property is sold
or all amounts secured hereby are paid in full.
3.3.2 In the event of any sale made under or by virtue of this Article III,
the entire principal of, and interest in respect of the Secured Obligations, if
not previously due and payable, shall, at the option of Beneficiary, immediately
become due and payable, anything in this Deed of Trust to the contrary
notwithstanding.
3.3.3 The proceeds of any sale made under or by virtue of this Article III,
together with any other sums which then may be held by Beneficiary or Trustee
under this Deed of Trust, whether under the provisions of this Article III or
otherwise, shall be applied in accordance with the provisions of the Indenture.
3.3.4 Beneficiary may bid for and acquire the Mortgaged Property or any
part thereof at any sale made under or by virtue of this Article III and, in
lieu of paying cash therefor, may make settlement for the purchase price by
crediting against the purchase price the unpaid amounts (whether or not then
due) owing to Beneficiary in respect of the Secured Obligations, after deducting
from the sales price the expense of the sale and the reasonable costs of the
action or proceedings and any other sums that Beneficiary is authorized to
deduct under this Deed of Trust.
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3.3.5 Beneficiary or Trustee may adjourn from time to time any sale by it
to be made under or by virtue of this Deed of Trust by announcement at the time
and place appointed for such sale or for such adjourned sale or sales, and,
Beneficiary or Trustee, without further notice or publication, may make such
sale at the time and place to which the same shall be so adjourned.
3.3.6 If the Premises is comprised of more than one parcel of land,
Beneficiary or Trustee may take any of the actions authorized by this Section
3.3 in respect of any or a number of individual parcels.
3.3.7 The word "sale" as used in this Section 3.3 with respect to the
Mortgaged Lease shall mean the sale, transfer, assignment or conveyance for
value of the leasehold interest of Grantor in the Mortgaged Lease, together with
all Grantor's right, title and interest in and to the other items comprising the
Mortgaged Property.
SECTION 3.4 Additional Remedies in Case of an Event of Default.
3.4.1 Beneficiary shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceedings for the enforcement of
the provisions of this Deed of Trust, and the right of Beneficiary to recover
such judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this Deed of Trust, or the foreclosure of, or absolute conveyance
pursuant to, this Deed of Trust. In case of proceedings against Grantor in
insolvency or bankruptcy or any proceedings for its reorganization or involving
the liquidation of its assets, Beneficiary shall be entitled to prove the whole
amount of principal and interest and other payments, charges and costs due in
respect of the Secured Obligations to the full amount thereof without deducting
therefrom any proceeds obtained from the sale of the whole or any part of the
Mortgaged Property; provided, however, that in no case shall Beneficiary receive
a greater amount than the aggregate of such principal, interest and such other
payments, charges and costs (with interest at the Default Rate) from the
proceeds of the sale of the Mortgaged Property and the distribution from the
estate of Grantor.
3.4.2 Any recovery of any judgment by Beneficiary and any levy of any
execution under any judgment upon the Mortgaged Property shall not affect in any
manner or to any extent the Lien and security interests created and evidenced
hereby upon the Mortgaged Property or any part thereof, or any conveyances,
powers, rights and remedies of Beneficiary hereunder, but such conveyances,
powers, rights and remedies shall continue unimpaired as before.
3.4.3 Any moneys collected by Beneficiary under this Section 3.4 shall be
applied in accordance with the provisions of subsection 3.3.3.
SECTION 3.5 Legal Proceedings After an Event of Default.
3.5.1 Upon the occurrence and during the continuance of any Event of
Default and immediately upon the commencement of any action, suit or legal
proceedings to obtain judgment for the Secured Obligations or any part thereof,
or of any proceedings to foreclose the Lien and security interest created and
evidenced hereby or otherwise enforce the provisions of this Deed of Trust or of
any other proceedings in aid of the enforcement of this Deed of Trust, Grantor
shall enter its voluntary appearance in such action, suit or proceeding.
3.5.2 Upon the occurrence and during the continuance of an Event of
Default, Beneficiary shall be entitled forthwith as a matter of right,
concurrently or independently of any other right or remedy hereunder either
before or after declaring the Secured Obligations or any part thereof to be due
and payable, to the appointment of a receiver without giving notice to any party
and without regard to the adequacy or inadequacy
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of any security for the Secured Obligations or the solvency or insolvency of any
person or entity then legally or equitably liable for the Secured Obligations or
any portion thereof. Grantor hereby consents to the appointment of such
receiver. Notwithstanding the appointment of any receiver, Beneficiary shall be
entitled as pledgee to the possession and control of any cash, deposits or
instruments at the time held by or payable or deliverable under the terms of the
Indenture to Beneficiary.
3.5.3 Grantor shall not (i) at any time insist upon, or plead, or in any
manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Deed of Trust, (ii) claim, take or insist on any benefit or advantage of
any law now or hereafter in force providing for the valuation or appraisal of
the Mortgaged Property, or any part thereof, prior to any sale or sales of the
Mortgaged Property which may be made pursuant to this Deed of Trust, or pursuant
to any decree, judgment or order of any court of competent jurisdiction or (iii)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the property so sold or any part
thereof. To the extent permitted by applicable law, Grantor hereby expressly (i)
waives all benefit or advantage of any such law or laws, including, without
limitation, any statute of limitations applicable to this Deed of Trust, (ii)
waives any and all rights to trial by jury in any action or proceeding related
to the enforcement of this Deed of Trust, (iii) waives any objection which it
may now or hereafter have to the laying of venue of any action, suit or
proceeding brought in connection with this Deed of Trust and further waives and
agrees not to plead that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum and (iv) covenants not to
hinder, delay or impede the execution of any power granted or delegated to
Beneficiary by this Deed of Trust but to suffer and permit the execution of
every such power as though no such law or laws had been made or enacted.
Beneficiary shall not be liable for any incorrect or improper payment made
pursuant to this Article III in the absence of gross negligence or willful
misconduct.
SECTION 3.6 Remedies Not Exclusive. No remedy conferred upon or reserved to
Beneficiary by this Deed of Trust is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Deed of Trust or now or
hereafter existing at law or in equity. Any delay or omission of Beneficiary to
exercise any right or power accruing on any Event of Default shall not impair
any such right or power and shall not be construed to be a waiver of or
acquiescence in any such Event of Default. Every power and remedy given by this
Deed of Trust may be exercised from time to time concurrently or independently,
when and as often as may be deemed expedient by Beneficiary in such order and
manner as Beneficiary, in its sole discretion, may elect. If Beneficiary accepts
any moneys required to be paid by Grantor under this Deed of Trust after the
same become due, such acceptance shall not constitute a waiver of the right
either to require prompt payment, when due, of all other sums secured by this
Deed of Trust or to declare an Event of Default with regard to subsequent
defaults. If Beneficiary accepts any moneys required to be paid by Grantor under
this Deed of Trust in an amount less than the sum then due, such acceptance
shall be deemed an acceptance on account only and on the condition that it shall
not constitute a waiver of the obligation of Grantor to pay the entire sum then
due, and Grantor's failure to pay the entire sum then due shall be and continue
to be a default hereunder notwithstanding acceptance of such amount on account.
ARTICLE IV
CERTAIN DEFINITIONS
The following terms shall have the following respective meanings:
<PAGE>
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"Cost of Construction" shall mean the sum, so far as it relates to the
reconstructing, renewing, restoring or replacing of the Improvements, of (i)
obligations incurred or assumed by Grantor or undertaken by tenants pursuant to
the terms of the Leases for labor, materials and other expenses and to
contractors, builders and materialmen; (ii) the cost of contract bonds and of
insurance of all kinds that may reasonably be deemed by Grantor to be desirable
or necessary during the course of construction; (iii) the expenses incurred or
assumed by Grantor for test borings, surveys, estimates, any Plans and
Specifications and preliminary investigations therefor, and for supervising
construction, as well as for the performance of all other duties required by or
reasonably necessary for proper construction; (iv) ad valorem property taxes
levied upon the Premises during performance of any Restoration; and (v) any
costs or other charges in connection with obtaining title insurance and counsel
opinions that may be required or necessary in connection with a Restoration.
"Governmental Authority" shall mean any Federal, state, local or foreign
court, agency, authority, board, bureau, commission, department, office or
instrumentality of any nature whatsoever or any governmental or
quasi-governmental unit, whether now or hereafter in existence, or any officer
or official thereof, having jurisdiction over the Grantor or the Mortgaged
Property. "Prudent Operator" shall mean a prudent operator of property similar
in use and configuration to the Premises and the Equipment, as applicable, and
located in the locality where the Premises and Equipment, as applicable, are
located.
"Purchase Agreement" shall mean that certain purchase agreement among
Issuer, Grantor, Beneficiary and the Donaldson, Lufkin & Jenrette Securities
Corporation and certain other parties, as of July 1, 1999.
"Real Property Officer's Certificate" shall mean that certain officer's
certificate delivered to the Beneficiary pursuant to Section 9(e)(x) of the
Purchase Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Severability of Provisions. Any provision of this Deed of Trust
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.2 Notices. Unless otherwise provided herein or in the Indenture,
any notice or other communication herein required or permitted to be given shall
be given in the manner set forth in the Indenture, if to Grantor or Beneficiary,
addressed to it at the address set forth in the Indenture, if to Trustee,
addressed to it at the address set forth below, or as to any party at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section 5.2; provided,
however, that notices to Beneficiary shall not be effective until received by
Beneficiary.
<PAGE>
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If to Trustee:
1629 Southwest Salmon Street
Portland, Oregon 97205
Attn: Kathy Healy
SECTION 5.3 Covenants To Run with the Land. All of the grants, covenants,
terms, provisions and conditions in this Deed of Trust shall run with the Land
and shall apply to, and bind the successors and assigns of Grantor. If there
shall be more than one mortgagor, the covenants and warranties hereof shall be
joint and several.
SECTION 5.4 Headings. The Section headings used in this Deed of Trust are
for convenience of reference only and shall not affect the construction of this
Deed of Trust.
SECTION 5.5 Limitation on Interest Payable. It is the intention of the
parties to conform strictly to the usury laws, whether state or Federal, that
are applicable to the transaction of which this Deed of Trust is a part. All
agreements between Grantor and Beneficiary whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever shall the amount paid or agreed to be paid by
Grantor for the use, forbearance or detention of the money to be loaned or
advanced under the Indenture or any related document, or for the payment or
performance of any covenant or obligation contained herein or in the Indenture
or any related document, exceeds the maximum amount permissible under applicable
Federal or state usury laws. If under any circumstances whatsoever fulfillment
of any such provision, at the time performance of such provision shall be due,
shall involve exceeding the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the limit of such validity. If
under any circumstances Grantor shall have paid an amount deemed interest by
applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable usury laws shall be applied to the
reduction of the principal amount owing in respect of the Secured Obligations
and not to the payment of interest, or if such excessive interest exceeds the
unpaid balance of principal and any other amounts due hereunder, the excess
shall be refunded to Grantor. All sums paid or agreed to be paid for the use,
forbearance or detention of the principal under any extension of credit by
Beneficiary shall, to the extent permitted by applicable law, and to the extent
necessary to preclude exceeding the limit of validity prescribed by law, be
amortized, prorated, allocated and spread from the date of this Deed of Trust
until payment in full of the Secured Obligations so that the actual rate of
interest on account of such principal amounts is uniform throughout the term
hereof.
SECTION 5.6 Indemnity. Grantor agrees to indemnify, pay and hold harmless
Trustee, Beneficiary, the Holders of Notes and each of the Secured Parties and
the officers, directors, employees, agents and Affiliates of Trustee,
Beneficiary, the Holders of Notes and each of the Secured Parties (collectively
called the "Indemnitees") from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs (including, without limitation, settlement costs), reasonable expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), which may be imposed on, incurred by or asserted against that
Indemnitee, in any manner relating to or arising out of this Deed of Trust, the
Indenture or any other Collateral Document (including, without limitation, any
misrepresentation by Grantor in this Deed of Trust, the Indenture or any other
Collateral Document) (the "Indemnified Liabilities"); provided, however, that
Grantor shall have no obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities if it has been determined by a final decision (after all
appeals and the expiration of time to appeal) by a court of competent
jurisdiction that such Indemnified Liability arose from the gross negligence or
willful misconduct
<PAGE>
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of that Indemnitee. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, Grantor shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The obligations of Grantor contained in this Section
5.6 shall survive the termination of this Deed of Trust and the discharge of
Grantor's other obligations under this Deed of Trust, the Indenture and the
other Collateral Documents. Any amount paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured Obligations
secured by the Mortgaged Property.
SECTION 5.7 Governing Law; Terms. THIS DEED OF TRUST SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK OTHER THAN ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF THE STATE IN WHICH THE PREMISES ARE LOCATED AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PORTION OF THE MORTGAGED PROPERTY, ARE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED. GRANTOR
DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY, WITH AN ADDRESS AT 285
LIBERTY STREET, NORTHEAST, SUITE 370, SALEM, OREGON 97301, AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY GRANTOR IRREVOCABLY AGREEING IN WRITING
TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY
PROCEEDING BROUGHT AGAINST GRANTOR WITH RESPECT TO THIS DEED OF TRUST, SERVICE
BEING HEREBY ACKNOWLEDGED BY GRANTOR TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO GRANTOR AT ITS ADDRESS PROVIDED FOR IN THE PREAMBLE OF THIS AGREEMENT
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT
APPOINTED BY GRANTOR REFUSES TO ACCEPT SERVICE, GRANTOR HEREBY AGREES THAT
SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF BENEFICIARY TO BRING PROCEEDINGS AGAINST GRANTOR IN THE
COURTS OF ANY OTHER JURISDICTION.
SECTION 5.8 No Merger. The rights and estate created by this Deed of Trust
shall not, under any circumstances, be held to have merged into any other estate
or interest now owned or hereafter acquired by Beneficiary unless Beneficiary
shall have consented to such merger in writing.
SECTION 5.9 Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Deed of Trust,
nor consent to any departure by Grantor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture and unless in
writing and signed by Beneficiary. Any amendment, modification or supplement of
or to any provision of this Deed of Trust, any waiver of any provision of this
Deed of Trust and any consent to any departure by Grantor from the terms of any
provision of this Deed of Trust shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Deed of Trust or any other Collateral Document, no
notice to or demand on Grantor in any case shall entitle Grantor to any other or
further notice or demand in similar or other circumstances.
SECTION 5.10 No Credit for Payment of Taxes or Impositions. Grantor shall
not be entitled to any credit against the principal, premium, if any, or
interest payable under the Indenture or the Notes, and Grantor shall not be
entitled to any credit against any other sums which may become payable under the
terms
<PAGE>
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thereof or hereof, by reason of the payment of any tax or other impositions on
the Mortgaged Property or any part thereof.
SECTION 5.11 Stamp and Other Taxes. Subject to the provisions of subsection
1.5.5 relating to permitted contests, Grantor shall pay any United States
documentary stamp taxes, with interest and fines and penalties, and any mortgage
recording taxes, with interest and fines and penalties, that may hereafter be
levied, imposed or assessed under or upon or by reason of this Deed of Trust or
the Secured Obligations or any instrument or transaction affecting or relating
to either thereof and in default thereof Beneficiary may (but shall have no
obligation) advance the same and the amount so advanced shall be payable by
Grantor to Beneficiary within ten (10) days after demand therefor, together with
interest thereon at the Default Rate.
SECTION 5.12 Estoppel Certificates. Grantor shall, from time to time, upon
twenty (20) days' prior written request of Beneficiary, execute, acknowledge and
deliver to Beneficiary a certificate signed by an authorized officer or officers
stating that this Deed of Trust, the Indenture and the other Collateral
Documents are unmodified and in full force and effect (or, if there have been
modifications, that this Deed of Trust is in full force and effect as modified
and setting forth such modifications).
SECTION 5.13 Additional Security. Without notice to or consent of Grantor
and without impairment of the Lien and rights created by this Deed of Trust,
Beneficiary may accept (but Grantor shall not be obligated to furnish) from
Grantor or from any other Person or Persons, additional security for the Secured
Obligations. Neither the giving of this Deed of Trust nor the acceptance of any
such additional security shall prevent Beneficiary from resorting, first, to
such additional security, and, second, to the security created by this Deed of
Trust without affecting Beneficiary's Lien and rights under this Deed of Trust.
SECTION 5.14 Release. The Mortgaged Property shall be released from the
Lien of this Deed of Trust in accordance with the provisions of the Indenture.
Beneficiary, on the written request and at the expense of Grantor, will execute
and deliver such proper instruments of release and satisfaction or assignment as
may reasonably be requested to evidence such release or assignment, and any such
instrument, when duly executed by Beneficiary and duly recorded by Grantor in
the places where this Deed of Trust is recorded, shall conclusively evidence the
release or assignment of this Deed of Trust.
SECTION 5.15 Certain Expenses of Beneficiary and Trustee. If any action,
suit or other proceeding affecting the Mortgaged Property or any part thereof be
commenced, in which action, suit or proceeding Trustee or Beneficiary is made a
party or participates or in which the right to use the Mortgaged Property or any
part thereof is threatened, or in which it becomes necessary in the judgment of
Trustee or Beneficiary to defend or uphold the Lien of this Deed of Trust
(including, without limitation, any action, suit or proceeding to establish or
uphold the compliance of the Improvements with any Requirements of Law), then
all amounts paid or incurred by Trustee or Beneficiary for the expense of any
such action, suit or other proceeding or to protect its rights therein (whether
or not it is made or becomes a party thereto) or otherwise to enforce or defend
the rights and Lien created by this Deed of Trust, shall be paid by Grantor upon
demand together with interest at the Default Rate from the date of the payment
or incurring thereof to the date of repayment, and any such amount and the
interest thereon shall be a Lien on the Mortgaged Property, prior to any right,
or right to, interest in, or claim upon the Mortgaged Property attaching or
accruing subsequent to or otherwise subordinate to the Lien of this Deed of
Trust, and the same shall be deemed to be secured hereby. All other amounts
paid, advanced or incurred by Beneficiary in order to secure and protect the
Lien of this Deed of Trust or other security provided hereunder shall be a like
Lien on the Mortgaged Property and be deemed to be secured hereby.
SECTION 5.16 Expenses of Collection. Grantor will upon demand pay to
Beneficiary the amount of any and all expenses, including the fees and expenses
of its counsel and the fees and expenses of any
<PAGE>
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experts and agents, which Beneficiary or Trustee may incur in connection with
(i) the collection of the Secured Obligations, (ii) the enforcement and
administration of this Deed of Trust, (iii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Mortgaged
Property, (iv) the exercise or enforcement of any of the rights of Beneficiary,
Trustee or any Secured Party hereunder or (v) the failure by Grantor to perform
or observe any of the provisions hereof. All amounts payable by Grantor under
this Section 5.16 shall be due upon demand and shall be part of the Secured
Obligations. Grantor's obligations under this Section shall survive the
termination of this Deed of Trust and the discharge of Grantor's other
obligations hereunder.
SECTION 5.17 Business Days. In the event any time period or any date
provided in this Deed of Trust ends or falls on a day other than a Business Day,
then such time period shall be deemed to end and such date shall be deemed to
fall on the next succeeding Business Day, and performance herein may be made on
such Business Day, with the same force and effect as if made on such other day.
SECTION 5.18 Relationship. The relationship of Beneficiary to Grantor
hereunder is strictly and solely that of lender and borrower and grantor and
beneficiary and nothing contained in the Indenture, this Deed of Trust or any
other document or instrument now existing and delivered in connection therewith
or otherwise in connection with the Secured Obligations is intended to create,
or shall in any event or under any circumstance be construed as creating a
partnership, joint venture, tenancy-in-common, joint tenancy or other
relationship of any nature whatsoever between Beneficiary and Grantor other than
as lender and borrower and grantor and beneficiary.
SECTION 5.19 Reconveyance Upon Payment of Secured Obligations. In the event
that the Secured Obligations shall be paid and performed in full, Beneficiary
shall release and shall cause Trustee to release the Mortgaged Property from the
Lien and security interest of this Deed of Trust and to reconvey (without
warranty by or recourse against Beneficiary or any Secured Party) the Mortgaged
Property to Grantor.
SECTION 5.20 Concerning Beneficiary.
5.20.1 Beneficiary shall be entitled to rely upon any written notice,
statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person, and, with respect to all matters pertaining to this Deed
of Trust and its duties hereunder, upon advice of counsel selected by it.
5.20.2 If any item of Mortgaged Property also constitutes collateral
granted to Beneficiary under any other deed of trust, mortgage, security
agreement, pledge or instrument of any type, in the event of any conflict
between the provisions of this Deed of Trust and the provisions of such other
deed of trust, mortgage, security agreement, pledge or instrument of any type in
respect of such collateral, Beneficiary, in its sole discretion, shall select
which provision or provisions shall control.
5.20.3 Beneficiary has been appointed as collateral agent pursuant to the
Indenture. The actions of Beneficiary hereunder are subject to the provisions of
the Indenture. Beneficiary shall have the right hereunder to make demands, to
give notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Mortgaged Property), in accordance with this Deed of Trust and
the Indenture. Beneficiary may resign and a successor Beneficiary may be
appointed in the manner provided in the Indenture. Grantor shall recognize as
beneficiary under this instrument any party who has succeeded the interest of
Beneficiary under the Indenture. Upon the acceptance of any appointment as
Beneficiary by a successor Beneficiary, that successor Beneficiary shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Beneficiary under this Deed of Trust, and the
retiring Beneficiary shall thereupon be discharged from its duties and
obligations under this Deed
<PAGE>
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of Trust. After any retiring Beneficiary's resignation, the provisions of this
Deed of Trust shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Deed of Trust while it was Beneficiary.
SECTION 5.21 Concerning Trustee. Trustee may resign by an instrument in
writing addressed to Beneficiary or be removed at any time with or without cause
by instrument in writing duly executed by Beneficiary. In case of the death,
resignation or removal of Trustee, a successor (each, a "Successor Trustee") may
be appointed by Beneficiary by instrument of substitution complying with any
applicable requirements of law, and in the absence of designation in writing.
Such appointment and designation shall be full evidence of the right and
authority to make the same and of all facts therein recited, and upon the making
of any such appointment and designation this conveyance shall vest in the
Successor Trustee all the estate and title of its predecessor in all the
Mortgaged Property, and such Successor Trustee shall thereupon succeed to all
the rights, powers, privileges, immunities and duties hereby conferred upon the
prior Trustee. Except for gross negligence or willful misconduct, Trustee shall
not be liable for any act or omission or error or judgment. Trustee may rely on
any document believed by him in good faith to be genuine. All money received by
Trustee shall, until used or applied as herein provided, be held in trust, but
need not be segregated (except to the extent required by law), and Trustee shall
not be liable for interest thereon.
SECTION 5.22 Waiver of Stay.
5.22.1 Grantor agrees that in the event that Grantor or any property or
assets of Grantor shall hereafter become the subject of a voluntary or
involuntary proceeding under the Bankruptcy Code or Grantor shall otherwise be a
party to any Federal or state bankruptcy, insolvency, moratorium or similar
proceeding to which the provisions relating to the automatic stay under Section
362 of the Bankruptcy Code or any similar provision in any such law is
applicable, then, in any such case, whether or not Beneficiary has commenced
foreclosure proceedings under this Deed of Trust, Beneficiary shall be entitled
to relief from any such automatic stay as it relates to the exercise of any of
the rights and remedies (including, without limitation, any foreclosure
proceedings) available to Beneficiary as provided in this Deed of Trust or in
any other Collateral Document.
5.22.2 Beneficiary shall have the right to petition or move any court
having jurisdiction over any proceeding described in subsection 5.22.1 for the
purposes provided therein, and Grantor agrees (i) not to oppose any such
petition or motion and (ii) at Grantor's sole cost and expense, to assist and
cooperate with Beneficiary, as may be requested by Beneficiary from time to
time, in obtaining any relief requested by Beneficiary, including, without
limitation, by filing any such petitions, supplemental petitions, requests for
relief, documents, instruments or other items from time to time requested by
Beneficiary or any such court.
SECTION 5.23 Continuing Security Interest; Assignment. This Deed of Trust
shall create a continuing security interest in the Mortgaged Property and shall
(i) be binding upon Grantor, its successors and assigns and (ii) inure, together
with the rights and remedies of Beneficiary hereunder, to the benefit of
Beneficiary, Trustee, the Holders of the Notes and the other Secured Parties and
each of their respective successors, transferees and assigns; no other Persons
(including, without limitation, any other creditor of Grantor) shall have any
interest herein or any right or benefit with respect hereto.
SECTION 5.24 Obligations Absolute. Subject to the Indenture, all
obligations of Grantor hereunder shall be absolute and unconditional
irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Grantor;
<PAGE>
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(ii) any lack of validity or enforceability of the Indenture, the
Notes, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
the Notes, or any other agreement or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Deed of Trust, the
Indenture, the Notes or any other agreement or instrument relating thereto
except as specifically set forth in a waiver granted pursuant to the
provisions of Section 5.9 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Grantor.
SECTION 5.25 NOTICE UNDER ORS 746.201 - WARNING.
UNLESS GRANTOR PROVIDES BENEFICIARY WITH EVIDENCE OF INSURANCE COVERAGE AS
REQUIRED BY THIS DEED OF TRUST, BENEFICIARY MAY PURCHASE INSURANCE AT GRANTOR'S
EXPENSE TO PROTECT BENEFICIARY'S INTEREST. THIS INSURANCE MAY, BUT NEED NOT,
ALSO PROTECT GRANTOR'S INTEREST. IF THE MORTGAGED PROPERTY IS DAMAGED, THE
COVERAGE PURCHASED BY BENEFICIARY MAY NOT PAY ANY CLAIM MADE BY GRANTOR OR ANY
CLAIM MADE AGAINST GRANTOR. GRANTOR MAY LATER CANCEL THE COVERAGE OBTAINED BY
BENEFICIARY BY PROVIDING EVIDENCE THAT IT HAS PROVIDED THE INSURANCE COVERAGE
REQUIRED BY THIS DEED OF TRUST.
GRANTOR IS RESPONSIBLE FOR THE COST OF ANY INSURANCE OBTAINED BY
BENEFICIARY. THE COST OF THAT INSURANCE MAY BE ADDED TO THE SECURED OBLIGATIONS
SECURED BY THIS DEED OF TRUST. IF THE COST IS ADDED TO THE SECURED OBLIGATIONS
THE INTEREST RATE UNDER THE NOTES WILL APPLY TO THE ADDED AMOUNT. THE EFFECTIVE
DATE OF COVERAGE MAY BE THE DATE GRANTOR'S PRIOR COVERAGE LAPSED OR THE DATE
GRANTOR FAILED TO PROVIDE PROOF OF COVERAGE.
THE COVERAGE PURCHASED BY BENEFICIARY MAY BE CONSIDERABLY MORE EXPENSIVE
THAN INSURANCE GRANTOR MAY BE ABLE TO OBTAIN ON ITS OWN AND MAY NOT SATISFY THE
NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE
REQUIREMENTS IMPOSED BY APPLICABLE LAW.
- --------------------------------------------------------------------------------
THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT
IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR
ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD
CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED
USES AND TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST PRACTICES
AS DEFINED IN ORS 30.930.
- --------------------------------------------------------------------------------
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
BENEFICIARY AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS
WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE GRANTOR'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED
BY THE BENEFICIARY TO BE ENFORCEABLE.
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be duly
executed and delivered under seal the day and year first above written.
AMERICAN TISSUE MILLS OF OREGON, INC.,
Grantor
By: /s/ Nourollah Elghanayan
---------------------------------
Name: Nourollah Elghanayan
Title: Chairman of the Board
By: /s/ Mehdi Gabayazadeh
---------------------------------
Name: Mehdi Gabayazadeh
Title: President
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 9th day of July,
1999, by Nourollah Elghanayan of American Tissue Mills of Oregon, Inc., a New
York corporation, on behalf of the corporation.
/s/ Kevin William Wells (Signature of person taking acknowledgement)
- --------------------------------
KEVIN WILLIAM WELLS
Title or rank:
Serial Number (if any): Notary Public, State of New York
My commission expires: No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 9th day of July,
1999, by Mehdi Gabayazadeh of American Tissue Mills of Oregon, Inc., a New
York corporation, on behalf of the corporation.
/s/ Kevin William Wells (Signature of person taking acknowledgement)
- --------------------------------
KEVIN WILLIAM WELLS
Title or rank:
Serial Number (if any): Notary Public, State of New York
My commission expires: No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement")
made this 9th day of July, 1999 by and among FLEET CAPITAL CORPORATION, as a
Lender ("Fleet") and as syndications agent for the Lenders ("Syndication
Agent"), 233 South Wacker Drive, Chicago, Illinois 60606, FINOVA CAPITAL
CORPORATION, as a Lender ("FINOVA"), 311 South Wacker Drive, Suite 4100,
Chicago, Illinois 60606, LASALLE BANK NATIONAL ASSOCIATION, a national banking
association (in its individual capacity, "LaSalle"), 135 South LaSalle Street,
Chicago, Illinois 60603-4105, for itself, and as Agent for all Lenders that are
now or hereafter parties to this Agreement, all other Lenders from time to time
a party to this Agreement, AMERICAN TISSUE CORPORATION, a New York corporation,
("ATC"), AMERICAN TISSUE MILLS OF OREGON, INC., a New York corporation,
("ATMO"), AMERICAN TISSUE MILLS OF NEENAH LLC, a New York limited liability
company, ("ATMN"), AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC., a New York
corporation, ("ATMNH"), AMERICAN TISSUE MILLS OF NEW YORK, INC., a New York
corporation, ("ATMNY"), AMERICAN TISSUE MILLS OF GREENWICH LLC, a New York
limited liability company, ("ATMG"), CALEXICO TISSUE COMPANY LLC, a New York
limited liability company ("Calexico"), PULP & PAPER OF AMERICA LLC, a New York
limited liability company ("PPA"), PULP OF AMERICA LLC, a New York limited
liability company ("Pulp"), PAPER OF AMERICA LLC, a New York limited liability
company ("Paper") and AMERICAN TISSUE INC., a Delaware corporation ("Holdings"),
each with an office at 135 Engineers Road, Hauppauge, New York 11788. For
purposes hereof, ATC, ATMO, ATMN, ATMNH, ATMNY, ATMG, Calexico, PPA, Pulp and
Paper are sometimes referred to herein individually as a "Borrower" and
collectively, as "Borrowers". Borrowers and Holdings are sometimes collectively
referred to as "Companies" and individually as a "Company".
W I T N E S S E T H
WHEREAS, LaSalle, as a Lender and as Agent, certain other Lenders and
certain of the Borrowers are parties to individual Loan and Security Agreements
(each, an "Original Loan Agreement" and collectively, the "Original Loan
Agreements") pursuant to which the Lenders agreed to make certain loans to such
Borrower, upon the terms and conditions set forth therein;
WHEREAS, the Companies are contemporaneously herewith issuing Senior
Secured Notes in a principal amount of not less than One Hundred Eighty Million
Dollars ($180,000,000) pursuant to the Indenture of even date herewith, among
the Companies, American Cellulose Mill Corp., American Tissue Mills of
Wisconsin, Inc., Gilpin Realty LLC, Tagsons Paper Inc., 100 Realty Management
LLC, Coram Realty LLC, Engineers
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Road, LLC, Grand LLC, Hydro of America LLC, Landfill of America LLC, Markwood
LLC, Railway of America LLC, Saratoga Realty LLC, Unique Financing LLC, Crown
Vantage-New Hampshire Electric, Inc. and Berlin Mills Railway, Inc.
(collectively the "Additional Notes Guarantor") and The Chase Manhattan Bank, as
trustee;
WHEREAS, Borrowers, Agent and Lenders wish to (i) consolidate the Original
Loan Agreements into this Agreement, (ii) extend the term of the financing
arrangements contemplated by the Original Loan Agreements, (iii) add additional
Borrowers and (iv) amend the Original Loan Agreements in various other respects,
and Agent, Lenders and Borrowers have agreed to amend and restate the Original
Loan Agreements in their entirety by the execution of this Agreement.
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal
or extension) heretofore, now or hereafter made to any Borrower by Agent or any
Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Borrowers, the parties agree as
follows:
1. DEFINITIONS.
(a) "Account," "Account Debtor," "Chattel Paper," "Documents," "Equipment,"
"General Intangibles," "Goods," "Instruments," "Inventory," and "Investment
Property" shall have the respective meanings assigned to such terms, as of the
date of this Agreement, in the Uniform Commercial Code as in effect in the State
of Illinois.
(b) "Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with a Company.
(c) "Agent" shall mean LaSalle or its successor appointed pursuant to
Paragraph 10 of Exhibit A, acting in its capacity as agent for, and on behalf of
all Lenders.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday or
any day that banks in the Chicago area, London or New York are required or
permitted to close.
(e) "Capital Expenditures" shall mean all payments for the acquisition of
any fixed assets or improvements or for replacements, substitutions or additions
thereto, that have a useful life of more than one year and that are required to
be capitalized under GAAP.
(f) "Collateral" shall mean all of the property of Borrowers described in
paragraph 4 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Agent, for the benefit
of Agent and Lenders, to secure, either directly or indirectly, repayment of any
of the Liabilities.
(g) "Current Assets" shall have the meaning given such term in accordance
with GAAP plus the Inventory LIFO Reserve less any deferred taxes.
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(h) "Current Liabilities" shall have the meaning given such term in
accordance with GAAP less any deferred taxes.
(i) "EBITDA" shall mean, for any period, (i) a Person's Net Income
(excluding the effect of (A) extraordinary items of such Person for such period
(recognizing that gains or losses on the sales of Equipment shall not be deemed
extraordinary items) and (B) non-recurring charges incurred by such Person
during such period) plus, (ii) the amount of all Interest Expense, income tax
expense, depreciation and amortization of such Person for such period, plus or
minus (as the case may be), (iii) any other non-cash charges which have been
subtracted or added, (as the case may be) in calculating such Person's Net
Income for such period, plus or minus (as the case may be), (iv) any increase or
decrease, (as the case may be) in the Inventory LIFO Reserve for such period,
all determined on a consolidated basis in accordance with GAAP.
(j) "Eligible Account," shall mean with respect to a Borrower an Account
owing to such Borrower which is acceptable to Agent in its sole discretion for
lending purposes. Without limiting Agent's discretion, Agent shall, in general,
consider an Account to be an Eligible Account of a Borrower if it meets, and so
long as it continues to meet, the following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by such Borrower, such Borrower has the right to
subject it to a perfected security interest in favor of Agent for the
benefit of Agent and Lenders, or assign it to Agent, for the benefit of
Agent and Lenders and it is subject to a first priority perfected security
interest in favor of Agent, for the benefit of Lenders and to no other
claim, lien, security interest or encumbrance whatsoever, other than
Permitted Liens;
(iii) it arises from (A) the performance of services by such Borrower
and such services have been fully performed and acknowledged and accepted
by the Account Debtor thereunder; or (B) the sale or lease of Goods by such
Borrower, and such Goods have been completed in accordance with the Account
Debtor's specifications (if any) and delivered to and accepted by the
Account Debtor, such Account Debtor has not refused to accept any of the
Goods, returned or offered to return any of the Goods, or refused to accept
any of the services which are the subject of such Account, and such
Borrower has possession of, or such Borrower has delivered to Agent (at
Agent's request) shipping and delivery receipts evidencing delivery of such
Goods;
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within ninety (90) days after the date of
the invoice and does not remain unpaid ninety (90) days past the invoice
date thereof; provided, however, that if and for so long as more than fifty
percent
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(50%) of the aggregate dollar amount of invoices owing by a particular
Account Debtor remain unpaid more than ninety (90) days after the
respective invoice dates thereof, then all Accounts owing by that Account
Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor thereunder, and is not subject to setoff, counterclaim,
credit, allowance or adjustment by such Account Debtor, or to any claim by
such Account Debtor denying liability thereunder in whole or in part;
(vi) it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director, officer,
employee or agent of such Borrower, or a Subsidiary, Parent or Affiliate,
unless the Account arises out of a transaction permitted by paragraph 11(l)
hereof and is otherwise an Eligible Account;
(viii) it is not an Account with respect to which the Account Debtor
is the United States of America or any department, agency or
instrumentality thereof, unless such Borrower assigns its right to payment
of such Account to Agent pursuant to, and in full compliance with, the
Assignment of Claims Act of 1940, as amended;
(ix) it is not an Account with respect to which the Account Debtor is
located in a state which requires such Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either to
(A) receive a certificate of authority to do business and be in good
standing in such state, or (B) file a notice of business activities report
or similar report with such state's taxing authority, unless (x) such
Borrower has taken one of the actions described in clauses (A) or (B), (y)
the failure to take one of the actions described in either clause (A) or
(B) may be cured retroactively by such Borrower at its election, or (z)
such Borrower has proven, to Agent's satisfaction, that it is exempt from
any such requirements under any such state's laws;
(x) it is an Account which arises out of the performance of services
or a sale or lease of goods made in the ordinary course of such Borrower's
business;
(xi) the Account Debtor is a resident or citizen of, and is located
within, the United States of America, the Provinces of Alberta, Manitoba,
Ontario, Saskatchewan, British Columbia and New Brunswick (provided that
with respect to New Brunswick, Agent is able to obtain a prior perfected
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security interest and lien upon such Accounts) Canada, or another foreign
country, provided that as to any such Account Debtor that is a resident or
citizen of another foreign country, the Account is (A) supported by a
letter of credit which is in form and substance satisfactory to Agent,
issued by a financial institution acceptable to Agent and assigned to Agent
in a manner acceptable to Agent or (B) such Account is supported by credit
insurance in an amount satisfactory to Agent issued by an insurance company
acceptable to Agent and collaterally assigned to Agent in a manner
acceptable to Agent;
(xii) it is not an Account with respect to which the Account Debtor's
obligation to pay is conditional upon the Account Debtor's approval of the
Goods or services or is otherwise subject to any repurchase obligation or
return right, as with sales made on a bill-and-hold, guaranteed sale, sale
on approval, sale or return or consignment basis;
(xiii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue in any
material respect or (B) which violates any of the covenants of Borrowers
contained in this Agreement;
(xiv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to such Borrower, exceeds a credit limit
determined by Agent in its sole discretion for that Account Debtor (except
that Accounts excluded from Eligible Accounts solely by reason of this
paragraph 1(j)(xiv) shall be Eligible Accounts to the extent of such credit
limit); and
(xv) it is not an Account with respect to which the prospect of
payment or performance by the Account Debtor is or will be impaired, as
determined by Agent in its sole discretion.
(k) "Eligible Inventory," shall mean, with respect to a Borrower, Inventory
of such Borrower which is acceptable to Agent in its sole discretion for lending
purposes. Without limiting Agent's discretion, Agent shall, in general, consider
Inventory to be Eligible Inventory of a Borrower if it meets, and so long as it
continues to meet, the following requirements:
(i) it is owned by such Borrower, such Borrower has the right to
subject it to a perfected security interest in favor of Agent, for the
benefit of Agent and Lenders and it is subject to a first priority
perfected security interest in favor of Agent, for the benefit of Agent and
Lenders, and to no other claim, lien, security interest or encumbrance
whatsoever other than Permitted Liens;
(ii) it is located on one or more of the locations listed on Exhibit B
(as in effect from time to time) and is not in transit;
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(iii) if held for sale or lease or furnishing under contracts of
service, it is (except as Agent may otherwise consent in writing) new and
unused and free from defects which would, in Agent's sole determination,
affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Agent has given its prior written
approval and such bailee, consignee, warehouseman, processor or similar
party has issued and delivered to Agent, in form and substance acceptable
to Agent, such UCC financing statements, warehouse receipts, waivers and
other documents as Agent shall require;
(v) Agent has determined in accordance with Agent's customary business
practices that it is not unacceptable due to age, type, category or
quantity; and
(vi) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue in
any material respect or (B) which violates any of the covenants of
Borrowers contained in this Agreement.
(l) "Environmental Laws" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to a Borrower's business or
facilities owned or operated by a Borrower, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
(m) "Event of Default" shall have the meaning specified in paragraph 13
hereof.
(n) "Exhibit A" shall mean the exhibit entitled Exhibit A - Special
Provisions which is attached hereto and made a part hereof.
(o) "Exhibit B" shall mean the exhibit entitled Exhibit B - Business and
Collateral Locations which is attached hereto and made a part hereof.
(p) "Exhibit C" shall mean the exhibit entitled Exhibit C - Form of
Assignment and Acceptance Agreement which is attached hereto and made a part
hereof.
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(q) "Federal Funds Rate" shall mean, for any period a fluctuating interest
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a business day, for the immediately preceding business day)
by the Federal Reserve Bank of New York or, if such rate is not published for
any business day, the average of the quotations for such day on such
transactions received by Agent from three (3) Federal Funds brokers of
recognized standing selected by Agent.
(r) "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time consistently applied.
(s) "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
(t) "Indemnified Party" shall have the meaning specified in paragraph 15
hereof.
(u) "Intercreditor Agreement" shall have the meaning specified in the
definition of "Permitted Liens" herein.
(v) "Interest Expense" shall mean the interest expense of a Person in
respect of liabilities, determined in accordance with GAAP.
(w) "Inventory LIFO Reserve" shall mean the excess (or shortfall) of
Inventory value determined by using the first-in, first-out ("FIFO") method
compared to the Inventory value determined by using the last-in, first-out
("LIFO") method, all in accordance with GAAP.
(x) "Issuing Bank" shall mean LaSalle or any other financial institution
acceptable to Agent.
(y) "Letter of Credit" shall mean any letter of credit issued by Issuing
Bank on behalf of a Borrower.
(z) "Liabilities" shall mean any and all obligations, liabilities and
indebtedness of each Borrower to Agent or any Lender or to any parent, affiliate
or
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subsidiary of Agent or any Lender of any and every kind and nature, howsoever
created, arising or evidenced and howsoever owned, held or acquired, whether now
or hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including,
without limitation, obligations of performance), whether several, joint or joint
and several, and whether arising or existing under written or oral agreement or
by operation of law.
(aa) "LIBOR Rate Loans" shall mean the Loans bearing interest at the rates
set forth in Paragraph 3(b) of Exhibit A.
(bb) "Loans" shall mean all loans and advances made by or on behalf of
Lenders to or on behalf of Borrowers hereunder.
(cc) "Loan Limit" shall have the meaning specified in Paragraph (1) of
Exhibit A.
(dd) "Lock Box" and "Lock Box Account" shall have the meanings specified in
paragraph 8 hereof.
(ee) "Maximum Loan Amount" shall mean, with respect to any Lender, the
maximum amount of Loans which such Lender has agreed, pursuant to the terms and
conditions of this Agreement, to make available to Borrowers, as set forth on
the signature page hereto or in an Assignment and Acceptance Agreement executed
by such Lender.
(ff) "Maximum Loan Limit" shall have the meaning set forth in Paragraph (l)
of Exhibit A hereto.
(gg) "Net Income" shall mean, for any period, the net income of a Person
reflected on such Person's financial statements for such period.
(hh) "Obligor" shall mean each Borrower and each Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
(ii) "Original Term" shall have the meaning specified in paragraph 10
hereof.
(jj) "Other Agreements" shall mean all agreements, instruments and
documents, other than this Agreement, including, without limitation, guaranties,
mortgages, trust deeds, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and all
other writings heretofore, now or from time to time hereafter executed by or on
behalf of a Borrower or any other Person and delivered to Agent and/or any
Lender or to any parent, affiliate or subsidiary of Agent and/or any Lender in
connection with the Liabilities or the transactions contemplated hereby.
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(kk) "Parent" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding equity of a Borrower.
(ll) "Permitted Liens" shall mean (i) statutory liens of landlord's,
carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder, (ii) liens or security interests in favor
of Agent, for the benefit of Agent and Lenders, (iii) zoning restrictions and
easements, licenses, covenants and other restrictions affecting the use of real
property that do not individually or in the aggregate have a material adverse
effect on a Borrower's ability to use such real property for its intended
purpose in connection with such Borrower's business, (iv) liens specifically
permitted by Agent in writing, (v) liens arising in connection with the
financing or refinancing of the acquisition of real estate, provided that such
borrowings are permitted by this Agreement, and further provided that such liens
are limited to the real estate being financed or refinanced, (vi) deposits under
worker's compensation, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases or to secure statutory obligations or surety,
appeal or stay bonds, or to secure indemnity, performance or other similar bonds
in the ordinary course of business, (vii) judgment and other similar liens
arising in connection with court proceedings, either less than $150,000 in the
aggregate or provided that the execution or other enforcement of such liens is
effectively stayed and the claims secured thereby are the subject of a good
faith contest, (viii) liens for taxes not yet due and payable, (ix) liens
securing the Senior Secured Notes, subject to the terms of the Existing Lien
Intercreditor Agreement of even date herewith among Agent, the other lenders
party thereto, the Companies, the Additional Notes Guarantors and The Chase
Manhattan Bank, as trustee (the "Intercreditor Agreement"), (x) liens described
on Schedule 1(kk) hereof, (xi) liens arising in connection with the refinancing
of secured indebtedness permitted under this Agreement, and (xii) liens securing
indebtedness permitted pursuant to clause (iv) of subparagraph 11(q) of this
Agreement.
(mm) "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
(nn) "Prime Rate Loans" shall mean the Loans bearing interest at the rates
set forth in Paragraph 3(a) of Exhibit A.
(oo) "Pro Rata Share" shall mean at any time, with respect to any Lender, a
fraction (expressed as a percentage in no more than four (4) decimal places),
the numerator of which shall be the Maximum Loan Amount of such Lender at such
time and the
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denominator of which shall be the aggregate amount of the Maximum Loan Amounts
of all Lenders at such time.
(pp) "Renewal Term" shall have the meaning specified in paragraph 10
hereof.
(qq) "Representative Company" shall mean Holdings or such other company
designated by the Borrowers and acceptable to Agent and Lenders.
(rr) "Requisite Lenders" shall mean at any time Lenders having, in the
aggregate, Pro Rata Shares of at least sixty-six and two-thirds percent (66.66%)
at such time; provided, that Agent shall vote the Pro Rata Share of any Lender
that has not made a required settlement payment when due pursuant to Paragraph 6
of Exhibit A. Agent shall continue to vote such Pro Rata Share until such Lender
makes its required settlement payment and all interest payable to Agent thereon
pursuant to Paragraph 6 of Exhibit A is paid. (ss) "Senior Secured Notes" shall
mean the 12 1/2% Senior Secured Notes due 2006 in the aggregate principal amount
of not less than $165,000,000 issued by Holdings pursuant to the terms of that
certain Indenture of even date herewith among the Companies, the Additional
Notes Guarantors and The Chase Manhattan Bank, as Trustee.
(tt) "Senior Secured Note Documents" shall mean the documents, instruments
and agreements evidencing and/or securing the Senior Secured Notes, including,
without limitation, the Indenture of even date herewith and all exhibits
thereto.
(uu) "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by a Borrower or by any partnership or joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by a Borrower or of which a Borrower is a general partner.
(vv) "Tangible Net Worth" shall have the meaning specified in paragraph
12(o) hereof.
2. LOANS. Subject to the terms and conditions of this Agreement (including
Exhibit A) and the Other Agreements, during the Original Term and any Renewal
Term, each Lender, severally and not jointly, agrees to make its Pro Rata Share
of such Loans to Borrowers up to such Lender's Maximum Loan Amount as the
Representative Company shall from time to time request on behalf of each
Borrower; provided, that so long as no Event of Default is then continuing Agent
shall make such Loans to Borrowers on
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behalf of Lenders as a "Disproportionate Advance" (as defined below). The
Representative Company shall designate, with each request for a Loan, the
Borrowers on whose behalf such request is being made and the amount of each Loan
to be advanced to each such Borrower. The aggregate unpaid principal of all
Loans outstanding at any one time shall not exceed the lesser of the Loan Limit
and the Maximum Loan Limit set forth in Exhibit A and shall bear interest at the
rates set forth in Exhibit A. It is expressly understood and agreed that nothing
in this Agreement shall require Agent to approve any advance hereunder if an
Event of Default has occurred and is continuing or the making of such advance
would cause an Event of Default. It is further expressly understood and agreed
that, subject to the preceding sentences, each Lender shall be obligated to make
its Pro Rata Share of any Loan requested by the Representative Company on behalf
of a Borrower in accordance with the terms and conditions hereof. All Loans
shall be repaid in full by Borrowers at the end of the Original Term or the
applicable Renewal Term or such earlier time as required pursuant to Paragraph
14 of this Agreement. Prior to such time the Loans shall be repaid as provided
elsewhere in this Agreement. If at any time the outstanding principal balance of
the Liabilities exceeds the Loan Limit or the Maximum Loan Limit, or any portion
of the Loans exceeds any applicable sublimit set forth in Exhibit A, Borrowers
shall immediately, and without the necessity of a demand by Agent, pay to Agent
such amount as may be necessary to eliminate such excess and Agent shall apply
such payment to the Liabilities in such order as Agent shall determine in its
sole discretion; provided, that if the outstanding principal balance of the
Loans with respect to Borrowers exceeds the Loan Limit or any portion of the
Loans with respect to a Borrower exceeds any applicable sublimit set forth in
Exhibit A (an "Interim Advance"), the Agent may, in its sole discretion, permit
such Interim Advance to remain outstanding and continue to advance Loans to
Borrowers on behalf of Lenders without the consent of any Lender for a period of
up to thirty (30) calendar days, so long as (i) the amount of the Interim
Advance does not exceed $1,000,000, (ii) the aggregate outstanding principal
balance of the Loans does not exceed the aggregate Maximum Loan Amounts of all
Lenders and (iii) Agent has not been notified by Requisite Lenders to cease
making such advances. If the Interim Advance is not repaid in full within thirty
(30) days of the initial occurrence of the Interim Advance, no further advances
may be made to any Borrower without the consent of all Lenders until the Interim
Advance is repaid in full. Each Borrower hereby authorizes Agent, in its sole
discretion, to charge any of such Borrower's accounts or advance Loans to make
any payments of principal, interest, fees, costs or expenses required by this
Agreement. All Loans shall, in Agent's sole discretion, be evidenced by one or
more promissory notes delivered to each Lender in the amount of the Maximum Loan
Amount of such Lender in form and substance satisfactory to Agent. However, if
such Loans are not so evidenced, such Loans may be evidenced solely by entries
upon the books and records maintained by Agent. Neither Agent nor any Lender
shall be responsible for any failure by any other Lender to perform its
obligations to make advances hereunder approved by Agent, and the failure of any
Lender to make its Pro Rata Share of any advance hereunder shall not relieve any
other Lender of its obligation, if any, to make its Pro Rata Share of Loans
hereunder nor require such other Lender to make more than its Pro Rata Share of
any Loans hereunder. Provided that no Event of Default is then continuing, if
the Representative
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Company makes a request for a Loan on behalf of a Borrower as provided herein
and Agent, in its sole discretion, approves such Loan, Agent shall advance the
amount of the proposed Loan to the designated Borrower disproportionately (a
"Disproportionate Advance") out of Agent's own funds on behalf of Lenders, and
request settlement in accordance with Paragraph (7) of Exhibit A such that upon
such settlement each Lender's share of the outstanding Loans (including, without
limitation, the amount of any Disproportionate Advance) equals its Pro Rata
Share. If a Lender does not settle with Agent as required above, such Lender
shall pay interest to Agent on the necessary settlement amount as set forth in
Paragraph (7) of Exhibit A.
Following the occurrence of an Event of Default and during the continuance
thereof, if the Representative Company makes a request for a Loan as provided
herein and Agent, in its sole discretion, approves such Loan, Agent, at its
option and in its sole discretion, shall either (a) make a Disproportionate
Advance to the designated Borrower as set forth in the preceding paragraph or
(b) notify each Lender by telecopy or other similar form of teletransmission of
the proposed advance on the same day Agent is notified by the Representative
Company of the Representative Company's request for an advance pursuant to
paragraph 2 of this Agreement. Each Lender shall remit, to the demand deposit
account designated by the Representative Company on behalf of the designated
Borrower, at or prior to three o'clock p.m., Chicago time, on the date of
notification by the Representative Company to Agent, if such notification is
made before twelve o'clock noon, Chicago time, or by ten o'clock a.m., Chicago
time, on the business day immediately succeeding the date of such notification
by the Representative Company to Agent, if such notification is made after
twelve o'clock noon, Chicago time, immediately available funds in an amount
equal to such Lender's Pro Rata Share of such proposed advance.
3. FEES AND CHARGES. Each Borrower jointly and severally (but without
duplication) agrees to pay to Agent, for the benefit of Agent and Lenders as
described in Exhibit A or in any of the Other Agreements, in addition to all
other amounts payable hereunder, the fees and charges set forth in Exhibit A or
in any of the Other Agreements. It is the intent of the parties that the rate of
interest and the other charges to Borrowers under this Agreement shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement by any Borrower are found by a court of competent jurisdiction,
in a final determination, to exceed the limit which Agent or Lenders may
lawfully charge such Borrower, then the obligation to pay interest and other
charges shall automatically be reduced to such limit and, if any amount in
excess of such limit shall have been paid, then such amount shall be refunded to
such Borrower.
4. GRANT OF SECURITY INTEREST TO AGENT. As security for the payment of all
Loans now or in the future made by Agent or Lenders to Borrowers hereunder and
for the payment or other satisfaction of all other Liabilities, each Borrower
hereby assigns to Agent, for the benefit of Agent and Lenders, and grants to
Agent, for the benefit of Agent and Lenders, a continuing security interest in
the following property of such
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Borrower having the relative priorities set forth in the Intercreditor
Agreement, whether now or hereafter owned, existing, acquired or arising and
wherever now or hereafter located, subject to the terms of the Intercreditor
Agreement: (a) all Accounts (whether or not Eligible Accounts) and all Goods
whose sale, lease or other disposition by such Borrower has given rise to
Accounts and have been returned to, or repossessed or stopped in transit by such
Borrower; (b) all Chattel Paper, Instruments, Documents and General Intangibles
(including, without limitation, all patents, patent applications, trademarks,
trademark applications, tradenames, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, tax refund claims, claims
against carriers and shippers, guarantee claims, contracts rights, security
interests, security deposits and any rights to indemnification); (c) all
Inventory (whether or not Eligible Inventory); (d) all Equipment and fixtures
(excluding Equipment and fixtures of ATMO); (e) all Investment Property; (f) all
deposits and cash; (g) any other property of such Borrower now or hereafter in
the possession, custody or control of Agent, any Lender or any agent or any
parent, affiliate or subsidiary of Agent or any Lender or any participant with
any Lender in the Loans for any purpose (whether for safekeeping, deposit,
collection, custody, pledge, transmission or otherwise); and (h) all additions
and accessions to, substitutions for, and replacements, products and proceeds of
the foregoing property, including, without limitation, proceeds of all insurance
policies insuring the foregoing property, and all of such Borrower's books and
records relating to any of the foregoing and to such Borrower's business.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Each Borrower shall, at Agent's request, at any time and from time to time,
execute and deliver to Agent such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed necessary or desirable by Agent) and do such other
acts and things as Agent may deem necessary or desirable in order to establish
and maintain a valid, attached and perfected security interest in the Collateral
in favor of Agent, for the benefit of Agent and Lenders, (free and clear of all
other liens, claims encumbrances and rights of third parties whatsoever, whether
voluntarily or involuntarily created, except Permitted Liens) to secure payment
of the Liabilities, and in order to facilitate the collection of the Collateral.
Each Borrower irrevocably hereby makes, constitutes and appoints Agent (and all
Persons designated by Agent for that purpose) as such Borrower's true and lawful
attorney and agent-in-fact to execute such financing statements, documents and
other agreements and instruments and do such other acts and things as may be
necessary to preserve and perfect Agent's security interest in the Collateral.
Each Borrower further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until the commencement of
a foreclosure or liquidation to realize upon the Collateral, each Borrower shall
have the right, except as otherwise provided in this Agreement, in the ordinary
course of such Borrower's business, to (a) sell, lease or furnish under
contracts of
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service any of such Borrower's Inventory normally held by such Borrower for any
such purpose, and (b) use and consume any raw materials, work in process or
other materials normally held by such Borrower for such purpose; provided,
however, that a sale in the ordinary course of business shall not include any
transfer or sale in satisfaction, partial or complete, of a debt owed by such
Borrower.
7. COLLATERAL FOR THE BENEFIT OF AGENT AND LENDERS. All liens and security
interests granted to Agent hereunder and under the Other Agreements and all
Collateral delivered to Agent hereunder and under the Other Agreements shall be
deemed to have been granted and delivered to Agent, for the benefit of Agent and
Lenders, to secure the Liabilities.
8. COLLECTIONS.
(a) Each Borrower shall direct all of its Account Debtors to make all
payments on the Accounts directly to a post office box (the "Lock Box")
designated by, and under the exclusive control of, LaSalle or another financial
institution acceptable to Agent. Each Borrower shall establish an account (the
"Lock Box Account") in Agent's name with LaSalle or such other financial
institution acceptable to Agent, into which all payments received in the Lock
Box shall be deposited, and into which such Borrower will immediately deposit
all payments received by such Borrower for Inventory or services in the
identical form in which such payments were received, whether by cash or check.
If any Borrower, any Affiliate or Subsidiary, or any shareholder, officer,
director, employee or agent of any Borrower or any Affiliate or Subsidiary, or
any other Person acting for or in concert with any Borrower shall receive any
monies, checks, notes, drafts or other payments relating to or as proceeds of
Accounts or other Collateral, such Borrower and each such Person shall receive
all such items in trust for, and as the sole and exclusive property of, Agent,
for the benefit of Agent and Lenders and, immediately upon receipt thereof,
shall remit the same (or cause the same to be remitted) in kind to the Lock Box
Account. If the Lock Box Account is not established with LaSalle, the financial
institution with which the Lock Box Account is established shall acknowledge and
agree, in a manner satisfactory to Agent, that the amounts on deposit in such
Lock Box Account are the sole and exclusive property of Agent, for the benefit
of Agent and Lenders, that such financial institution has no right to setoff
against the Lock Box Account or against any other account maintained by such
financial institution into which the contents of the Lock Box Account are
transferred, and that such financial institution shall wire, or otherwise
transfer in immediately available funds in a manner satisfactory to Agent, funds
deposited in the Lock Box Account on a daily basis as such funds are collected.
Each Borrower agrees that all payments made to such Lock Box Account or
otherwise received by Agent, whether in respect of the Accounts or as proceeds
of other Collateral or otherwise, will be applied on account of the Liabilities
in accordance with the terms of this Agreement. If the Lock Box Account is
established with LaSalle, each Borrower agrees to pay all fees, costs and
expenses which LaSalle incurs in connection with opening and maintaining the
Lock Box Account with respect to such Borrower and
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depositing for collection by LaSalle any check or other item of payment received
by Agent on account of the Liabilities. All of such fees, costs and expenses
may, in Agent's sole discretion, be paid by Agent on each such Borrower's
behalf, and such payments by Agent shall constitute Loans hereunder, shall be
payable to Agent by such Borrower upon demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder. All checks,
drafts, instruments and other items of payment or proceeds of Collateral shall
be endorsed by the applicable Borrower to Agent, and, if that endorsement of any
such item shall not be made for any reason, Agent is hereby irrevocably
authorized to endorse the same on such Borrower's behalf. For the purpose of
this paragraph, each Borrower irrevocably hereby makes, constitutes and appoints
Agent (and all Persons designated by Agent for that purpose) as Borrower's true
and lawful attorney and agent-in-fact (i) to endorse such Borrower's name upon
said items of payment and/or proceeds of Collateral and upon any Chattel Paper,
document, instrument, invoice or similar document or agreement relating to any
Account of such Borrower or goods pertaining thereto; (ii) to take control in
any manner of any item of payment or proceeds thereof; and (iii) to have access
to any lock box or postal box into which any of such Borrower's mail is
deposited, and open and process all mail addressed to such Borrower and
deposited therein.
(b) Agent may, at any time and from time to time after the occurrence of an
Event of Default and during the continuance thereof, whether before or after
notification to any Account Debtor and whether before or after the maturity of
any of the Liabilities, (i) enforce collection of any of Borrowers' Accounts or
other amounts owed to a Borrower by suit or otherwise; (ii) exercise all of
Borrowers' rights and remedies with respect to proceedings brought to collect
any Accounts or other amounts owed to a Borrower; (iii) surrender, release or
exchange all or any part of any Accounts or other amounts owed to a Borrower, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any Account of
each Borrower or other amount owed to such Borrower upon such terms, for such
amount and at such time or times as Agent deems advisable; (v) prepare, file and
sign the applicable Borrower's name on any proof of claim in bankruptcy or other
similar document against any Account Debtor or other Person obligated to
Borrower; and (vi) do all other acts and things which are necessary, in Agent's
sole discretion, to fulfill each Borrower's obligations under this Agreement and
to allow Agent to collect the Accounts or other amounts owed to a Borrower. In
addition to any other provision hereof, Agent may at any time, whether before or
after the occurrence of an Event of Default and during the continuance thereof,
at the applicable Borrower's expense, notify any parties obligated on any of the
Accounts to make payment directly to Agent of any amounts due or to become due
thereunder.
(c) For purposes of calculating interest, Agent shall, within one (1)
Business Day after receipt by Agent at its office in Chicago, Illinois of checks
from collections of items of payment and proceeds of any Collateral, and cash or
other immediately available funds from collections of items of payment and
proceeds of any Collateral, apply the whole or any part of such collections or
proceeds against the Liabilities
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<PAGE>
in such order as Agent shall determine in its sole discretion. For purposes of
determining the amount of Loans available for borrowing purposes, (i) checks and
(ii) cash or other immediately available funds from collections of items of
payment and proceeds of any Collateral shall be applied in whole or in part
against the Liabilities, in such order as Agent shall determine in its sole
discretion, on the day of receipt, subject to actual collection.
(d) Agent, in its sole discretion, without waiving or releasing any
obligation, liability or duty of any Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Agent or any Lender in respect thereof and all
costs, fees and expenses including, without limitation, reasonable attorney
fees, all court costs and all other charges relating thereto incurred by Agent
or any Lender shall constitute Loans, payable by Borrowers to Agent on demand
and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder.
(e) Immediately upon each Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document, including, without
limitation, any Chattel Paper, such Borrower shall deliver the original thereof
to Agent together with an appropriate endorsement or other specific evidence of
assignment thereof to Agent, for the benefit of Agent and Lenders (in form and
substance acceptable to Agent). If an endorsement or assignment of any such
items shall not be made for any reason, Agent is hereby irrevocably authorized,
as such Borrower's attorney and agent-in-fact, to endorse or assign the same on
such Borrower's behalf.
9. SCHEDULES AND REPORTS.
(a) Within fifteen (15) days after the close of each calendar month, and at
such other times as may be reasonably requested by Agent from time to time
hereafter, the Representative Company shall deliver to Agent (i) a schedule
identifying each Eligible Account of each Borrower on a consolidating basis
together with copies of the invoices when requested by Agent (with evidence of
shipment attached) pertaining to each such Eligible Account, for the month (or
other applicable period) immediately preceding; (ii) such additional schedules,
certificates, reports and information with respect to the Collateral as Agent
may from time to time reasonably require; and (iii) an assignment from each
Borrower of any or all items of Collateral to Agent, for the benefit of Agent
and Lenders. Agent, through its officers, employees or agents, shall have the
right, at any time and from time to time in Agent's name, in the name of a
nominee of Agent or in any Borrower's name, to verify the validity, amount or
any other matter relating to a Borrower's Accounts, by mail, telephone,
telegraph or otherwise. Borrowers shall, jointly and severally (but without
duplication), reimburse Agent, on demand, for all costs, fees and expenses
incurred by Agent in this regard. Agent shall furnish any such schedule or
report in Agent's possession to each Lender upon request of any such Lender.
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<PAGE>
(b) Without limiting the generality of the foregoing, the Representative
Company shall deliver to Agent, at least once a month (or more frequently when
reasonably requested by Agent), a report with respect to each Borrower's
Inventory on a consolidating basis. Agent shall furnish any such schedule or
report in Agent's possession to such Lenders upon request of any such Lender.
The Representative Company shall immediately notify Agent of any event causing
loss or depreciation in value of any Borrower's Inventory (other than normal
depreciation occurring in the ordinary course of business).
(c) All schedules, certificates, reports, assignments and other items
delivered by the Representative Company or any Borrower to Agent hereunder shall
be executed by an authorized representative of such party and shall be in such
form and contain such information as Agent shall reasonably specify.
10. TERMINATION. This Agreement shall be in effect from the date hereof
until July 8, 2004 (the "Original Term") and shall automatically renew itself
from year to year thereafter (each such one-year renewal being referred to
herein as a "Renewal Term") unless (a) any Lender notifies Agent and Borrowers
of its election to terminate this Agreement as of the end of the Original Term
or the then-current Renewal Term, at least ninety (90) days prior to the end of
such Original Term or Renewal Term; (b) the due date of the Liabilities is
accelerated pursuant to paragraph 14 hereof; or (c) any Borrower elects to
terminate this Agreement at or prior to the end of the Original Term or at or
prior to the end of any Renewal Term by giving Agent written notice of such
election at least ninety (90) days prior to the end of the Original Term or the
then-current Renewal Term or such other date identified by Borrowers as their
intended repayment date (if earlier) and by paying all of the Liabilities in
full on such date. If Borrowers prepay the Liabilities in full and terminate
this Agreement prior to the end of the Original Term or the Renewal Term, such
prepayment shall be without premium or penalty. If one or more of the events
specified in clauses (a), (b) and (c) occurs, then (i) neither Agent nor any
Lender shall make any additional Loans on or after the date identified as the
date on which the Liabilities are to be repaid and (ii) this Agreement shall
terminate on the date thereafter that the Liabilities are paid in full. At such
time as Borrowers have repaid all of the Liabilities and this Agreement has
terminated, each Borrower shall deliver to Agent and each Lender a release, in
form and substance satisfactory to Agent or such Lender, as applicable, of all
obligations and liabilities of Agent or such Lender, as applicable, and its
officers, directors, managers, employees, agents, parents, subsidiaries and
affiliates to such Borrower, and if a Borrower is obtaining new financing from
another lender, such Borrower shall deliver an Indemnification Agreement from
such lender in the form attached hereto as Exhibit D and made a part hereof to
Agent, in form and substance satisfactory to Agent, for checks which Agent has
credited to such Borrower's account, but which subsequently are dishonored for
any reason. In addition, each Lender and Agent shall deliver to Borrowers a
Release and Agreement attached hereto as Exhibit E and made a part hereof
releasing all obligations and liabilities of Borrowers, their respective
officers, directors, employees and agents. At such time as (i) Borrowers have
satisfied all of the Liabilities and this Agreement has terminated and (ii)
Borrowers have delivered to Agent
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and each Lender the aforesaid release and lender's indemnification, Agent shall
deliver to Borrowers such releases and termination statements as Borrowers may
reasonably request in order to terminate the perfected status of Agent's liens
and security interests upon the Collateral.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Company hereby
represents, warrants and covenants that:
(a) the financial statements delivered or to be delivered by the
Representative Company or Borrowers to Agent and Lenders at or prior to the date
of this Agreement and at all times subsequent thereto accurately reflect the
financial condition of Borrowers, and there has been no material adverse change
in the financial condition, the operations or any other status of any Borrower
since the date of the financial statements delivered to Agent and Lenders most
recently prior to the date of this Agreement;
(b) the office where each Borrower keeps its books, records and accounts
(or copies thereof) concerning the Collateral, each Borrower's principal place
of business and all of each Borrower's other places of business, locations of
Collateral and post office boxes are as set forth in Exhibit B; each Borrower
shall promptly (but in no event less than ten (10) days prior thereto) advise
Agent in writing of the proposed opening of any new place of business or new
location of Collateral, the closing of any existing place of business or
location of Collateral, any change in the location of such Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of such Borrower;
(c) the Collateral (except any part thereof which prior to the date of this
Agreement any Borrower shall have advised Agent in writing consists of
Collateral normally used in more than one state) is and shall be kept, or, in
the case of vehicles, based, only at the addresses set forth on Exhibit B, and
at other locations within the continental United States of which Agent has been
previously advised by a Borrower in writing;
(d) if any of the Collateral consists of Goods of a type normally used in
more than one state, whether or not actually so used, (i) each Borrower shall
within seven (7) days give written notice to Agent of any use of any such Goods
in any state other than a state in which such Borrower has previously advised
Agent such Goods shall be used, and (ii) such Goods shall not, unless Agent
shall otherwise consent in writing, be used outside of the continental United
States;
(e) except as set forth on Schedule 11(1) no Borrower has made, nor shall
make, any loans or advances to any Affiliate or other Person except for (i)
advances to employees, officers and directors of such Borrower for travel and
other expenses arising in the ordinary course of such Borrower's business and
(ii) inter-company advances among Borrowers;
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(f) each Account or item of Inventory which the Representative Company or a
Borrower shall, expressly or by implication, request Agent to classify as an
Eligible Account or as Eligible Inventory, respectively, shall, as of the time
when such request is made, conform in all respects to the requirements of such
classification as set forth in the respective definitions of "Eligible Account"
and "Eligible Inventory" as set forth herein and as otherwise established by
Agent from time to time, and the Representative Company shall promptly notify
Agent in writing if any such Eligible Account or Eligible Inventory shall
subsequently become ineligible;
(g) each Borrower is and shall at all times during the Original Term or any
Renewal Term be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by such Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) each Company has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements to which it is a party and perform its obligations hereunder and
thereunder; each Company's execution, delivery and performance of this Agreement
and the Other Agreements does not and shall not conflict with the provisions of
any statute, regulation, ordinance or rule of law, or any agreement, contract or
other document which may now or hereafter be binding on such Company where such
conflict would have a material adverse effect on such Company's business,
property, assets, operations or conditions, financial or otherwise, and each
Company's execution, delivery and performance of this Agreement and the Other
Agreements shall not result in the imposition of any lien or other encumbrance
upon any of such Company's property under any existing indenture, mortgage, deed
of trust, loan or credit agreement or other agreement or instrument by which
such Company or any of its property may be bound or affected;
(i) there are no actions or proceedings which are pending or, to the best
of each Company's actual knowledge, threatened against any Company which might
result in any material adverse change in its financial condition or materially
adversely affect the Collateral or threaten the suspension of operation of any
Company and the Representative Company shall, promptly upon any Company becoming
aware of any such pending or threatened action or proceeding, give written
notice thereof to Agent;
(j) (i) each Company has obtained and shall maintain all licenses,
authorizations, approvals and permits the lack of which would have a material
adverse effect on the operation of its business, and (ii) each Company is and
shall remain in compliance in all material respects with all applicable federal,
state, local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, Environmental Laws and statutes, orders,
regulations, rules and ordinances relating to taxes, employer and employee
contributions and similar items, securities, ERISA (as hereafter defined) or
employee health
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and safety) the failure to comply with which would have a material adverse
effect on its business, property, assets, operations or condition, financial or
otherwise;
(k) all written information now, heretofore or hereafter furnished by any
Company to Agent or any Lender is and shall be true and correct in all material
respects as of the date with respect to which such information was or is
furnished;
(l) except as otherwise provided in this Agreement, no Company is
conducting, permitting or suffering to be conducted, nor shall any Company
conduct, permit or suffer to be conducted, any activities pursuant to or in
connection with which any of the Collateral is now, or will (while any
Liabilities remain outstanding) be owned by any Affiliate; provided, however,
that each Company may enter into transactions with Affiliates for the purchase
or sale of Inventory or services in the ordinary course of business pursuant to
terms that are no less favorable to such Company than the terms upon which such
transfers or transactions would have been made had they been made to or with a
Person that is not an Affiliate and, in connection therewith, may transfer cash
or property to Affiliates for fair value and further provided that Borrowers may
make loans or advances to other Borrowers;
(m) except as otherwise disclosed to Agent in writing, each Borrower's name
has always been as set forth on the first page of this Agreement and no Borrower
uses tradenames or division names in the operation of its business, except as
otherwise disclosed in writing to Agent; the Representative Company shall notify
Agent in writing within ten (10) days of the change of any Borrower's name or
the use of any tradenames or division names not previously disclosed to Agent in
writing;
(n) with respect to each Borrower's Equipment (and, in the case of clauses
(i), (iii) and (iv) of this subparagraph (n), to the extent Equipment
constitutes Collateral): (i) such Borrower has good and indefeasible and
merchantable title to and ownership of all of its Equipment; (ii) each Borrower
shall keep and maintain the Equipment in the condition and repair required
pursuant to the Senior Secured Note Documents and shall make replacements
thereof and repairs thereto as so required; (iii) each Borrower shall not permit
any such items to become a fixture to real estate unless Agent's lien and
security interest in such fixtures and priority relative thereto is not impaired
or an accession to other personal property; and (iv) each Borrower, within five
(5) days following written demand by Agent, shall deliver to Agent any and all
evidence of ownership of, including, without limitation, certificates of title
and applications of title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which each Company is a
party are the legal, valid and binding obligations of such Company and are
enforceable against such Company in accordance with their respective terms;
(p) each Company is and shall remain solvent, is and shall be able to pay
its debts as they become due, has and shall continue to have capital sufficient
to carry on its business, now owns and shall continue to own property having a
value both at fair valuation
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and at present fair saleable value greater than the amount required to pay its
debts, and will not be rendered insolvent by the execution and delivery of this
Agreement or any of the Other Agreements or by completion of the transactions
contemplated hereunder or thereunder;
(q) no Company is now obligated, nor shall it create, incur, assume or
become obligated (directly or indirectly), for any loans or other indebtedness
for borrowed money other than the Loans, except that each Company may (i) borrow
money from a Person other than Agent and Lenders on an unsecured and
subordinated basis if a subordination agreement in favor of Agent and in form
and substance satisfactory to Agent is executed and delivered to Agent relative
thereto; (ii) maintain any present indebtedness to any Person described on
Schedule 11(q) hereof and may refinance any such indebtedness; (iii) incur
unsecured indebtedness to trade creditors in the ordinary course of such
Borrower's business; (iv) incur purchase money indebtedness or capitalized lease
obligation in connection with capital expenditures pursuant to subparagraph
12(q) of this Agreement and may refinance any such indebtedness; (v) guaranty by
endorsement of negotiable instruments for deposits or collection or similar
transactions in the ordinary course of business; (vi) Holdings may guaranty the
obligations of any of its direct and indirect Subsidiaries, and each Borrower
may guaranty the obligations of any Company to Agent and/or Lenders or with
respect to indebtedness incurred as permitted by clauses (iii) and (iv) above;
(vii) with respect to the Borrowers, guaranty the obligations of Holdings under
the Senior Secured Notes in an amount not to exceed the initial aggregate
principal amount issued on the date hereof and with respect to Holdings, issue
the Senior Secured Notes in an amount not to exceed the initial aggregate
principal amount issued on the date hereof, and (viii) each Borrower may borrow
money from other Borrowers or Holdings, and any Borrower may advance or loan
money to Holdings in order to permit Holdings to make scheduled interest
payments on the Senior Secured Notes;
(r) no Borrower owns any margin securities, and none of the proceeds of the
Loans hereunder shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation G or Regulation U of the Board of Governors
of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed in writing to Agent, no Company has any
Parents, Subsidiaries, other Affiliates or divisions, nor is any Company engaged
in any joint venture or partnership with any other Person;
(t) if a Company is a corporation, limited liability company or
partnership, such Company is duly organized validly existing and in good
standing in its state of organization and such Company is duly qualified and in
good standing in all states where the nature and extent of the business
transacted by it or the ownership of its assets makes such
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qualification necessary, except where failure to qualify or be in good standing
in foreign jurisdictions will not have a material adverse effect on such
Company;
(u) no Company is in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does any Company
know of any dispute regarding any contract, lease or commitment which is
material to the continued financial success and well-being of any Company;
(v) there are no controversies pending or, to the best of each Company's
actual knowledge, threatened between any Company and any of its employees, other
than employee grievances arising in the ordinary course of business which are
not, in the aggregate, material to the continued financial success and
well-being of such Company, and each Company is in compliance in all material
respects with all federal and state laws respecting employment and employment
terms, conditions and practices;
(w) each Company possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it;
(x) except as disclosed in the environmental reports described on Schedule
11(x) hereto, (i) no Company has generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any Environmental Law or any license, permit, certificate, approval or
similar authorization thereunder and the operations of each Borrower comply in
all material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder; (ii) there has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice by any governmental authority or any other Person, nor is any pending
or to the best of any Company's knowledge threatened, and the Representative
Company shall immediately notify Agent upon any Company becoming aware of any
such investigation, proceeding, complaint, order, directive, claim, citation or
notice and take prompt and appropriate actions to respond thereto, with respect
to any non-compliance with or violation of the requirements of any Environmental
Law by a Company or the release, spill or discharge, threatened or actual, of
any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects any
Company or its business, operations or assets or any properties at which a
Company has transported, stored or disposed of any Hazardous Materials; (iii) no
Company has any material liability (contingent or otherwise) in connection with
a release, spill or discharge, threatened or actual, of any Hazardous Materials
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials; and (iv) without
limiting the generality of the foregoing, each Company shall, following the
determination by Agent that there is non-compliance, or any condition which
requires any action by or on behalf of a Company in order to avoid any
non-compliance, with
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<PAGE>
any Environmental Law, at Borrowers' expense, cause an independent environmental
engineer acceptable to Agent to conduct such tests of the relevant site as are
appropriate and prepare and deliver a report setting forth the result of such
tests, a proposed plan for remediation and an estimate of the costs thereof; and
(y) Each Company has paid and discharged, and shall at all times hereafter
promptly pay and discharge all obligations and liabilities arising under the
Employee Retirement Income Security Act of 1974 (as amended, modified or
restated from time to time, "ERISA") of a character which if unpaid or
unperformed might result in the imposition of a lien against any of its
properties or assets and will promptly notify the Agent of (i) the occurrence of
any "reportable event" (as defined in ERISA) which might result in the
termination by the Pension Benefit Guaranty Corporation ("PBGC") of any employee
benefit plan ("Plan") covering any officers or employees of such Company, any
benefits of which are, or are required to be, guaranteed by PBGC; (ii) receipt
of any notice from PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor and (iii) its intention to terminate or
withdraw from any Plan; provided, no Company shall terminate any Plan or
withdraw therefrom if such withdrawal or termination shall result in any
liability to a Company.
Each Company represents, warrants and covenants to Agent and Lenders that all
representations and warranties of Company contained in this Agreement (whether
appearing in paragraphs 11 or 12 hereof or elsewhere) shall be true at the time
of Companies' execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true in all material respects
until the repayment in full of all of the Liabilities and termination of this
Agreement, and shall be remade by each Company at the time each Loan is made
pursuant to this Agreement.
12. ADDITIONAL COVENANTS OF BORROWERS. Until payment or satisfaction in
full of all Liabilities and termination of this Agreement, unless Companies
obtain the prior written consent of the Requisite Lenders waiving or modifying
any of Companies' covenants hereunder in any specific instance, each Company
agrees as follows:
(a) each Company shall at all times keep accurate and complete books,
records and accounts with respect to all of such Company's business activities,
in accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) the Representative Company agrees to deliver to Agent and each Lender
the following financial information (which financial information shall, unless
otherwise permitted by this Agreement, be kept confidential in accordance with
any now existing or hereafter enacted confidentiality law), all of which shall
be prepared in accordance with generally accepted accounting principles
consistently applied: (i) no later
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than thirty (30) days after each calendar month, copies of internally prepared
financial statements, including, without limitation, balance sheets and
statements of income, retained earnings and cash flow of Companies, each on a
consolidated and consolidating basis, certified by the Chief Financial Officer
of the Representative Company pursuant to a Compliance Certificate in the form
of Exhibit F hereto (the "Compliance Certificate"); (ii) no later than thirty
(30) days after the end of each calendar quarter, copies of internally prepared
financial statements, including, without limitation, balance sheets and
statements of income, retained earnings and cash flow of Companies for the
quarter then-ended, each on a consolidated and consolidating basis, together
with a calculation of the financial covenants set forth herein, certified by the
Chief Financial Officer of the Representative Company pursuant to the Compliance
Certificate and (iii) no later than ninety (90) days after the end of each of
each Company's fiscal years, annual financial statements on a consolidated and
consolidating basis with an unqualified opinion by independent certified public
accountants selected by each Company and reasonably satisfactory to Agent,
together with a Compliance Certificate. Companies shall use their best efforts
to cause their independent certified public accountants to deliver such audited
annual financial statements with a letter from such accountants acknowledging
that they are aware that a primary intent of such Company in obtaining such
financial statements is to influence Agent and Lenders and that Agent and
Lenders are relying upon such financial statements in connection with the
exercise of its rights hereunder and copies of any management letters sent to a
Company by such accountants;
(c) the Representative Company shall promptly advise Agent and each Lender
in writing of any material adverse change in the business, assets or condition,
financial or otherwise, of any Company, the occurrence of any Event of Default
hereunder or the occurrence of any event which, if uncured, will become an Event
of Default hereunder after notice or lapse of time (or both);
(d) Agent, or any Persons designated by it, shall have the right, at any
time, to call at each Company's places of business at any reasonable times, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from such Company's books, records, journals, orders,
receipts and any correspondence and other data relating to such Company's
business, the Collateral or any transactions between the parties hereto, and
shall have the right to make such verification concerning such Company's
business as Agent may consider reasonable under the circumstances. Any Lender
may, at such Lender's expense, accompany Agent in any such inspection. Each
Company shall furnish to Agent such information relevant to Agent's or any
Lender's rights under this Agreement as Agent shall at any time and from time to
time request. Each Company authorizes Agent to discuss the affairs, finances and
business of such Company with any officers, employees or directors of such
Company or with any Affiliate or the officers, employees or directors of any
Affiliate, and to discuss the financial condition of such Company with such
Company's independent public
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<PAGE>
accountants. Any such discussions shall be without liability to Agent, any
Lender or to such Company's independent public accountants. Borrowers shall,
jointly and severally (but without duplication), pay to Agent all customary fees
and out-of-pocket expenses incurred by Agent in the exercise of its rights
hereunder, and all of such fees and expenses shall constitute Loans hereunder,
shall be payable on demand and, until paid, shall bear interest at the highest
rate then applicable to Loans hereunder;
(e) each Borrower shall:
(i) keep the Collateral owned by it properly housed and insured for
the full insurable value thereof against loss or damage by fire, theft,
explosion, sprinklers, collision (in the case of motor vehicles, to the
extent such motor vehicles constitute Collateral) and such other risks as
are customarily insured against by Persons engaged in businesses similar to
that of such Borrower, with such companies, in such amounts and under
policies in such form as shall be satisfactory to Agent. Original (or
certified) copies of such policies of insurance have been or shall be
delivered to Agent within fifteen (15) days after the date hereof, together
with evidence of payment of all premiums therefor, and shall contain an
endorsement, in form and substance acceptable to Agent, showing loss under
such insurance policies payable to Agent. Such endorsement, or an
independent instrument furnished to Agent, shall provide that the insurance
company shall give Agent at least thirty (30) days' written notice before
any such policy of insurance is altered or canceled and that no act,
whether willful or negligent, or default of such Borrower or any other
Person shall affect the right of Agent to recover under such policy of
insurance in case of loss or damage. In addition, each Borrower shall cause
to be executed and delivered to Agent, for the benefit of Agent and
Lenders, an assignment of proceeds of its business interruption insurance
policies. Each Borrower hereby directs all insurers under all policies of
insurance to pay all proceeds payable thereunder directly to Agent, for the
benefit of Agent and Lenders or such other secured party pursuant to the
provisions of the Intercreditor Agreement as such secured party's interest
may appear. Each Company irrevocably makes, constitutes and appoints Agent
(and all officers, employees or agents designated by Agent) as such
Company's true and lawful attorney (and agent-in-fact) for the purpose of
making, settling and adjusting claims (other than the ATMNY Yankee claim),
subject to the terms of the Intercreditor Agreement under such policies of
insurance, endorsing the name of such Company on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance; provided, that so long as no Event of Default is
then continuing, Companies may settle and adjust claims involving less than
$300,000 in the aggregate during any fiscal year; and
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<PAGE>
(ii) maintain, at its expense, such public liability and third party
property damage insurance as is customary for Persons engaged in businesses
similar to that of such Borrower with such companies and in such amounts,
with such deductibles and under policies in such form as shall be
satisfactory to Agent and original (or certified) copies of such policies
have been or shall be delivered to Agent within fifteen (15) days after the
date hereof, together with evidence of payment of all premiums therefor;
each such policy shall contain an endorsement showing Agent and each Lender
as additional insured thereunder and providing that the insurance company
shall give Agent at least thirty (30) days' written notice before any such
policy shall be altered or canceled.
If any Borrower at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then Agent, without waiving or releasing
any obligation or default by Borrowers hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Agent deems
advisable. All sums disbursed by Agent in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall constitute Loans hereunder, and
shall be payable on demand by Borrowers to Agent and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder;
(f) no Company shall use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; each Borrower shall keep the Collateral which is subject to a
senior lien in favor of Agent pursuant to the Intercreditor Agreement in good
condition, repair and order and shall keep all other Collateral in the
condition, repair and order required pursuant to the Senior Secured Note
Documents; shall permit Agent and any Lender accompanying Agent to examine any
of the Collateral at any time and wherever the Collateral may be located; shall
not permit the Collateral, or any part thereof, to be levied upon under
execution, attachment, distraint or other legal process; shall not sell, lease,
grant a security interest in or otherwise dispose of any of the Collateral
except as expressly permitted by this Agreement; shall not settle or adjust any
Account identified by the Representative Company as an Eligible Account or with
respect to which the Account Debtor is an Affiliate, without the consent of
Agent, provided, that following the occurrence of an Event of Default, no
Borrower shall settle or adjust any Account without the consent of Agent; and
shall not secrete or abandon any of the Collateral, or remove or permit removal
of any of the Collateral which is subject to a senior lien in favor of Agent
pursuant to the Intercreditor Agreement from any of the locations listed on
Exhibit B or in any written notice to Agent pursuant to subparagraph 11(b)
hereof, except for the removal of Inventory sold in
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<PAGE>
the ordinary course of such Borrower's business as permitted herein and with
respect to all other Collateral, as otherwise permitted pursuant to the Senior
Secured Note Documents;
(g) all monies and other property obtained by each Borrower from Agent
and/or any Lender pursuant to this Agreement will be used solely for business
purposes of such Borrower;
(h) each Borrower shall, at the request of Agent, indicate on its records
concerning the Collateral a notation, in form satisfactory to Agent, of the
security interest of Agent hereunder;
(i) each Company shall file all required tax returns and pay all of its
taxes when due (as such due date may be lawfully extended), including, without
limitation, taxes imposed by federal, state or municipal agencies, and shall
cause any liens for taxes to be promptly released; provided, that such Company
shall have the right to contest the payment of such taxes in good faith by
appropriate proceedings so long as (i) the amount so contested is shown on such
Company's financial statements, (ii) the contesting of any such payment does not
give rise to a lien for taxes, (iii) such Company keeps on deposit with Agent
(such deposit to be held with interest) an amount of money which, in the sole
judgment of Agent, is sufficient to pay such taxes and any interest or penalties
that may accrue thereon or such Company maintains adequate reserves on its
balance sheet the accordance with GAAP, and (iv) if such Company fails to
prosecute such contest with reasonable diligence, Agent may apply the money so
deposited in payment of such taxes. If any Company fails to pay any such taxes
and in the absence of any such contest by such Company, Agent may (but shall be
under no obligation to) advance and pay any sums required to pay any such taxes
and/or to secure the release of any lien therefor, and any sums so advanced by
Agent shall constitute Loans hereunder, shall be payable by Borrowers to Agent
on demand, and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder;
(j) except as provided in paragraph 11(q)(v), (vi) and (vii) of this
Agreement, no Company shall assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business;
(k) no Company shall (i) enter into any merger or consolidation (other than
the merger or consolidation of any Borrower with and into any other Borrower),
(ii) sell, lease or otherwise dispose of any of its assets other than in the
ordinary course of business, (iii) purchase all or substantially all of the
assets of any Person or division of such Person or (iv) enter into any
transaction outside the ordinary course of such Company's business, including,
without limitation, any purchase, redemption or retirement of any shares of any
class of its stock or any other equity interest, and any issuance of any shares
of, or warrants or other rights to receive or purchase any shares of, any class
of its stock or any other equity interest;
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(l) except as provided on Schedule 12(l) of this Agreement, and except for
dividends or distributions made by any Borrower to Holdings solely for payment
by Holdings of scheduled payments of interest on the Senior Secured Notes, no
Company shall declare or pay any dividend or other distribution (whether in cash
or in kind) on any class of its stock (if such Company is a corporation) or on
account of any equity interest in such Company (if such Company is a
partnership, limited liability company or other type of entity);
(m) no Company shall purchase or otherwise acquire, or contract to purchase
or otherwise acquire, the obligations or stock of any Person, other than direct
obligations of the United States;
(n) no Company shall amend its organizational documents or change its
fiscal year or enter into a new line of business materially different from
Company's current business without the consent of Agent which consent will not
be unreasonably withheld or delayed;
(o) Borrowers shall not at any time during the periods set forth below,
permit the "Tangible Net Worth" (as defined below) of Holdings and its
Subsidiaries on a consolidated basis, to be less then the Minimum Tangible Net
Worth corresponding to such period:
<TABLE>
<CAPTION>
Minimum Tangible
Period Net Worth
------ ---------
<S> <C>
From the date hereof through December 30, 1999 $ 55,000,000
From December 31, 1999 through March 30, 2000 $ 57,300,000
From March 31, 2000 through June 29, 2000 $ 59,600,000
From June 30, 2000 through September 29, 2000 $ 63,100,000
From September 30, 2000 through December 30, 2000 $ 66,600,000
From December 31, 2000 through March 30, 2001 Adjusted TNW plus $2,900,000
From March 31, 2001 through June 29, 2001 Adjusted TNW plus $5,800,000
From June 30, 2001 through September 29, 2001 Adjusted TNW plus $10,200,000
From September 30, 2001 through December 30, 2001 Adjusted TNW plus $14,600,000
From December 31, 2001 through March 30, 2002 Adjusted TNW plus $3,200,000
From March 31, 2002 through June 29, 2002 Adjusted TNW plus $6,400,000
From June 30, 2002 through September 29, 2002 Adjusted TNW plus $11,100,000
From September 30, 2002 through December 30, 2002 Adjusted TNW plus $15,900,000
From December 31, 2002 through March 30, 2003 Adjusted TNW plus $3,400,000
From March 31, 2003 through June 29, 2003 Adjusted TNW plus $6,800,000
From June 30, 2003 through September 29, 2003 Adjusted TNW plus $11,800,000
From September 30, 2003 through December 30, 2003 Adjusted TNW plus $16,900,000
From December 31, 2003 through March 30, 2004 Adjusted TNW plus $3,800,000
From March 31, 2004 through June 29, 2004 Adjusted TNW plus $7,600,000
From June 30, 2004 through September 29, 2004 Adjusted TNW plus $13,400,000
From September 30, 2004 and thereafter Adjusted TNW plus $19,100,000
</TABLE>
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<PAGE>
"Adjusted TNW" being defined for each period from December 31 of each year
through December 30 of the following year as the greater of (a) the Minimum
Tangible Net Worth as of the September 30 immediately preceding such period and
(b) the actual Tangible Net Worth of Holdings and its subsidiaries on a
consolidated basis as of such September 30; and "Tangible Net Worth" being
defined for purposes of this paragraph with respect to any Person, such Person's
shareholders' equity (including retained earnings) less the book value of all
intangible assets, as determined solely by Agent on a consistent basis, plus the
amount of any LIFO reserve, plus the amount of any debt subordinated to Agent,
all as determined under GAAP except as otherwise set forth herein;
(p) Borrowers shall, jointly and severally (but without duplication),
reimburse Agent for all costs and expenses, including, without limitation, legal
expenses and reasonable attorneys' fees incurred by Agent in connection with (i)
documentation and consummation of this transaction and any other transactions
between any Company and Agent, including, without limitation, Uniform Commercial
Code and other public record searches and filings, overnight courier or other
express or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs, (ii) collection, protection or enforcement
any rights in or to the Collateral, (iii) collection of any Liabilities and (iv)
administration and enforcement of any of Agent's or any Lender's rights under
this Agreement. Borrowers shall also, jointly and severally (but without
duplication), pay all normal service charges with respect to all accounts
maintained by any Company with Agent and for any additional services requested
by such Company from Agent. All such costs, expenses and charges shall
constitute Loans hereunder, shall be payable by Borrowers to Agent on demand,
and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder;
(q) Companies shall not purchase or otherwise acquire (including, without
limitation, acquisition by way of capitalized lease), or commit to purchase or
acquire, any fixed asset if, after giving effect to such purchase or other
acquisition, the aggregate cost of all such fixed assets purchased or otherwise
acquired would exceed $5,000,000 from the date hereof through the end of the
fiscal year ending September 30, 1999, $35,000,000 for the fiscal year of
Companies ending September 30, 2000, and $30,000,000 during any other fiscal
year of Companies; and
(r) no Company nor any Affiliate shall use any portion of the proceeds of
the Loans, either directly or indirectly for the purpose of (i) purchasing any
securities underwritten or privately placed by ABN AMRO Securities (USA) Inc.
("AASI"), an affiliate of LaSalle, or (ii) purchasing from AASI any securities
in which AASI makes a
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<PAGE>
market, or (iii) refinancing or making payments of principal, interest or
dividends on any securities issued by a Company or any Affiliate, and
underwritten, privately placed or dealt in by AASI.
13. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" by Borrowers hereunder:
(a) the failure of any Obligor to pay when due any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, condition, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements; provided, that any such failure
by any Obligor under this Agreement shall not constitute an Event of Default
hereunder unless such failure remains uncured by the tenth (10th) day following
written notice thereof. Agent agrees to endeavor to provide a copy of such
notice of default to the law firm of Mandel & Resnik P.C., Attention: Nicholas
Kaiser, Esq. by mail at the mailing address of 220 East 42nd Street, 20th Floor,
New York, New York 10017, or by facsimile transmission at facsimile number (212)
573-0067. Failure of Agent to provide a copy of such notice of default shall not
impair Agent's rights hereunder.
(c) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
any other agreement with any Person if such failure may have a material adverse
effect on such Obligor's business, property, assets, operations or condition,
financial or otherwise;
(d) the making or furnishing by any Obligor to Agent or any Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Agent and/or any
such Lender, which is untrue or misleading in any material respect;
(e) the loss, theft, damage or destruction of any of the Collateral (other
than Equipment, if any) having a fair market value in excess of $2,000,000 in
the aggregate for all such events during any calendar year during the Original
Term or any Renewal Term, and with respect to Collateral consisting of
Equipment, if any, having a fair market value in excess of $5,000,000 in the
aggregate for all such events during any calendar year during the Original Term
or any Renewal Term, as determined by Agent in its sole discretion, or (except
as permitted hereby) sale, lease or furnishing under a contract of service of,
any of the Collateral in which Agent has a senior priority lien pursuant to the
Intercreditor Agreement or, with respect to all other Collateral, as permitted
pursuant to the Senior Secured Note Documents;
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<PAGE>
(f) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than the
Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
(g) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or for
the readjustment or arrangement of any Obligor's debts, whether under the United
States Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary, such action shall not constitute an Event of Default unless such
proceedings are not dismissed within sixty (60) days after the commencement of
such proceedings;
(h) the appointment of a receiver or trustee for any Obligor, for any of
the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within sixty
(60) days after the commencement of such proceedings;
(i) the entry of any judgment in excess of $1,000,000 or order against any
Obligor which remains unsatisfied or undischarged and in effect for thirty (30)
days after such entry without a stay of enforcement or execution;
(j) the death of any Obligor who is a natural Person, or of any partner of
any Obligor which is a partnership, or any member of a limited liability company
or any natural Person who owns a material interest in a corporate Obligor the
dissolution of any Obligor which is a partnership, limited liability company or
corporation; provided, however, that the death of Nourollah Elghanayan shall not
constitute an Event of Default;
(k) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Agent pursuant to which such Person has guaranteed to Agent the
payment of all or any of the Liabilities or has granted Agent a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities;
(l) the institution in any court of a criminal proceeding for which the
possibility of a forfeiture of assets exists against any Obligor, or the
indictment of any Obligor for any crime other than traffic and boating tickets
and misdemeanors not punishable by jail terms;
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<PAGE>
(m) Holdings shall cease to own 100% of the equity interests of Borrowers,
Middle American Tissue Inc. ("Middle American") shall cease to own at least 100%
of the stock of Holdings, Super American Tissue Inc. shall cease to own at least
88% of the stock of Middle American or Nourollah Elghanayan, Mehdi Gabayzadeh
and their family members (including children, grandchildren and
great-grandchildren) shall cease to own, indirectly or beneficially, at least
95% of the stock of Super American Tissue Inc.; provided, that if DLJ Merchant
Banking II, Inc. or its Affiliates becomes the owner of the stock of Holdings,
such event shall not constitute an Event of Default; and
(n) any material adverse change in the business, property, assets,
operations or conditions, financial or otherwise of any Obligor, as determined
by the Requisite Lenders.
14. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in subparagraph
13(g) hereof, all of Borrowers' Liabilities shall immediately and automatically
become due and payable, without notice of any kind. Upon the occurrence of any
other Event of Default, all Liabilities may, at the option of the Requisite
Lenders, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, Agent may, in its sole
discretion, refuse to advance any Loan requested by or on behalf of a Borrower
under this Loan Agreement.
(c) Upon the occurrence of an Event of Default, subject to the terms of the
Intercreditor Agreement, Agent may exercise from time to time any rights and
remedies available to it under the Uniform Commercial Code and any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the Other Agreements and all of
Agent's rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing,
Agent may, subject to the terms of the Intercreditor Agreement, without notice,
demand or legal process of any kind, take possession of any or all of the
Collateral (in addition to Collateral of which it already has possession),
wherever it may be found, and for that purpose may pursue the same wherever it
may be found, and may enter into any of each Borrower's premises where any of
the Collateral may be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or otherwise disposed
of, and Agent shall have the right to store the same at any of each Borrower's
premises without cost to Agent. At Agent's request, subject to the terms of the
Intercreditor Agreement, each Borrower shall, at Borrowers' expense, assemble
the Collateral and make it available to Agent at one or more places to be
designated by Agent and reasonably convenient to Agent and such Borrower. Each
Borrower recognizes that if such Borrower fails to perform, observe or discharge
any of its Liabilities under this Agreement or the Other Agreements, no remedy
at law will provide adequate relief to Agent and Lenders, and agrees that Agent
and Lenders shall be entitled to
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temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages. Any notification of intended disposition of any of
the Collateral required by law will be deemed reasonably and properly given if
given at least ten (10) calendar days before such disposition. Subject to the
terms of the Intercreditor Agreement, any proceeds of any disposition by Agent
of any of the Collateral may be applied by Agent to the payment of expenses in
connection with the Collateral, including, without limitation, legal expenses
and reasonable attorneys' fees, and any balance of such proceeds may be applied
by Agent toward the payment of such of the Liabilities, and in such order of
application, as Agent may from time to time elect.
15. INDEMNIFICATION. Each Company agrees to defend, protect, indemnify and
hold harmless Agent, each Lender, each affiliate or subsidiary of Agent and each
Lender (with counsel reasonably satisfactory to Agent or such Lender, as
applicable), and each of their respective officers, directors, employees,
attorneys and agents (each an "Indemnified Party") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature (including,
without limitation, the disbursements and the reasonable fees of counsel for
each Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities, environmental and commercial laws and regulations, under
common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any Other Agreement, or any act,
event or transaction related or attendant thereto, the making and the management
of the Loans or the issuance of any Letters of Credit or the use or intended use
of the proceeds of the Loans or any Letters of Credit; provided, however, that
no Company shall have any obligation hereunder to any Indemnified Party with
respect to matters solely caused by or resulting from the willful misconduct or
gross negligence of such Indemnified Party, and Companies shall not indemnify
Agent or any Lender for claims brought against any such party by any other
Lender or Agent. To the extent that the undertaking to indemnify set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, each Company shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and, failing prompt payment, shall, together with
interest thereon at the highest rate then applicable to Loans hereunder from the
date incurred by each Indemnified Party until paid by Companies, be added to the
Liabilities of Borrowers and be secured by the Collateral. The provisions of
this paragraph 15 shall survive the satisfaction and payment of the other
Liabilities and the termination of this Agreement.
16. NOTICE. Any notice required or desired to be served, given or delivered
hereunder shall be in writing (including facsimile transmission), and such
notice and other written communications shall be deemed to have been validly
served, given or delivered
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upon the earlier of (a) personal delivery to the address set forth below, (b) in
the case of mailed notice and other written communications, three (3) days after
deposit in the United States mails, with proper postage for certified mail,
return receipt requested, prepaid, or in the case of notice and other written
communications by Federal Express or other reputable overnight courier service,
one (1) Business Day after delivery to such courier service, and (c) in the case
of facsimile transmission, upon transmission with confirmation of receipt with
additional notice by Federal Express or other reputable overnight courier
service, in any such case addressed to the party to be notified as follows: (i)
in the case of Agent and LaSalle shall be sent to it at 135 South LaSalle
Street, Chicago, Illinois 60603, Attention: Asset Based Lending Division,
facsimile number (312) 750-6450, (ii) in the case of any Lender other than
LaSalle, shall be sent to it at the address identified on the signature page
hereto or in the Assignment and Assumption Agreement with such Lender and (iii)
in the case of each Company shall be sent to it at its principal place of
business set forth on the first page of this Agreement, facsimile number (516)
435-8980.
17. JOINT AND SEVERAL LIABILITY.
(a) Notwithstanding anything to the contrary contained herein, all
Liabilities of each Borrower hereunder shall be joint and several (but without
duplication) obligations of Borrowers.
(b) Notwithstanding any provisions of this Agreement to the contrary, it is
intended that the joint and several nature of the Liabilities of Borrowers and
the liens and security interests granted by Borrowers to secure the Liabilities,
not constitute a "Fraudulent Conveyance" (as defined below). Consequently,
Agent, Lenders and Borrowers agree that if the Liabilities of such Borrower, or
any liens or security interests granted by such Borrower securing the
Liabilities would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Liabilities of such Borrower and the liens and
security interests securing such Liabilities shall be valid and enforceable only
to the maximum extent that would not cause such Liabilities or such lien or
security interest to constitute a Fraudulent Conveyance, and the Liabilities of
such Borrower and this Agreement shall automatically be deemed to have been
amended accordingly. For purposes hereof, "Fraudulent Conveyance": means a
fraudulent conveyance under Section 548 of Chapter 11 of Title II of the United
States Code (11 U.S.C. ss. 101, et seq.), as amended (the "Bankruptcy Code") or
a fraudulent conveyance or fraudulent transfer under the applicable provisions
of any fraudulent conveyance or fraudulent transfer law or similar law of any
state, nation or other governmental unit, as in effect from time to time.
(c) Each Borrower assumes responsibility for keeping itself informed of the
financial condition of the other Borrowers, and any and all endorsers and/or
guarantors of any instrument or document evidencing all or any part of such
other Borrower's Liabilities and of all other circumstances bearing upon the
risk of nonpayment by such other Borrowers of their Liabilities and each
Borrower agrees that neither Agent nor any Lender shall have any duty to advise
such Borrower of information known to Agent or such Lender regarding
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<PAGE>
such condition or any such circumstances or to undertake any investigation not a
part of its regular business routine. If Agent or any Lender, in its sole
discretion, undertakes at any time or from time to time to provide any such
information to a Borrower, neither Agent nor such Lender shall be under any
obligation to update any such information or to provide any such information to
such Borrower on any subsequent occasion.
(d) Subject to the terms and conditions of this Agreement, Agent and
Lenders are hereby authorized, without notice or demand and without affecting
the liability of any Borrower hereunder, to, at any time and from time to time,
(i) renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to a Borrower's Liabilities or otherwise modify, amend or
change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by a Borrower and delivered to Agent and/or
Lenders; (ii) accept partial payments on a Borrower's Liabilities; (iii) take
and hold security or collateral for the payment of a Borrower's Liabilities
hereunder or for the payment of any guaranties of a Borrower's Liabilities or
other liabilities of a Borrower and exchange, enforce, waive and release any
such security or collateral; (iv) apply such security or collateral and direct
the order or manner of sale thereof as Agent in its sole discretion may
determine; and (v) settle, release, compromise, collect or otherwise liquidate a
Borrower's Liabilities and any security or collateral therefor in any manner,
without affecting or impairing the obligations of the other Borrowers. Agent
shall have the exclusive right to determine the time and manner of application
of any payments or credits, whether received from a Borrower or any other
source, and such determination shall be binding on such Borrower. All such
payments and credits may be applied, reversed and reapplied, in whole or in
part, to any of a Borrower's Liabilities as Agent shall determine in its sole
discretion without affecting the validity or enforceability of the Liabilities
of the other Borrowers.
(e) Each Borrower hereby agrees that, except as hereinafter provided, its
obligations hereunder shall be unconditional, irrespective of (i) the absence of
any attempt to collect a Borrower's Liabilities from any Borrower or any
guarantor or other action to enforce the same, (ii) the waiver or consent by
Agent, the Requisite Lenders and/or Lenders with respect to any provision of any
instrument evidencing Borrowers' Liabilities, or any part thereof, or any other
agreement heretofore, now or hereafter executed by a Borrower and delivered to
Agent and/or any Lender, (iii) failure by Agent or any Lender to take any steps
to perfect and maintain its security interest in, or to preserve its rights to,
any security or collateral for Borrowers' Liabilities (iv) the institution of
any proceeding under the Bankruptcy Code, or any similar proceeding, by or
against a Borrower or Agent's election in any such proceeding of the application
of Section 1111(b)(2) of the Bankruptcy Code, (v) any borrowing or grant of a
security interest by any Borrower as debtor-in-possession, under Section 364 of
the Bankruptcy Code, (vi) the disallowance, under Section 502 of the Bankruptcy
Code, of all or any portion of Agent's and/or any Lender's claim(s) for
repayment of any of Borrowers' Liabilities, or (vii) any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
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(f) No payment made by or for the account of a Borrower including, without
limitation, (i) a payment made by such Borrower on behalf of another Borrower's
Liabilities or (ii) a payment made by any other person under any guaranty, shall
entitle such Borrower, by subrogation or otherwise, to any payment from such
other Borrower or from or out of such other Borrower's property and such
Borrower shall not exercise any right or remedy against such other Borrower or
any property of such other Borrower by reason of any performance of such
Borrower of its joint and several obligations hereunder.
18. EFFECT OF AMENDMENT AND RESTATEMENT. Upon the date of this Agreement,
the Original Loan Agreements (and, except as otherwise set forth in the
following proviso, all obligations and rights of any party thereunder), shall be
amended and restated by this Agreement; provided, however, that the obligations
to repay the loans and advances arising under the Original Loan Agreements shall
continue in full force and effect and the liens and security interests securing
payment thereof shall be continuing but shall now be governed by the terms of
this Agreement and the Other Agreements. No action or inaction by Agent or
Lender prior to the date of this Agreement shall be deemed to have established a
course of conduct among the parties hereto. All rights and obligations of
Companies, Agent and Lenders shall be solely as set forth in this Agreement and
the Other Agreements.
19. CAPITAL ADEQUACY. If after the date hereof, either (i) any change in or
in the interpretation of any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Agent, any
Lender or any other banking or financial institution from whom the Agent or any
of the Lenders borrow funds or obtain credit (a "Funding Bank"), or (ii) a
Funding Bank or any of the Lenders complies with any future guideline or request
from any central bank or other governmental authority or (iii) a Funding Bank or
any of the Lenders determines that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof has or would have the effect described below, or a
Funding Bank or any of the Lenders complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on any of the
Lenders' capital as a consequence of its obligations hereunder to a level below
that which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration the Funding Bank's or Lenders' policies
with respect to capital adequacy) by an amount deemed by such Lender to be
material, and any of the foregoing events described in clauses (i), (ii) or
(iii) increases the cost to Agent, the Issuing Bank or any of the Lenders of (A)
funding or maintaining the Loans or (B) issuing, making or maintaining any
Letter of Credit or of purchasing or maintaining any participation or
subparticipation therein, or reduces the amount receivable in respect thereof by
Agent or any Lender, then Borrowers shall upon demand by Agent, pay to
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<PAGE>
Agent, for the account of each applicable Lender, additional amounts sufficient
to indemnify the Lenders against such increase in cost or reduction in amount
receivable. A certificate as to the amount of such increased cost and setting
forth in reasonable detail the calculation thereof shall be submitted to
Borrowers by the applicable Lender, and shall be conclusive absent manifest
error.
20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement
and the Other Agreements are submitted by each Company to Agent and each Lender
for Agent's and such Lender's acceptance or rejection at Agent's principal place
of business as an offer by each Borrower to borrow monies from Agent and Lenders
now and from time to time hereafter, and shall not be binding upon Agent and
Lenders or become effective until accepted by Agent and Lenders, in writing, at
said place of business. If so accepted by Agent and Lenders, this Agreement and
the Other Agreements shall be deemed to have been made at said place of
business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS,
INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL
LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If
any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
To induce Agent and Lenders to accept this Agreement, each Company
irrevocably agrees that, subject to Agent's sole and absolute election, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR
RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
EACH COMPANY HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE
OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. Each Company hereby
irrevocably appoints and designates the Secretary of State of Illinois, whose
address is Springfield, Illinois (or any other person having and maintaining a
place of business in such state whom such Company may from time to time
hereafter designate upon ten (10) days written notice to Agent and who Agent has
agreed in its sole discretion in writing is satisfactory and who has executed an
agreement in form and substance satisfactory to Agent agreeing to act as such
attorney and agent), as such Company's true and lawful attorney and duly
authorized agent for acceptance of service of legal process. Each Company agrees
that service of such process upon such person shall constitute personal
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service of such process upon such Borrower. Agent agrees to endeavor to provide
a copy of such process to the law firm of Mandel & Resnik, P.C., Attention:
Nicholas Kaiser, Esq., by mail at the mailing address of 220 East 42nd Street,
20th Floor, New York, New York 10017 or by facsimile transmission at facsimile
number (212) 573-0067. Failure of Agent to provide a copy of such process shall
not impair Agent's rights herewith. EACH COMPANY HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH
BORROWER BY AGENT IN ACCORDANCE WITH THIS PARAGRAPH.
21. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
22. POWER OF ATTORNEY. Each Company acknowledges and agrees that its
appointment of Agent as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Liabilities are satisfied and paid in full and
this Agreement is terminated.
23. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) EACH COMPANY, AGENT AND EACH LENDER HEREBY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL,
ANY ALLEGED TORTIOUS CONDUCT BY ANY COMPANY, AGENT OR ANY LENDER OR WHICH, IN
ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN EACH COMPANY AND AGENT OR ANY LENDER. IN NO EVENT SHALL AGENT OR ANY
LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Each Company hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY AGENT OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
SUCH BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL.
(d) Agent's and Lenders' failure, at any time or times hereafter, to
require strict performance by Companies of any provision of this Agreement or
any of the Other Agreements shall not waive, affect or diminish any right of
Agent or Lenders thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Agent or Lenders of an Event of Default
under this Agreement or any default under any of the Other
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Agreements shall not suspend, waive or affect any other Event of Default under
this Agreement or any other default under any of the Other Agreements, whether
the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of Agent or Lenders in the
exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Companies contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Agent
or Lenders unless such suspension or waiver is in writing, signed by a duly
authorized officer of all Lenders (or such lesser number of Lenders as required
under this Agreement) and directed to the Representative Company specifying such
suspension or waiver.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the 9th day of July, 1999.
<TABLE>
<S> <C>
AMERICAN TISSUE CORPORATION LASALLE BANK NATIONAL ASSOCIATION, as Agent
and a Lender
By /s/ Frank DiMaio By /s/ Christopher Clifford
---------------------------------------- ----------------------------------------
Title Asst Sec Title SVP
Maximum Loan Amount: $45,000,000
AMERICAN TISSUE MILLS OF OREGON, INC. FLEET CAPITAL CORPORATION, as a Lender
By /s/ Frank DiMaio By /s/ [ILLEGIBLE]
---------------------------------------- ----------------------------------------
Its Asst Sec Title SVP
Maximum Loan Amount: $35,000,000
AMERICAN TISSUE MILLS OF NEENAH LLC FINOVA CAPITAL CORPORATION, as a Lender
By /s/ Frank DiMaio By /s/ [ILLEGIBLE]
---------------------------------------- ----------------------------------------
Its Asst Sec Title SVP
Maximum Loan Amount: $20,000,000
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
</TABLE>
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AMERICAN TISSUE MILLS OF NEW YORK, INC.
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
AMERICAN TISSUE MILLS OF GREENWICH LLC
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
CALEXICO TISSUE COMPANY LLC
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
PULP & PAPER OF AMERICA LLC
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
PULP OF AMERICA LLC
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
PAPER OF AMERICA LLC
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
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AMERICAN TISSUE INC., as the Representative
Company
By /s/ Frank DiMaio
----------------------------------------
Title Asst Sec
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================================================================================
EXISTING LIEN INTERCREDITOR AGREEMENT
Dated as of July 9, 1999
----------------------
LASALLE BANK NATIONAL ASSOCIATION,
BANK UNITED,
THE ROSLYN SAVINGS BANK,
THE CHASE MANHATTAN BANK,
as Trustee,
AMERICAN TISSUE INC.
and
THE SUBSIDIARY GUARANTORS PARTY HERETO
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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RECITALS..................................................................................1
AGREEMENT.................................................................................2
ARTICLE I. DEFINITIONS................................................................3
Section 1.1. Definitions.............................................................3
Section 1.2. Interpretation.........................................................14
Section 1.3. Resolution of Drafting Ambiguities.....................................14
ARTICLE II. INTERCREDITOR PROVISIONS..................................................14
Section 2.1. Acknowledgment and Consent; Lien Priorities............................14
(a) Acknowledgment and Consent......................................15
(b) Lien Priorities.................................................15
Section 2.2. Distribution of Proceeds of Collateral.................................17
Section 2.3. Enforcement Actions....................................................18
Section 2.4. Accountings............................................................19
Section 2.5. Notices of Default.....................................................20
Section 2.6. Agent for Perfection...................................................20
Section 2.7. Action upon Repayment or Other Satisfaction of any of the
Secured Obligations..................................................20
Section 2.8. Insurance..............................................................20
Section 2.9. UCC Notices............................................................21
Section 2.10. Rights of Secured Parties Upon an Event of Default.....................21
Section 2.11. Permitted ARL Refinancing..............................................21
Section 2.12. Roslyn Foreclosure.....................................................21
Section 2.13. Existing Mortgage Lender Rights........................................21
Section 2.14. Regarding Trustee......................................................22
ARTICLE III. MISCELLANEOUS.............................................................22
Section 3.1. Notices................................................................22
Section 3.2. Contesting Liens.......................................................24
Section 3.3. Binding Agreement; Assignment; Obligations Several.....................24
Section 3.4. No Additional Rights for Pledgors Hereunder............................25
Section 3.5. Independent Credit Investigations......................................25
Section 3.6. Limitation of Liability................................................25
Section 3.7. Amendments to Financing Arrangements or to this Agreement..............25
Section 3.8. Marshalling of Assets..................................................26
Section 3.9. GOVERNING LAW..........................................................26
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Section 3.10. WAIVER OF JURY TRIAL...................................................26
Section 3.11. Information............................................................26
Section 3.12. Insolvency.............................................................26
Section 3.13. Inconsistent Provisions................................................27
Section 3.14. Severability...........................................................27
Section 3.15. Headings...............................................................27
Section 3.16. Counterparts...........................................................27
Section 3.17. Authority..............................................................27
Section 3.18. Execution by Pledgors..................................................27
Section 3.19. Covenants to Run with the Real Property................................28
</TABLE>
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EXISTING LIEN INTERCREDITOR AGREEMENT
EXISTING LIEN INTERCREDITOR AGREEMENT, dated as of July 9, 1999
(the "Agreement"), by and among AMERICAN TISSUE INC., a Delaware corporation
having an address at 135 Engineers Road, Hauppauge, New York 11788 (together
with its successors and assigns, the "Company"), each other company listed on
the signature pages hereto or from time to time party hereto by execution of a
joinder agreement (collectively, the "Subsidiary Guarantors"; together with the
Company, the "Pledgors"), LASALLE BANK NATIONAL ASSOCIATION, a national banking
association, as agent for itself and each other lender from time to time a party
to the LaSalle Agreement (as hereinafter defined) having an address at 135 South
LaSalle Street, Chicago, Illinois 60603 (together with its successors and
assigns, "LaSalle"), BANK UNITED, a federal savings bank having an address at
3200 Southwest Freeway, Houston, Texas 77027 (together with its successors and
assigns, "Bank United"), THE ROSLYN SAVINGS BANK, a New York banking corporation
having an address at 1400 Old Northern Boulevard, Roslyn, New York 11576
(together with its successors and assigns, "Roslyn"; together with Bank United,
the "Existing Mortgage Lenders"), those parties who in the future become ARL
Refinancing Lenders (as hereinafter defined), such other parties as may from
time to time became party hereto by execution of a Joinder Agreement (as
hereinafter defined) and THE CHASE MANHATTAN BANK, a New York banking
corporation having an address at 450 West 33rd Street, New York, New York 10001,
solely as trustee (together with any successors or assigns in such capacity, the
"Trustee") for the holders (collectively, the "Noteholders") from time to time
of the Notes (as hereinafter defined) of the Company issued pursuant to the
Indenture (as hereinafter defined).
R E C I T A L S :
A. Contemporaneously with the execution and delivery of this Agreement, the
Pledgors and the Trustee have entered into a certain indenture, dated as of July
9, 1999 (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Indenture"), pursuant to which the Company has issued
its senior secured notes due July 15, 2006 (the "Senior Secured Notes") in the
aggregate principal amount of $165,000,000. It is contemplated that the Company
may, after the date hereof, issue exchange notes pursuant to the Indenture
("Exchange Notes"; together with the Senior Secured Notes, the "Notes").
B. Contemporaneously with the execution of this Agreement, the Pledgors and
the Trustee are executing and delivering the Noteholder Collateral Documents (as
hereinafter defined) pursuant to which the Pledgors are granting a lien in and
security interest on the Collateral (as hereinafter defined) in favor of the
Trustee for its benefit and for the benefit of the holders of the Notes with the
priority set forth herein.
C. As of the date hereof, the following Subsidiary Guarantors have entered
into the following mortgage financing arrangements: (i) on June 21, 1998 each of
Coram Realty LLC ("Coram LLC"), Engineers Road, LLC ("Engineers LLC"),
Huntington LLC ("Huntington LLC") and Gilpin Realty Corp. ("Gilpin Corp.")
executed a consolidated mortgage note in the amount of
<PAGE>
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$14,325,000 in favor of Roslyn (the "Rosyln Note"), which is secured by a
consolidated mortgage of even date therewith (the "Rosyln Mortgage") encumbering
the Roslyn Collateral (as hereinafter defined), (ii) on December 24, 1997
Saratoga Realty LLC ("Saratoga LLC") executed a consolidated mortgage note in
the amount of $2,850,000 in favor of Bank United (the "Saratoga Note"), which is
secured by a consolidated mortgage of even date therewith (the "Saratoga
Mortgage") encumbering the Saratoga Collateral (as hereinafter defined), (iii)
on October 15, 1997 Grand LLC ("Grand LLC") executed a consolidated mortgage
note in the amount of $6,500,000 in favor of Bank United (the "Grand Note"),
which is secured by a consolidated mortgage of even date therewith (the "Grand
Mortgage") encumbering the Grand Collateral (as hereinafter defined), (iv) on
April 15, 1999 Calexico Tissue Company LLC ("Calexico LLC") executed a mortgage
note in the amount of $4,000,000 in favor of Bank United (the "Calexico Parcel
Six Note"), which is secured by a deed of trust of even date therewith (the
"Calexico Parcel Six Deed of Trust") encumbering the Calexico Parcel Six
Collateral (as hereinafter defined) and (v) on April 1, 1997 (A) Calexico LLC
and CRA (as hereinafter defined) executed a loan agreement (the "CRA Loan
Agreement"), (B) Calexico LLC executed in favor of CRA an agency loan promissory
note in the amount of $166,000 (the "CRA Agency Note"), which is secured by an
agency loan deed of trust (the "CRA Agency Deed of Trust") encumbering the
Calexico Parcel Six Collateral and (C) Calexico LLC executed in favor of CRA a
reimbursement promissory note in the amount of $284,000 (the "CRA Reimbursement
Note"; together with the CRA Agency Note, the "CRA Notes"), which is secured by
a reimbursement deed of trust (the "CRA Reimbursement Deed of Trust"; together
with the CRA Agency Deed of Trust, the "CRA Deeds of Trust") encumbering the
Calexico Parcel Six Collateral.
D. Pursuant to that certain amended and restated loan and security
agreement, dated as of July 9, 1999, among certain of the Pledgors, LaSalle and
the other lenders from time to time a party thereto (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "LaSalle
Agreement"), LaSalle has agreed to make certain loans and advances from time to
time to or for the account of the Pledgors, which loans and advances are secured
by a lien and security interest in the Collateral in favor of LaSalle with the
priority set forth herein.
E. The Trustee, LaSalle and each Existing Mortgage Lender desire to enter
into this Agreement to reflect the relative priorities of their respective
security interests in and liens on the Collateral in which each such party has
an interest and certain other rights, priorities and interests under the
Indenture, the Noteholder Collateral Documents (as hereinafter defined), the
Existing Mortgage Documents (as hereinafter defined), the LaSalle Agreement, the
LaSalle Collateral Documents (as hereinafter defined), the ARL Refinancing
Agreement (as hereinafter defined) and the ARL Refinancing Collateral Documents
(as hereinafter defined).
A G R E E M E N T:
In consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
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ARTICLE I. DEFINITIONS
Section 1.1. Definitions. As used in this agreement, the following terms
shall have the meanings specified below:
"Accounts" shall mean, collectively, with respect to each Pledgor, all
"accounts" (as such term is defined in the UCC).
"Acquisition Document Rights" shall mean, with respect to each Pledgor,
collectively, all of such Pledgor's presently existing or hereafter arising
rights, title and interest in, to and under the Acquisition Documents,
including, without limitation, (i) all rights and remedies relating to monetary
damages, including indemnification rights and remedies, and claims for damages
or other relief pursuant to or in respect of the Acquisition Documents, (ii) all
rights and remedies relating to monetary damages, including indemnification
rights and remedies, and claims for monetary damages under or in respect of the
agreements, documents and instruments referred to in the Acquisition Documents
or related thereto and (iii) all proceeds, collections, recoveries and rights of
subrogation relating to the foregoing.
"Acquisition Documents" shall have the meaning assigned to such term in the
Noteholder Security Agreement as such term is defined on the date hereof.
"Agreement" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"ARL Refinancing Agreement" shall mean the agreement among the ARL
Refinancing Lenders and the Pledgors governing any ARL Refinancing Indebtedness.
"ARL Refinancing Collateral" shall mean any and all of the LaSalle
Collateral secured by the ARL Collateral Documents.
"ARL Refinancing Collateral Documents" shall mean the agreement(s) and
instrument(s) evidencing or creating any Lien on all or any portion of the
Collateral in favor of any ARL Refinancing Lenders securing the ARL Refinancing
Secured Obligations.
"ARL Refinancing Indebtedness" means the Permitted Refinancing Indebtedness
of each Pledgor to the extent the proceeds thereof are used to refinance
(whether by amendment, assignment, renewal, extension or refunding) in full all
outstanding indebtedness under the LaSalle Agreement; provided, however, that
such indebtedness shall be secured by Liens solely on the LaSalle Collateral and
shall have the same priority as the Liens in favor of LaSalle contemplated
herein.
"ARL Refinancing Lenders" means, collectively, each of the persons, and any
duly authorized agent or representative of such persons, that hold the ARL
Refinancing Indebtedness.
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"ARL Refinancing Secured Obligations" shall mean, collectively, any and all
obligations of any kind whatsoever of Pledgor set forth in the ARL Refinancing
Agreement and the ARL Collateral Documents, including, without limitation, all
sums loaned, advanced to or for the benefit of such Pledgor at any time, any
interest thereon, any future advances, any costs of collection or enforcement,
reasonable attorneys' and paralegals' costs and fees and any prepayment fees
with respect thereto.
"Bank United" shall have the meaning assigned to such term in the Preamble
of this Agreement.
"Bank United Collateral" shall mean, collectively, whether now owned or
hereafter acquired, (i) the Bank United Property and the Existing Mortgage
Equipment located at the Bank United Property, (ii) the Existing Mortgage UCC
Documents to the extent relating thereto, (iii) the Existing Mortgage
Intangibles to the extent relating thereto and (iv) any and all Proceeds of any
of the foregoing.
"Bank United Property" shall mean, collectively, the Grand Property and the
Saratoga Property.
"Bank United Secured Obligations" shall mean all obligations of any kind of
any Pledgor set forth in the Saratoga Documents and the Grand Documents,
including, without limitation, all sums loaned, advanced to or for the benefit
of such Pledgor at any time, any interest thereon, any future advances, any
costs of collection or enforcement, reasonable attorneys' and paralegals' costs
and fees and any prepayment fees with respect thereto.
"Berlin-Gorham Property" shall mean the Real Property commonly known as 650
Main Street, Berlin & Gorham, New Hampshire, as more particularly described on
Schedule A annexed hereto.
"Calexico Documents" shall mean, collectively, (i) the Calexico Parcel Six
Note and any other agreement or instrument governing the obligations of Calexico
LLC to Bank United, (ii) the Calexico Parcel Six Deed of Trust and (iii) all
security agreements, mortgages, deeds of trust, pledges, collateral assignments
and other instruments evidencing or creating any security interest in favor of
Bank United in the Calexico Parcel Six Collateral, in each case as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with their terms and the terms of this Agreement.
"Calexico LLC" shall have the meaning assigned to such term in Recital C of
this Agreement.
"Calexico Parcel Six Collateral" shall mean, collectively, (i) the Calexico
Parcel Six Property and the Existing Mortgage Equipment located at such Calexico
Parcel Six Property, (ii) the Existing Mortgage UCC Documents to the extent
relating thereto, (iii) the Existing Mortgage Intangibles to the extent relating
thereto and (iv) any and all Proceeds of any of the foregoing.
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"Calexico Parcel Six Property" shall mean that portion of the Calexico
Property known as Parcel 6 of the Kloke Tract. "Calexico Property" shall mean
the Real Property located at 2361 Portico Boulevard, also known as Parcels 5 & 6
of the Kloke Tract, Calexico, California, as more particularly described on
Schedule L annexed hereto.
"Cash" shall mean, collectively, with respect to each Pledgor, the cash,
deposit accounts and collection accounts of such Pledgor wherever located, other
than the Collateral Account and Collateral Account Funds.
"Cash Equivalents" shall have the meaning assigned to such term in the
Indenture as such term is defined on the date hereof.
"Chattel Paper" shall mean, collectively, with respect to each Pledgor, all
"chattel paper," as such term is defined in the UCC.
"Collateral" shall mean, collectively, the Noteholder Collateral, the
Existing Mortgage Collateral, the LaSalle Collateral and the ARL Refinancing
Collateral, if any.
"Collateral Account" shall have the meaning assigned to such term in the
Indenture as such term is defined on the date hereof.
"Collateral Account Funds" shall mean, collectively, (i) all funds from
time to time on deposit in the Collateral Account, (ii) all investments
(including, without limitation, Cash Equivalents) and all certificates and
instruments from time to time representing or evidencing such investments, (iii)
all notes, certificates of deposit, checks and other instruments from time to
time hereafter delivered to or otherwise possessed by the Trustee for or on
behalf of any Pledgor in substitution for, or in addition to, any or all of the
Noteholder Collateral and (iv) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the items constituting Noteholder
Collateral.
"Collateral Documents" shall mean, collectively, the Noteholder Collateral
Documents, the Existing Mortgage Documents, the LaSalle Collateral Documents and
the ARL Collateral Documents, if any.
"Company" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"Coram LLC" shall have the meaning assigned to such term in Recital C of
this Agreement.
"CRA" shall mean the Community Redevelopment Agency of the City of
Calexico, a public body, corporate and politic, organized and existing under
laws of the State of California having an address at 608 Heber Avenue, Calexico,
California 92231, together with its successors and assigns.
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"CRA Agency Deed of Trust" shall have the meaning assigned to such term in
Recital C of this Agreement.
"CRA Agency Note" shall have the meaning assigned to such term in Recital C
of this Agreement.
"CRA Deeds of Trust" shall have the meaning assigned to such term in
Recital C of this Agreement.
"CRA Loan Agreement" shall have the meaning assigned to such term in
Recital C of this Agreement.
"CRA Notes" shall have the meaning assigned to such term in Recital C of
this Agreement.
"CRA Reimbursement Deed of Trust" shall have the meaning assigned to such
term in Recital C of this Agreement.
"CRA Reimbursement Note" shall have the meaning assigned to such term in
Recital C of this Agreement.
"Debt Instruments" shall mean, collectively, the Indenture, the Notes, the
Noteholder Collateral Documents, the Existing Mortgage Documents, the LaSalle
Agreement, the LaSalle Collateral Documents, any ARL Refinancing Agreement, any
ARL Refinancing Collateral Documents.
"Distributions" shall mean, collectively, with respect to each Pledgor, all
dividends, cash, options, warrants, rights, instruments, distributions, returns
of capital or principal, income, interest, profits and other property, interests
(debt or equity) or proceeds, including as a result of a split, revision,
reclassification or other like change of the Pledged Securities, from time to
time received, receivable or otherwise distributed to such Pledgor in respect of
or in exchange for any or all of the Pledged Securities.
"Enforcement" shall mean, collectively or individually, for any Secured
Party, to make demand for payment or accelerate the indebtedness of any Pledgor
(other than any acceleration which may occur automatically upon the filing of a
bankruptcy petition by the Pledgors) held by such Secured Party, repossess any
Collateral or commence the judicial or other enforcement of any of the rights
and remedies of any such Secured Party under the applicable Debt Instrument or
any related mortgages, guaranties or agreements or under applicable law.
"Enforcement Notice" shall mean a written notice delivered, at a time when
an Event of Default has occurred and is continuing, by either the Trustee, the
applicable Existing Mortgage Lender or LaSalle to the other Secured Parties
announcing that it has commenced Enforcement with respect to any of its rights
and remedies and that an Enforcement Period has commenced, specifying the
relevant Event of Default, stating the current amount then outstanding of the
Noteholder Secured Obligations, applicable Existing Mortgage Secured Obligations
or LaSalle Secured Obligations, as
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applicable, and requesting a statement for the current amount then outstanding
from the others' secured obligations.
"Enforcement Period" shall mean the period of time following the giving by
a Secured Party of an Enforcement Notice to the other Secured Parties until (i)
the final payment or satisfaction in full of the Noteholder Secured Obligations
or the LaSalle Secured Obligations and any then outstanding Existing Mortgage
Secured Obligations or (ii) the Trustee, any then outstanding Existing Mortgage
Lender and LaSalle agree in writing to terminate the Enforcement Period.
"Engineers LLC" shall have the meaning assigned to such term in Recital C
of this Agreement.
"Equipment" shall mean, collectively, with respect to each Pledgor, all
"equipment" (as such term is defined in the UCC) and all other machinery,
apparatus, equipment, office machinery, electronic data-processing equipment,
computers and computer hardware and software (whether owned or licensed),
furniture, conveyors, tools, materials, storage and handling equipment,
automotive equipment, motor vehicles, tractors, trailers and other like
property, whether or not the title thereto is governed by a certificate of title
or ownership, and all other equipment of every kind and nature owned by such
Pledgor or in which such Pledgor may have any interest (to the extent of such
interest) and all modifications, renewals, improvements, alterations, repairs,
substitutions, attachments, additions, accessions and other property now or
hereafter affixed thereto or used in connection therewith, all replacements and
all parts therefor and together with all substitutes for any of the foregoing.
"Event of Default" shall have the meaning assigned to such term in the
Indenture, the LaSalle Agreement or any of the Existing Mortgage Documents, as
the case may be.
"Existing Mortgage Collateral" shall mean, collectively, the Bank United
Collateral and the Roslyn Collateral.
"Existing Mortgage Documents" shall mean, collectively, the Roslyn
Documents, the Saratoga Documents and the Grand Documents.
"Existing Mortgage Equipment" shall mean the Equipment encumbered by the
Existing Mortgage Documents.
"Existing Mortgage Intangibles" shall mean, collectively, with respect to
each Pledgor, all "general intangibles" (as such term is defined in the UCC) of
such Pledgor relating to any of the Existing Mortgage Collateral.
"Existing Mortgage Lenders" shall have the meaning assigned to such term in
the Preamble of this Agreement.
"Existing Mortgage Secured Obligations" shall mean, collectively, the Bank
United Secured Obligations and the Roslyn Secured Obligations.
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"Existing Mortgage UCC Documents" shall mean, collectively, with respect to
each Pledgor, all "documents" (as such term is defined in the UCC) of such
Pledgor relating to any of the Existing Mortgage Collateral, and in any event
shall include, without limitation, all receipts of such Pledgor covering,
evidencing or representing Existing Mortgage Equipment.
"Gilpin Corp." shall have the meaning assigned to such term in Recital C of
this Agreement.
"Governmental Authority" shall mean any Federal, state, local, foreign or
other governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission or other similar dispute-resolving
body including, without limitation, those governing the regulation and
protection of the environment.
"Grand Documents" shall mean, collectively, (i) the Grand Note and any
other agreement or instrument governing the obligations of Grand LLC to Bank
United, (ii) the Grand Mortgage and (iii) all security agreements, mortgages,
deeds of trust, pledges, collateral assignments and other instruments evidencing
or creating any security interest in favor of Bank United in that portion of the
Bank United Property pledged to Bank United by Grand, in each case as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with their terms and the terms of this Agreement.
"Grand LLC" shall have the meaning assigned to such term in Recital C of
this Agreement.
"Grand Mortgage" shall have the meaning assigned to such term in Recital C
of this Agreement.
"Grand Note" shall have the meaning assigned to such term in Recital C of
this Agreement.
"Grand Property" shall mean the Real Property located at Route 4 and Bell's
Lane, Waterford, New York, as more particularly described on Schedule C annexed
hereto.
"Greenwich LLC" shall mean American Tissue Mills of Greenwich LLC.
"Greenwich Property" shall mean the Real Property located at Mill Road,
Greenwich, New York, as more particularly described on Schedule D annexed
hereto.
"Guarantees" shall have the meaning assigned to such term in the Indenture
as such term is defined on the date hereof.
"Halfmoon Property" shall mean the Real Property located at 418 and 420
Hudson River Road, Halfmoon, New York, as more particularly described on
Schedule E annexed hereto.
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"Huntington Collateral" shall mean, collectively, (i) the Real Property
located at 8 Arnold Drive, Huntington, New York, (ii) the equipment encumbered
by the Roslyn Documents which is located at such property, (iii) certain
documents (as defined in the UCC) encumbered by the Roslyn Documents to the
extent relating to such property, (iv) certain general intangibles (as defined
in the UCC) encumbered by the Roslyn Documents to the extent relating to such
property and (v) any and all Proceeds of any of the foregoing.
"Huntington LLC" shall have the meaning assigned to such term in Recital C
of this Agreement.
"Indenture" shall have the meaning assigned to such term in Recital A of
this Agreement.
"Instruments" shall mean, collectively, with respect to each Pledgor, all
"instruments" (as such term is defined in the UCC) of any Pledgor.
"Intellectual Property Collateral" shall have the meaning assigned to such
term in the Noteholder Security Agreement as such term is defined on the date
hereof.
"Inventory" shall mean, collectively, with respect to each Pledgor, all
"inventory" (as such term is defined in the UCC) of such Pledgor wherever
located and of every class, kind and description.
"Joinder Agreement" shall mean those certain joinder agreements and
amendment to existing lien intercreditor agreements attached hereto as Exhibit B
and Exhibit C.
"LaSalle" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"LaSalle Agreement" shall have the meaning assigned to such term in Recital
D of this Agreement.
"LaSalle Collateral" shall mean, collectively, whether now owned or
hereafter acquired, (i) the Accounts, (ii) the Inventory, (iii) the LaSalle
Intangibles, (iv) the LaSalle UCC Documents, (v) the Instruments (vi) the
Chattel Paper, (vii) the letters of credit of which any Pledgor is the
beneficiary, (viii) Proceeds of business interruption insurance with respect to
each Pledgor, (ix) the Acquisition Documents Rights relating to any LaSalle
Collateral acquired pursuant to the Acquisition Documents, (x) the Cash, (xi)
the books and records of each Pledgor relating to the LaSalle Collateral and
(xii) any and all Proceeds of any of the foregoing.
"LaSalle Collateral Documents" shall mean, collectively, (i) the LaSalle
Agreement and (ii) all security agreements, mortgages, deeds of trust, pledges,
collateral assignments and other instruments evidencing or creating any security
interest in favor of LaSalle in all or any portion of the Collateral, in each
case as amended, amended and restated, supplemented or otherwise modified from
time to time in accordance with their terms and the terms of this Agreement.
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"LaSalle Intangibles" shall mean "Secondary Intangibles" as such term is
defined in the Noteholders Security Agreement as such term is defined on the
date hereof.
"LaSalle Secured Obligations" shall mean all obligations of any kind
whatsoever of any Pledgor set forth in the LaSalle Agreement and the LaSalle
Collateral Documents, including, without limitation, all sums loaned, advanced
to or for the benefit of such Pledgor at any time, any interest thereon, any
future advances, any costs of collection or enforcement, reasonable attorneys'
and paralegals' costs and fees and any prepayment fees with respect thereto.
"LaSalle UCC Documents" shall mean, collectively, with respect to each
Pledgor, all "documents" (as such term is defined in the UCC) of such Pledgor,
relating to any of the LaSalle Collateral, and in any event, shall include,
without limitation, all receipts of such Pledgor covering, evidencing or
representing Inventory.
"Lien" shall have the meaning assigned to such term in the Indenture as
such term is defined on the date hereof.
"Mechanicville Property" shall mean the Real Property located at 510 South
Main Street, Mechanicville, New York, as more particularly described on Schedule
F annexed hereto.
"Miscellaneous Collateral" shall have the meaning assigned to such term in
the Noteholder Security Agreement.
"Neenah LLC" shall mean American Tissue Mills of Neenah LLC.
"Neenah Property" shall mean the Real Property located at 249 North Lake
Street, Neenah, Wisconsin, as more particularly described on Schedule G annexed
hereto.
"New Hampshire, Inc." shall mean American Tissue Mills of New Hampshire,
Inc.
"New York, Inc." shall mean American Tissue Mills of New York, Inc.
"Noteholder Collateral" shall mean, collectively, whether now owned or
hereafter acquired, (i) the Noteholder Property, (ii) the Noteholder Equipment,
(iii) the Noteholder Intangibles, (iv) the Pledged Securities, (v) the
Distributions, (vi) the Intellectual Property Collateral, (vii) the Noteholder
UCC Documents, (viii) the Acquisition Document Rights (other than the
Acquisition Documents Rights constituting a portion of the LaSalle Collateral),
(ix) the Collateral Account and the Collateral Account Funds, (x) the
Miscellaneous Collateral and (xi) any and all Proceeds of any of the foregoing.
"Noteholder Collateral Documents" shall mean, collectively, (i) the
Noteholder Security Agreement, (ii) the Noteholder Mortgages and (iii) all
security agreements, mortgages, deeds of trust, pledges, collateral assignments
and other instruments evidencing or creating any security interest in favor of
the Trustee in all or any portion of the Collateral, in each case as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with their terms.
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"Noteholder Equipment" shall mean any and all Equipment now owned or
hereafter acquired by any Pledgor, excluding the Existing Mortgage Equipment.
"Noteholder Intangibles" shall mean, all "Primary Intangibles" as such term
is defined in the Noteholder Security Agreement as such term is defined on the
date hereof.
"Noteholder Mortgages" shall mean any mortgage or deed of trust, as
applicable, dated as of the date hereof (i) executed by Pulp of America LLC,
Paper of America LLC, Landfill of America LLC, Crown Vantage-New Hampshire
Electric, Inc. and Berlin Mills Railway, Inc. in favor of the Trustee in respect
of the Berlin-Gorham Property, (ii) executed by New Hampshire, Inc. in favor of
the Trustee in respect of the Winchester Property, (iii) executed by Greenwich
LLC in favor of the Trustee, in respect of the Greenwich Property, (iv) New
York, Inc. in favor of the Trustee in respect of the Mechanicville Property, (v)
executed by Wisconsin, Inc. in favor of the Trustee in respect of the Tomahawk
Property and (vi) executed by Neenah LLC in favor of the Trustee in respect of
the Neenah Property.
"Noteholder Property" shall mean, collectively, the Berlin-Gorham Property,
the Winchester Property, the Greenwich Property, the Mechanicville Property, the
Tomahawk Property and the Neenah Property and all other Real Property excluding
any Existing Mortgage Collateral.
"Noteholder Secured Obligations" shall mean all obligations of any kind
whatsoever of each Pledgor in respect of the Notes, the Indenture, the
Guarantees and Noteholder Collateral Documents, including, without limitation,
all sums loaned, advanced to or for the benefit of such Pledgor at any time, any
interest thereon, any future advances, any costs of collection or enforcement,
reasonable attorneys' and paralegals' costs and fees and any prepayment fees
with respect thereto.
"Noteholder Security Agreement" shall mean that certain security agreement,
dated as of the date hereof, among the Pledgors and Trustee.
"Noteholder UCC Documents" shall mean, collectively, with respect to each
Pledgor, all "documents" (as such term is defined in the UCC) of such Pledgor
relating to any of the Noteholder Collateral, and in any event shall include,
without limitation, all receipts of such Pledgor covering, evidencing or
representing Noteholder Equipment.
"Noteholders" shall have the meaning assigned to such term in the Preamble
of this Agreement.
"Notes" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"Permitted Refinancing Indebtedness" shall have the meaning assigned to
such term in the Indenture.
"Person" shall have the meaning assigned to such term in the Indenture as
such term is defined on the date hereof.
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"Pledged Securities" shall have the meaning assigned to such term in the
Noteholder Security Agreement as such term is defined on the date hereof.
"Pledgors" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"Proceeds" shall mean all "proceeds" (as such term is defined in the UCC)
or under other relevant law, and in any event shall include, without limitation,
any and all (i) proceeds of any insurance (except payments made to a Person
which is not a party to this Agreement), indemnity, warranty, guaranty or claim
payable to any Secured Party or to such Pledgor from time to time with respect
to any of the Collateral, (ii) payments (in any form whatsoever) made or due and
payable to such Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting on behalf of a
Governmental Authority), (iii) instruments representing obligations to pay
amounts in respect of the Collateral, (iv) products of the Collateral and (v)
other amounts from time to time paid or payable under or in connection with any
of the Collateral.
"Real Property" means, collectively, whether now owned or hereafter
acquired, all estates, rights and interests of the Company and the other
applicable Pledgors in any and all real property, including, without limitation,
the real property described on Schedules A through K hereof, in each case,
together with (i) all appurtenances relating or appertaining thereto, (ii) all
existing buildings, structures and other improvements located or erected
thereon, (iii) Equipment which is affixed to such real property, or considered a
fixture or a part of such real property under applicable law and (iv) all
leases, licenses and occupancy and concession agreements in respect of such real
property and improvements located thereon and all rents, receipts, fees and
other amounts payable thereunder.
"Roslyn" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"Roslyn Collateral" shall mean, collectively, whether now owned or
hereafter acquired, (i) the Roslyn Property and the Existing Mortgage Equipment
located at the Roslyn Property, (ii) the Existing Mortgage UCC Documents to the
extent relating thereto, (iii) the Existing Mortgage Intangibles to the extent
relating thereto and (iv) any and all Proceeds of any of the foregoing.
"Roslyn Documents" shall mean, collectively, (i) the Roslyn Note and any
other agreement or instrument governing the obligations of Coram LLC, Engineers
LLC, Huntington LLC and Gilpin Corp. to Roslyn, (ii) the Roslyn Mortgage and
(iii) all security agreements, mortgages, deeds of trust, pledges, collateral
assignments and other instruments evidencing or creating any security interest
in favor of Roslyn in the Roslyn Collateral, in each case as amended, amended
and restated, supplemented or otherwise modified from time to time in accordance
with their terms and the terms of this Agreement.
"Roslyn Mortgage" shall have the meaning assigned to such term in Recital C
of this Agreement.
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"Roslyn Note" shall have the meaning assigned to such term in Recital C of
this Agreement.
"Roslyn Property" shall mean the Real Property located at (i) 466-468 Mill
Road, Coram, New York, (ii) 135 Engineers Road, Hauppauge, New York and (iii) 45
Gilpin Avenue, Hauppauge, New York, as more particularly described on Schedule H
annexed hereto.
"Roslyn Secured Obligations" shall mean all obligations of any kind
whatsoever of any Pledgor set forth in the Roslyn Documents, including, without
limitation, all sums loaned, advanced to or for the benefit of such Pledgor at
any time, any interest thereon, any future advances, any costs of collection or
enforcement, reasonable attorneys' and paralegals' costs and fees and any
prepayment fees with respect thereto.
"Saratoga Documents" shall mean, collectively, (i) the Saratoga Note and
any other agreement or instrument governing the obligations of Saratoga LLC to
Bank United, (ii) the Saratoga Mortgage and (iii) all security agreements,
mortgages, deeds of trust, pledges, collateral assignments and other instruments
evidencing or creating any security interest in favor of Bank United in that
portion of the Bank United Property pledged to Bank United by Saratoga, in each
case as amended, amended and restated, supplemented or otherwise modified from
time to time in accordance with their terms and the terms of this Agreement.
"Saratoga LLC" shall have the meaning assigned to such term in Recital C of
this Agreement.
"Saratoga Mortgage" shall have the meaning assigned to such term in Recital
C of this Agreement.
"Saratoga Note" shall have the meaning assigned to such term in Recital C
of this Agreement.
"Saratoga Property" shall mean the Real Property located at 3 Duplainville
Road, Saratoga, New York, as more particularly described on Schedule I annexed
hereto.
"Secured Obligations" shall mean, collectively, the Noteholder Secured
Obligations, the Existing Mortgage Secured Obligations, the LaSalle Secured
Obligations and the ARL Refinancing Secured Obligations, if any.
"Secured Party" shall mean each of the Trustee, any Existing Mortgage
Lender, LaSalle or the ARL Refinancing Lenders, as applicable.
"Subsidiary Guarantors" shall have the meaning assigned to such term in the
Preamble of this Agreement.
"Tomahawk Property" shall mean the Real Property located at 858 Leather
Avenue, Tomahawk, Wisconsin, as more particularly described on Schedule J
annexed hereto.
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"Trustee" shall have the meaning assigned to such term in the Preamble of
this Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in any applicable jurisdiction.
"Winchester Property" shall mean the Real Property located at 116 Lost
Road, Winchester, New Hampshire, as more particularly described on Schedule K
annexed hereto.
"Wisconsin, Inc." shall mean American Tissue Mills of Wisconsin, Inc.
Section 1.2. Interpretation. In this Agreement, unless otherwise specified,
(i) singular words include the plural and plural words include the singular,
(ii) words importing any gender include the other gender, (iii) references to
any Person include such Person's successors and assigns and in the case of an
individual, the word "successors" includes such Person's heirs, devisees,
legatees, executors, administrators and personal representatives, (iv)
references to any statute or other law include all applicable rules, regulations
and orders adopted or made thereunder and all statutes or other laws amending,
consolidating or replacing the statute or law referred to, (v) the words
"consent", "approve" and "agree", and derivations thereof or words of similar
import, mean the prior written consent, approval or agreement of the Person in
question, (vi) the words "include" and "including", and words of similar import,
shall be deemed to be followed by the words "without limitation", (vii) the
words "hereto", "herein", "hereof" and "hereunder", and words of similar import,
refer to this Agreement in its entirety, (viii) references to Articles,
Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the
Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses of
this Agreement, (ix) the Schedules and Exhibits to this Agreement are
incorporated herein by reference, (x) the titles and headings of Articles,
Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted
as a matter of convenience only and shall not affect the constructions of this
Agreement, and (xi) all obligations of each Pledgor hereunder shall be satisfied
by each Pledgor at each Pledgor's sole cost and expense.
Section 1.3. Resolution of Drafting Ambiguities. Each party hereto
acknowledges that it was represented by counsel in connection with this
Agreement, that it and its counsel reviewed and participated in the preparation
and negotiation of this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party (i.e., the
Trustee) shall not be employed in the interpretation of this Agreement.
ARTICLE II. INTERCREDITOR PROVISIONS
Section 2.1. Acknowledgment and Consent; Lien Priorities.
(a) Acknowledgment and Consent. Each Secured Party hereby acknowledges that
it has been granted a Lien upon some or all of the Collateral pursuant to
certain of the Collateral Documents in effect on the date hereof, true and
complete copies of which have been made available to
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each Secured Party. Each Secured Party hereby consents to the transaction
contemplated by this Agreement, including without limitation, the execution and
delivery of the Exhibits attached hereto, the Indenture, the Notes, the
Guarantees, the Noteholder Collateral Documents, the LaSalle Agreement and the
LaSalle Collateral Documents.
(b) Lien Priorities. Notwithstanding the order or time of attachment, or
the order, time or manner of perfection, or the order or time of filing or
recordation of any document or instrument, or other method of perfecting a Lien
in favor of any Secured Party in any of the Collateral, and notwithstanding any
provisions of the UCC or any other applicable law or decision or whether any
Secured Party holds possession of all or any part of the Collateral, or the
granting provisions of any mortgage, security instrument or the provisions of
any financing statement or any conflicting terms or conditions which may be
contained in any Debt Instrument, each Secured Party hereby acknowledges and
agrees to the Liens in favor of the Secured Parties set forth below and the
relative priorities thereof in respect of the following categories of Collateral
and that upon the sale or other disposition of the following items of Collateral
pursuant to any of the Collateral Documents, the proceeds of such sale or
disposition shall be delivered or distributed to the Secured Parties to the
extent any such Secured Party is secured by such category of Collateral in
accordance with the following priorities:
(i) with respect to the Noteholder Collateral:
FIRST: The Trustee, for itself and the Noteholders, with respect to
the Noteholder Secured Obligations, until satisfaction in
full of all such Noteholder Secured Obligations.
SECOND: LaSalle, with respect to the LaSalle Secured Obligations,
until satisfaction in full of all such LaSalle Secured
Obligations.
(ii) with respect to the Roslyn Collateral:
FIRST: Roslyn, with respect to the Roslyn Secured Obligations,
until satisfaction in full of all such Roslyn Secured
Obligations.
SECOND: The Trustee, for itself and the Noteholders, with respect to
the Noteholder Secured Obligations, until satisfaction in
full of all such Noteholder Secured Obligations.
THIRD: LaSalle, with respect to the LaSalle Secured Obligations,
until satisfaction of all such LaSalle Secured Obligations.
(iii) with respect to the Bank United Collateral:
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FIRST: Bank United, with respect to the Bank United Secured
Obligations, until satisfaction in full of all such Bank
United Secured Obligations.
SECOND: The Trustee, for itself and the Noteholders, with respect to
the Noteholder Secured Obligations, until satisfaction in
full of the Noteholder Secured Obligations.
THIRD: LaSalle, with respect to the LaSalle Secured Obligations,
until satisfaction in full of all such LaSalle Secured
Obligations.
(iv) with respect to the LaSalle Collateral:
FIRST: LaSalle, with respect to the LaSalle Secured Obligations,
until satisfaction in full of all such LaSalle Secured
Obligations.
SECOND: The Trustee, for itself and the Noteholders, with respect to
the Noteholder Secured Obligations, until satisfaction in
full of all such Noteholder Secured Obligations.
(c) The Lien priorities and provisions provided in Section 2.1(b) shall not
be altered or otherwise affected by any amendment, modification or supplement to
any Debt Instrument, nor by any action or inaction which any Secured Party may
take or fail to take in respect of the Collateral or otherwise.
(d) Each Secured Party shall be solely responsible for perfecting and
maintaining the perfection of its Lien in and to each item constituting the
Collateral in which such Secured Party has been granted a Lien pursuant to the
Collateral Documents.
(e) Each Secured Party agrees to execute and deliver to any other Secured
Party that makes a request therefor reasonable instruments of further assurance
to effect the Lien priorities referred to above and to fully effect the purpose
and intent of this Agreement.
(f) Notwithstanding anything to the contrary contained in any of the Debt
Instruments, as among the Secured Parties, the Secured Party who holds the first
priority Lien on any Collateral shall have the exclusive right to manage,
perform and enforce the terms of the Debt Instruments to which they are a party
with respect to all such Collateral, to exercise and enforce all privileges and
rights thereunder according to their discretion and the exercise of their
business judgment, including, without limitation, the exclusive right, as
against the other Secured Parties, to take or retake control or possession of
such Collateral and to hold, prepare for sale, process, sell, lease, dispose of,
or liquidate such Collateral.
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(g) Notwithstanding anything to the contrary contained in any of the Debt
Instruments or herein, only the Secured Party who holds the first priority Lien
on an item of Collateral shall have the right to restrict or permit, or approve
or disapprove, the sale, transfer, lease, liquidation or other disposition of
such Collateral. Upon any such sale, transfer, lease, liquidation or other
disposition of Collateral, the proceeds therefrom shall be distributed in
accordance with the provisions of Section 2.2 hereof. Each other Secured Party
shall, immediately upon the request of the Secured Party who holds the first
priority Lien on an item of Collateral, release or otherwise terminate its Liens
on any or all such Collateral to the extent such Collateral is sold or otherwise
disposed of either (i) by the Secured Party holding the first priority Lien on
such Collateral or its agents pursuant to the provision of the applicable Debt
Instrument or (ii) after an Event of Default under the Debt Instruments to which
such Secured Party is a party, by a Pledgor with the consent of such requesting
Secured Party; and each other Secured Party shall immediately deliver such
release documents as the Secured Party making the release request may require in
connection therewith.
(h) This Agreement shall not in any way limit or impair the right of any
Secured Party from (i) commencing, pursuing, discontinuing, settling or
compromising any legal action against Pledgors or any of them (A) seeking a
money judgment for payments owed under any Debt Instruments held by such Secured
Party, whether arising as a result of acceleration of maturity of such Debt
Instruments or otherwise, or (B) seeking declaratory or injunctive relief
against the Pledgors or any of them; (ii) commencing, pursuing, discontinuing,
settling or compromising any petition, action, suit or proceeding, howsoever
styled, relating to the Pledgors or any of them or any of the Debt Instruments
or holders thereof under any Bankruptcy Law; or (iii) bidding for and purchasing
Collateral at any private or judicial foreclosure upon such Collateral initiated
by any of the other Secured Parties, as permitted herein.
Section 2.2. Distribution of Proceeds of Collateral.
(a) At all times, including, without limitation, during any Enforcement
Period, all proceeds of Collateral shall be distributed in accordance with
Section 2.1(b).
(b) In the event that any Secured Party has a Lien on or right of setoff
against or possession of (i) any Collateral on which no other Secured Party has
a Lien, or (ii) any amount, other than identifiable cash proceeds of Collateral,
in any deposit account of any Pledgor, subject to the priority and other
provisions of this Agreement or (iii) following the filing of a bankruptcy
proceeding with respect to any Pledgor, any Collateral on which any of the
others has failed to perfect its Lien, then, in such case, the Secured Party
which has such Lien, setoff or possession shall use its reasonable best efforts
to enforce its rights with respect to such Collateral and to apply the proceeds
thereof to its claim, prior to a final application of the proceeds of other
Collateral.
(c) After the payment or other satisfaction in full of the Noteholder
Secured Obligations, the LaSalle Secured Obligations and each applicable
Existing Mortgage Secured Obligation, the balance of proceeds of Collateral, if
any, shall be paid to or at the discretion of the Pledgors or as otherwise
required by applicable law.
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Section 2.3. Enforcement Actions. Each Secured Party hereby agrees not to
commence Enforcement with respect to (i) the Indenture, the Notes, or Noteholder
Collateral Documents, (ii) the Existing Mortgage Documents and (iii) the LaSalle
Agreement or the LaSalle Collateral Documents, as applicable, until an
Enforcement Notice has been given to and received by the other Secured Parties.
Notwithstanding the generality of the foregoing pursuant to this Section 2.3,
each Secured Party agrees that during an Enforcement Period:
(a) The Trustee may, at its option, take any action to accelerate payment
of the Noteholder Secured Obligations and to foreclose or realize upon or
enforce any of its rights with respect to the Noteholder Collateral without the
prior written consent of LaSalle or any Existing Mortgage Lender; provided,
however, that the Trustee shall not take any action to foreclose or realize upon
or to enforce any of its rights with respect to the LaSalle Collateral or the
Existing Mortgage Collateral without the prior written consent of any Secured
Party that (i) has a Lien on such Collateral that is prior and superior to the
Lien of the Trustee thereon and (ii) with respect to such Lien, Secured
Obligations owing to such Secured Party then remain outstanding.
(b) Each Existing Mortgage Lender may, at its option, take any action to
accelerate payment of its respective Existing Mortgage Secured Obligations and
to foreclose or realize upon or enforce any of its rights with respect to its
portion of the Existing Mortgage Collateral without the prior written consent of
the Trustee or LaSalle. Each Existing Mortgage Lender agrees and acknowledges
that it shall have rights only with respect to its respective Existing Mortgage
Collateral as described herein and shall have no rights or claims with respect
to the Noteholder Collateral or the LaSalle Collateral except as provided for in
this Agreement.
(c) LaSalle may, at its option, take any action to accelerate payment of
the LaSalle Secured Obligations and to foreclose or realize upon or enforce any
of its rights with respect to the LaSalle Collateral, without the prior written
consent of the Trustee or any Existing Mortgage Lender; provided, however, that
LaSalle shall not take any action to foreclose or realize upon or to enforce any
of its rights with respect to the Noteholder Collateral or the Existing Mortgage
Collateral without the prior written consent of any Secured Party that (i) has a
Lien on such Collateral that is prior and superior to the Lien of LaSalle
thereon and (ii) with respect to such Lien, Secured Obligations owing to such
Secured Party then remain outstanding.
(d) If any Secured Party which elects to proceed with Enforcement under the
applicable Debt Instrument held by such Secured Party with respect to any
Collateral on which such Secured Party has a senior Lien as described in and
provided for by Section 2.1(b), then any other Secured Party which has a junior
Lien on such Collateral as described in and provided for by Section 2.1(b) may
proceed with the Enforcement of such Lien on such Collateral; provided, however,
that (i) no Secured Party other than LaSalle shall proceed with Enforcement with
respect to the Accounts without the prior written consent of LaSalle until the
LaSalle Secured Obligations have been repaid in full and (ii) in the event the
Secured Party which holds the senior Lien on such Collateral shall suspend such
Enforcement in respect of the Collateral on which it has a senior Lien (as
provided in Section 2.1(b)), the other or others thereof shall also suspend
Enforcement in respect of such Collateral.
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(e) For up to one-hundred and twenty (120) days following the issuance of
an Enforcement Notice, LaSalle may (i) enter upon any or all of the Pledgors'
premises, whether leased or owned, without force or process of law and without
obligation to pay rents, royalties or compensation to the Trustee, any Existing
Mortgage Lender or any Pledgor (except that LaSalle shall pay rents payable to
lessors of leased Real Property used or occupied by LaSalle) to remove the
LaSalle Collateral and/or (ii) use any of the Collateral (including, without
limitation, a royalty-free irrevocable license to use the Intellectual Property
Collateral) to the extent necessary to complete the manufacture of the
Inventory, collect the Accounts and sell or otherwise dispose of the LaSalle
Collateral. During such 120-day period and thereafter, as applicable, if LaSalle
has entered upon the Pledgors' premises as provided herein, LaSalle may, in its
sole discretion and with reasonable care, complete the manufacture of the
Inventory and sell or otherwise dispose of the LaSalle Collateral, and the
Trustee and any applicable Existing Mortgage Lender or their designees shall
have unrestricted access to the Noteholder Collateral or the Existing Mortgage
Collateral, as the case may be, for the purpose of evaluating the Noteholder
Collateral or the Existing Mortgage Collateral, as the case may be, and showing
it to potential purchasers. If during such 120-day period, or during the next
succeeding fifteen (15) days as provided below, the Trustee or such Existing
Mortgage Lender shall locate a bona fide purchaser for any parcel of such Real
Property and/or all or a substantial part of the remaining Noteholder Collateral
or the Existing Mortgage Collateral, as the case may be, at any location, the
Trustee or such Existing Mortgage Lender shall send a written notice to LaSalle
identifying the purchaser, the proposed sales price and the proposed closing
date. Following the expiration of the 120-day period, LaSalle may, at its
option, continue to occupy or use the Noteholder Collateral or the Existing
Mortgage Collateral, respectively, at any particular location for up to an
additional fifteen (15) days; provided, however, that if such continued
occupancy or use delays the proposed closing date for such sale, LaSalle shall
pay to the Trustee or such Existing Mortgage Lender, as the case may be, as
rent, an amount equal to interest on the proposed sales price for the Noteholder
Collateral or the Existing Mortgage Collateral, as the case may be, as to which
the closing date has been delayed, at a rate equal to 12% per annum (based on a
360 day year of twelve months) for the number of days that the proposed closing
date is delayed. The Trustee, any applicable Existing Mortgage Lender and
LaSalle shall cooperate in assembling the Pledgors' assets, wherever located. At
such time as the LaSalle Secured Obligations and the ARL Refinancing Secured
Obligations, if any, shall have been paid or otherwise satisfied in full, each
reference in this Section 2.3(e) to LaSalle shall be deemed to be a reference to
the Trustee and each Existing Mortgage Lender agrees that in such case the
Trustee may exercise the rights afforded to LaSalle as set forth in this Section
2.3(e).
(f) If any Secured Party has any Lien on any of the Collateral as security
for payment of any indebtedness or other obligation of any Pledgor, or of any
other party, other than any Secured Obligations, then such Secured Party may not
apply the proceeds of any of the Collateral to satisfy such other indebtedness
or other obligation until Secured Obligations secured by such Collateral have
been paid in full or otherwise satisfied.
Section 2.4. Accountings. Each Secured Party hereby agrees to render
accounts to the others upon request, as necessary or required to give effect to
the application of proceeds of Collateral as set forth in Section 2.1(b).
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Section 2.5. Notices of Default. Each Secured Party hereby agrees to use
their reasonable best efforts to give to the other or others copies of any
notice of the occurrence or existence of an Event of Default sent to any Pledgor
simultaneously with the sending of such notice to such Pledgor, but the failure
to do so shall not affect the validity of such notice or create a cause of
action against the Secured Party failing to give such notice or create any claim
or right on behalf of any third party. The sending of such notice shall in no
event be deemed to obligate any recipient thereof to cure such Event of Default.
Section 2.6. Agent for Perfection. Each Secured Party hereby appoints the
other Secured Parties as agent for purposes of perfecting their respective Liens
on that portion of the Collateral which is of a type such that perfection of a
security interest therein may be accomplished only by possession thereof by the
secured party. To the extent that any Secured Party obtains possession of any
Collateral (including Proceeds thereof) upon which another Secured Party has a
senior Lien on under Section 2.1(b), the Secured Party or Secured Parties having
possession shall notify the other Secured Party or Secured Parties (in
accordance with the provisions of Section 3.1) of such fact and shall deliver
such Collateral (including Proceeds thereof) to the Secured Party having the
senior Lien on such Collateral under Section 2.1(b) upon request of such Secured
Party.
Section 2.7. Action upon Repayment or Other Satisfaction of any of the
Secured Obligations. If any of the Noteholder Secured Obligations, any Existing
Mortgage Secured Obligations or the LaSalle Secured Obligations, but not all of
the others, is paid in full as a result of an Enforcement hereunder or
otherwise, then the Secured Party or Secured Parties whose claim is thus fully
paid shall transfer any Collateral (including Proceeds thereof) held by it or
them to the other Secured Party or Secured Parties entitled to receive such
Collateral (or Proceeds therefrom) in accordance with the Lien priorities as
described in and provided for by Section 2.1(b), unless otherwise required to
remit the proceeds according to law.
Section 2.8. Insurance. Notwithstanding anything to the contrary in any
Debt Instrument, the Pledgors shall obtain satisfactory lender's loss payable
endorsements naming the Secured Parties, as their interests may appear, as loss
payees, with respect to policies which insure the Collateral, or with such other
designation as the Secured Parties may agree. Each Secured Party shall have the
sole and exclusive right, as against the other Secured Parties, to adjust
settlement of such insurance policy in the event of any loss to the Collateral
upon which such Secured Party has a first priority Lien under Section 2.1(b) and
to exercise the rights provided in any Collateral Document to waive or amend
insurance requirements or to give consents relating to the application of any
proceeds of insurance, including, without limitation, consents relating to
restoration of Collateral following a casualty. All proceeds of such policy
relating to any item or type of Collateral shall be paid to the Secured Party
named in the applicable loss payable endorsement that has the first priority
Lien on such Collateral as set forth herein and disbursed in accordance with the
applicable provisions of the relevant governing Debt Instruments. So long as no
Enforcement Notice is in effect, after payment of such first priority Lien and
all expenses of collection, including, without limitation, reasonable attorneys'
and paralegals' costs, fees and expenses, the remaining proceeds, if any, shall
be applied in the manner specified by the Secured Party holding the Lien
immediately junior and subordinate to the Lien so repaid (in order of the
priority described in and provided for by Section 2.1(b)) in respect of the
Collateral giving rise to such proceeds in accordance with the applicable
provisions of the relevant
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governing Debt Instruments. Proceeds of business interruption insurance shall
constitute LaSalle Collateral and be applied in the manner set forth in Section
2.1(b).
Section 2.9. UCC Notices. In the event that any Secured Party shall be
required by the UCC or any other applicable law to give notice to any other
Secured Party of any intended disposition of Collateral, such notice shall be
given in accordance with Section 3.1 and ten (10) days' notice shall be deemed
to be commercially reasonable.
Section 2.10. Rights of Secured Parties Upon an Event of Default. Each of
the Secured Parties shall have the right, but not any obligation, to cure for
any Pledgor's account, any Event of Default, but without thereby assuming any
other or further obligation, liability or indebtedness to any other person.
Section 2.11. Permitted ARL Refinancing. If the ARL Refinancing
Indebtedness is used to refinance the LaSalle Secured Obligations, then, upon
execution and delivery by the ARL Refinancing Lenders of the undertaking
attached hereto as Exhibit A, such ARL Refinancing Lenders shall become party
hereto and shall be entitled to the same benefits, and shall have the same
obligations, hereunder with respect to the Collateral as LaSalle, all references
to LaSalle hereunder shall be deemed to be references to the ARL Refinancing
Lenders and unless otherwise agreed by the parties hereto (including the ARL
Refinancing Lenders), such ARL Refinancing Indebtedness shall be secured by
Liens on each category of Collateral with the same priority as the Liens
securing the LaSalle Secured Obligations.
Section 2.12. Roslyn Foreclosure. Pursuant to the Roslyn Documents, Roslyn
has the right, in its sole discretion, to foreclose on any and all of the Roslyn
Collateral or the Huntington Collateral or any portion thereof upon an Event of
Default under the Roslyn Documents. Notwithstanding the foregoing, Roslyn hereby
grants the Trustee the right, upon an Event of Default under the Roslyn
Documents, to reasonably direct the manner and order of foreclosure upon the
Roslyn Collateral and/or the Huntington Collateral, or any portion thereof in
accordance with laws and the resulting disposition, sale or transfer of such
collateral, if any. Roslyn and the Trustee agree to cooperate in a reasonable
and timely manner to carry out the agreements in this Section 2.12.
Section 2.13. Existing Mortgage Lender Rights. Notwithstanding any
provisions in any Noteholder Collateral Document in favor of the Trustee
encumbering any of the Existing Mortgage Collateral, (i) the Existing Mortgage
Lenders may extend, amend, supplement or replace any of their respective Debt
Instruments so long as such extensions, amendments, supplements or replacements
are consistent with the provisions of the Indenture and (ii) any assignment of
rents constituting a portion of the Existing Mortgage Collateral granted to the
Trustee pursuant the Noteholder Collateral Documents shall be subject and
subordinate to any rights of the applicable Existing Mortgage Lender with
respect to such rents, if any, for so long as any of such Existing Mortgage
Lender's Secured Obligations shall be outstanding.
Section 2.14. Regarding Trustee. In each instance in this Agreement that
requires the Trustee to take any action or grant any consent, such action or
consent shall be taken or granted, as the case may be, in accordance with the
provisions of the Indenture.
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ARTICLE III. MISCELLANEOUS
Section 3.1. Notices. All notices hereunder shall be effective upon
receipt, and shall be in writing and sent by certified mail, return receipt
requested, courier service guaranteeing next day delivery, telegram or telex,
to:
If to the Company or any other Pledgor:
135 Engineers Road
Hauppauge, New York
Attention: Chief Financial Officer
with a copy to:
Mandel & Resnik, P.C.
220 East 42nd Street
New York, New York 10017
Attention: Nicholas J. Kaiser, Esq.
If to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Kathleen Perry
with a copy to:
Kelley Drye & Warren
101 Park Avenue
29th Floor
New York, New York 10178
Attention: David Retter, Esq.
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If to LaSalle:
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Steven Fenton
with a copy to:
Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
Attention: Philip M. Blackman, Esq.
If to Bank United:
3200 Southwest Freeway
Houston, Texas 77027
Attention: Rick E. McKinnerney, Correspondent Lending
with a copy to:
Payne, Wood & Littlejohn
290 Broad Hollow Road
Melville, New York 11747
Attention: Alan C. Polacek, Esq.
If to Roslyn:
1400 Old Northern Boulevard
Roslyn, New York 11576
Attention: Commercial Real Estate Department
with a copy to:
Payne, Wood & Littlejohn
290 Broad Hollow Road
Melville, New York 11747
Attention: Alan C. Polacek, Esq.
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Any party hereto may by notice to each other party designate such additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party hereto shall be deemed to have been given or made
as of the date so delivered if personally delivered, and three calendar days
after mailing if sent by registered or certified mail (except that a notice of
change of address shall not be deemed to have been given until actually received
by the addressee). A copy of any notice given under this Agreement to any party
shall also be given to each other party hereto.
Section 3.2. Contesting Liens. No Secured Party shall contest the validity,
perfection, priority or enforceability of any Lien granted to the other or
others and each shall cooperate in the defense of any action contesting the
validity, perfection, priority or enforceability of such Liens brought by any
Pledgor or any third party. Each Secured Party shall also use its reasonable
best efforts to notify the other Secured Parties of any change in the location
of any of the Collateral or the business operations of any Pledgor or of any
change in law which would make it necessary or advisable for any other Secured
Party to file additional financing statements in another location as against any
Pledgor, but the failure to do so shall not create a cause of action against the
Secured Party failing to give such notice or create any claim or right on behalf
of any third party.
Section 3.3. Binding Agreement; Assignment; Obligations Several. This
Agreement shall be binding upon the Pledgors, each of the respective successors
and assigns, and shall be binding upon and inure to the benefit of each Secured
Party and each of their respective successors, transferees and assigns; no other
persons (including, without limitation, any other creditor of the Pledgors)
shall have any interest herein or any right or benefit with respect hereto.
Without limiting the generality of the foregoing clause, any Secured Party may
assign or otherwise transfer any indebtedness held by it to any other person,
and such other person shall thereupon become vested with all the benefits
granted, and be subject to all of the terms, hereof. Neither this Agreement nor
any interest herein or in the Collateral, or any part thereof, except as
otherwise permitted herein or in the Debt Instruments, may be assigned by the
Pledgors; provided, however, that this Agreement may be assigned by a Pledgor to
any person that shall become an obligor under the Debt Instruments in compliance
therewith if such person executes and delivers an amendment hereto whereby it
expressly assumes all obligations of the applicable Pledgor hereunder as if it
were an original party hereto. This Agreement shall be deemed to be
automatically assigned by any of the Secured Parties to those persons who
succeed to any of them in accordance with the provisions of the applicable Debt
Instrument. Except as otherwise expressly provided herein, the obligations of
each of the parties under this Agreement are several and not joint, it being
expressly agreed that no Secured Parties shall be liable for the failure of any
other Secured Parties to perform its duties or obligations hereunder. Anything
in this Agreement to the contrary notwithstanding, no holder of any ARL
Refinancing Indebtedness shall be entitled to any rights or benefits hereunder
unless and until (a) such ARL Refinancing Lender shall agree to be bound by all
the terms and provisions of this Agreement pursuant to a written undertaking in
the form attached as Exhibit A hereto and (b) the Company shall give written
consent thereto.
Section 3.4. No Additional Rights for Pledgors Hereunder. If any Secured
Party shall enforce its rights or remedies in violation of the terms of this
Agreement, the Pledgors agree that it shall not raise such violation as a
defense to the enforcement by any other Secured Party under any Debt Instrument,
nor assert such violation as a counterclaim or basis for setoff or recoupment
against any Secured Party.
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Section 3.5. Independent Credit Investigations. No Secured Party or any of
their respective directors, officers, agents or employees, shall be responsible
to the other or to any other person, firm or corporation, for any such Pledgors'
solvency, financial condition or ability to repay any of the Secured
Obligations, or for statements of any Pledgor, oral or written, or for the
validity, sufficiency or enforceability of any of the Secured Obligations or any
Debt Instrument or any Liens granted by any Pledgor in connection therewith.
Each Secured Party has entered into its respective financing agreements with the
applicable Pledgors based upon its own independent investigation, and makes no
warranty or representation to the other Secured Parties nor does it rely upon
any representation of any other Secured Party with respect to matters identified
or referred to in this Section.
Section 3.6. Limitation of Liability. Except as provided in this Agreement,
none of the Secured Parties shall have any liability to the other or others
except for gross negligence or willful misconduct.
Section 3.7. Amendments to Financing Arrangements or to this Agreement.
Each Secured Party shall use its reasonable best efforts to notify the other or
others of any amendment or modification to any Debt Instrument but the failure
to do so shall not create a cause of action against the party failing to give
such notice or create any claim or right on behalf of any third party. Each
Secured Party shall, upon request of the other or others, provide copies of all
such modifications or amendments and copies of all other documentation relevant
to the Collateral. This Agreement may be amended, changed, waived, discharged or
terminated with the written consent of each party hereto (who shall only grant
such consent in accordance with the relevant provisions of the appropriate Debt
Instrument); provided, however, that no such consent shall be required of any
Secured Party to the extent that all Secured Obligations of such Secured Party
have been irrevocably and indefeasibly paid in full. Notwithstanding the
foregoing, no such amendment (other than to this Agreement) shall be in conflict
with the provisions hereof and, upon request by any Secured Party to the others,
such other Secured Parties shall enter into such amendments to its subordinate
security instruments as shall be necessary to cause such instruments to conform
to the provisions of the corresponding senior security instruments affecting the
same Collateral.
Section 3.8. Marshalling of Assets. Each Secured Party hereby waives any
and all rights to have the Collateral or any part thereof, marshalled upon any
foreclosure of any Liens of the other Secured Parties.
Section 3.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES, EXCEPT TO THE EXTENT THAT THE LAWS OF ANY OTHER
JURISDICTION MAY BE MANDATORILY APPLICABLE; PROVIDED, HOWEVER, THAT ANY REMEDIES
HEREIN PROVIDED WHICH SHALL BE VALID UNDER THE LAWS OF THE JURISDICTION WHERE
PROCEEDINGS FOR THE ENFORCEMENT HEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY
ANY INVALIDITY HEREOF UNDER THE LAWS OF THE STATE OF NEW YORK. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
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EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
Section 3.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT.
Section 3.11. Information. Upon the request of any Secured Party, each of
the other Secured Parties shall use its reasonable best efforts to provide the
others with all reasonable information relating to the transactions contemplated
by the Debt Instruments and with any credit or other information with respect to
any of the Collateral.
Section 3.12. Insolvency. This Agreement shall be applicable both before
and after the filing of any petition by or against a Pledgor under any
Bankruptcy Law and all converted or succeeding cases in respect thereof, and all
references herein to a Pledgor shall be deemed to apply to a trustee for such
Pledgor and a Pledgor as a debtor-in-possession. The relative rights of the
Secured Parties in any Collateral and proceeds of Collateral shall continue
after the filing thereof on the same basis as prior to the date of the petition.
Section 3.13. Inconsistent Provisions. If any provision of this Agreement
shall be inconsistent with, or contrary to, any provision in any Debt
Instrument, such provision of this Agreement shall be controlling, and shall
supersede such inconsistent provision to the extent necessary to give full
effect to all provisions contained in this Agreement.
Section 3.14. Severability. In the event that any provision contained in
this Agreement shall for any reason be held to be illegal or invalid under the
laws of any jurisdiction, such illegality or invalidity shall in no way impair
the effectiveness of any other provision hereof or of such provision under the
laws of any other jurisdiction; provided, however, that in the construction and
enforcement of such provisions under the laws of the jurisdiction in which such
holding of illegality or invalidity exists, and to the extent only of such
illegality or invalidity, this Agreement shall be construed and enforced as
though such illegal or invalid provision had not been contained herein.
Section 3.15. Headings. Section headings used herein are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
Section 3.16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
and all of which shall together constitute one and the same instrument.
Section 3.17. Authority. Each of the parties hereto represents and warrants
to all other parties hereto that (i) the execution, delivery and performance by
or on behalf of such party to this Agreement (A) has been duly authorized by all
necessary action, corporate or otherwise, (B) does not violate any provision of
law or governmental regulation or any agreement or instrument by which such
party is bound and (C) requires no governmental or other consent that has not
been obtained and
<PAGE>
-27-
is not in full force and effect and (ii) this Agreement is a valid and binding
obligation of such parties, enforceable against each such party in accordance
with the terms hereof.
Section 3.18. Execution by Pledgors.
(a) By executing this Agreement, the Pledgors agree to be bound by the
provisions hereof as they relate to the relative rights of the Secured Parties;
provided, however, that solely as between each of the Pledgors, on the one hand,
and the Secured Parties, on the other hand, (i) nothing in this Agreement shall
amend, modify, change or supersede the terms of any Debt Instrument and (ii) in
the event of any conflict or inconsistency between the terms of this Agreement
and any Debt Instrument, the terms of such Debt Instruments shall govern the
relationship between such Secured Party and Pledgor. Each Pledgor further agrees
that except as expressly provided herein (i) the terms of this Agreement shall
not give such Pledgor any substantive rights against the Secured Parties and
(ii) if any Secured Party shall enforce its rights or remedies in violation of
the terms of this Agreement, such Pledgor shall neither raise such violation as
a defense to the enforcement by any other Secured Party under any Debt
Instrument, nor assert such violation as a counterclaim or basis for setoff or
recoupment against any Secured Party.
(b) The Pledgors agree, pursuant to the terms of the Indenture to
facilitate the execution, delivery and recordation, as applicable, of (i)
Exhibit B attached hereto, at such time as CRA consents to the encumbrance of
the Calexico Parcel Six Collateral and (ii) Exhibit C attached hereto, at such
time as any Pledgor shall grant a Lien in favor of any lender on Parcel 5 of the
Calexico Property.
Section 3.19. Covenants to Run with the Real Property. All of the grants,
covenants, terms, provisions and conditions in this Agreement shall run with the
Real Property and shall apply to, and bind the successor and assigns of each
party hereto.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Kathleen Perry
---------------------------------
Name: Kathleen Perry
Title: Vice President
BANK UNITED
By: /s/ Rick D. McKinnerney
---------------------------------
Name: Rick D. McKinnerny
Title: Vice President
THE ROSLYN SAVINGS BANK
By: /s/ Jeffrey S. Wall
---------------------------------
Name: Jeffrey S. Wall
Title: Vice President
LASALLE BANK NATIONAL ASSOCIATION,
as Agent
By: /s/ Christopher Clifford
---------------------------------
Name: Christopher Clifford
Title: SRVP
<PAGE>
AMERICAN TISSUE INC.,
as Pledgor
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
President
<TABLE>
<S> <C>
AMERICAN CELLULOSE MILL CORP.,
AMERICAN TISSUE CORPORATION,
AMERICAN TISSUE MILLS OF NEW HAMPSHIRE, INC.,
AMERICAN TISSUE MILLS OF NEW YORK, INC.,
AMERICAN TISSUE MILLS OF OREGON, INC.,
AMERICAN TISSUE MILLS OF WISCONSIN, INC.,
BERLIN MILLS RAILWAY, INC.,
CROWN VANTAGE - NEW HAMPSHIRE ELECTRIC, INC.,
GILPIN REALTY CORP.,
TAGSONS PAPERS, INC.,
each as a Pledgor
</TABLE>
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
Chairman of the Board
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
President
<PAGE>
<TABLE>
<S> <C>
100 REALTY MANAGEMENT LLC,
AMERICAN TISSUE MILLS OF GREENWICH LLC,
AMERICAN TISSUE MILLS OF NEENAH LLC,
CALEXICO TISSUE COMPANY LLC,
CORAM REALTY LLC,
ENGINEERS ROAD, LLC,
GRAND LLC, HYDRO OF AMERICA LLC, LANDFILL OF
AMERICA LLC, MARKWOOD LLC, PAPER OF AMERICA LLC,
PULP & PAPER OF AMERICA LLC, PULP OF AMERICA LLC,
RAILWAY OF AMERICA LLC, SARATOGA REALTY LLC,
UNIQUE FINANCING LLC,
each as a Pledgor
</TABLE>
By: /s/ Nourollah Elghanayan
---------------------------------
Nourollah Elghanayan
Manager
By: /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
Manager
<PAGE>
Acknowledgment
State of New York )
)ss.
County of New York )
On the 9th day of July in the year 1999 before me personally came Kathleen Perry
to me known, who, being by me duly sworn, did depose and say that he/she resides
in Valley Stream, NY; that he/she is the Vice President of The Chase Manhattan
Bank, the corporation described in and which executed the above instrument; and
that he/she signed his/her name thereto by authority of the board of directors
of said corporation.
/s/ Annabelle DeLuca
-----------------------------------
Notary Public
ANNABELLE DeLUCA
Notary Public, State of New York
No. 01DE5013759
Qualified in Kings County
Certified Field in New York County
Commission Expires July 15, 2001
<PAGE>
Acknowledgment
State of Texas )
)ss.
County of Harris)
On the 6th day of July in the year 1999 before me personally came Rick D.
McKinnerney to me known, who, being by me duly sworn, did depose and say that
he/she resides in Houston, Texas; that he/she is the Vice President of Bank
United, the corporation described in and which executed the above instrument;
and that he/she signed his/her name thereto by authority of the board of
directors of said corporation.
/s/ Ellen Lockhart
-----------------------
Notary Public
"OFFICIAL SEAL"
ELLEN LOCKHART
MY COMMISSION EXPIRES
May 29, 2001
<PAGE>
Acknowledgment
State of New York )
)ss.
County of Suffolk )
On the 7th day of July, 1999, before me personally came JEFFREY S. WALL to me
known, who, being by me duly sworn, did depose and say that he/she resides at 37
Pond Lane, Levittown, New York; that he is a Vice President of THE ROSLYN
SAVINGS BANK, the corporation described in and which executed the above
instrument; by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
/s/ Alan C. Polacek
--------------------
Notary Public
ALAN C. POLACEK
Notary Public, State of New York
No. 01PO4721868
Qualified in Suffolk County
Commission Expires Oct. 31, 2000
<PAGE>
Acknowledgment
State of IL )
)ss.
County of [ILLEGIBLE])
On the 9th day of July in the year 1999 before me personally came Christopher
Clifford to me known, who, being by me duly sworn, did depose and say that
he/she resides in Chicago IL; that he/she is the SRVP of LaSalle Bank National
Association, the corporation described in and which executed the above
instrument; and that he/she signed his/her name thereto by authority of the
board of directors of said corporation.
/s/ Steven I. Fenton
--------------------
Notary Public
"OFFICIAL SEAL"
STEVEN I. FENTON
NOTARY PUBLIC STATE OF ILLINOIS
My Commission Expires 10/02/2002
<PAGE>
Acknowledgment
State of New York )
)ss.
County of New York)
On the 9th day of July, 1999, before me personally came Nourollah Elghanyan to
me known, who, being duly sworn by me, did depose and say that he resides in 135
Engineers Road, Hauppauge, New York 11788; that he is the Chairman of the Board
of each corporation listed on Annex A annexed hereto, each corporation described
in and which executed the above instrument; and that he signed his name thereto
by authroity of the board of directors of each corporation.
/s/ Kevin William Wells
-----------------------
Notary Public
Kevin William Wells
Notary Public, State of New York
No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
Acknowledgment
State of New York )
)ss.
County of New York)
On the 9th day of July, 1999 before me personally came Mehdi Gabayzadeh to me
known, who, being duly sworn by me, did depose and say that he resides in 135
Engineers Road, Hauppauge, New York 11788; that he is the President of each
corporation listed on Annex A annexed hereto, each corporation described in and
which executed the above instrument; and that he signed his name thereto by
authroity of the board of directors of each corporation.
/s/ Kevin William Wells
-----------------------
Notary Public
Kevin William Wells
Notary Public, State of New York
No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
<PAGE>
Acknowledgment
State of New York )
)ss.
County of New York)
On the 9th day of July, 1999, before me personally came Nourollah Elghanyan to
me known to be the individual who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say that he is a Manager of each of the
limited liability companies listed on Annex B annexed hereto and that he has
authority to sign the same, and acknowledged that he executed the same as the
act and deed of each such limited liability company.
/s/ Kevin William Wells
-----------------------
Notary Public
Kevin William Wells
Notary Public, State of New York
No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
Acknowledgment
State of New York )
)ss.
County of New York)
On the 9th day of July, 1999 before me personally came Mehdi Gabayzadeh to me
known to be the individual who executed the foregoing instrument, and who, being
duly sworn by me, did depose and say that he is a Manager of each of the limited
liability companies listed on Annex B annexed hereto and that he has authority
to sign the same, and acknowledged that he executed the same as the act and deed
of each such limited liability company.
/s/ Kevin William Wells
-----------------------
Notary Public
Kevin William Wells
Notary Public, State of New York
No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
<PAGE>
Annex A
- --------------------------------------------------------------------------------
Entity State Formation
- ------ ---------------
- --------------------------------------------------------------------------------
American Tissue Inc. Delaware
- --------------------------------------------------------------------------------
American Tissue Corporation New York
- --------------------------------------------------------------------------------
American Cellulose Mill Corp. New York
- --------------------------------------------------------------------------------
American Tissue Mills of New Hampshire, Inc. New York
- --------------------------------------------------------------------------------
American Tissue Mills of New York, Inc. New York
- --------------------------------------------------------------------------------
American Tissue Mills of Oregon, Inc. New York
- --------------------------------------------------------------------------------
American Tissue Mills of Wisconsin, Inc. New York
- --------------------------------------------------------------------------------
Berlin Mills Railway, Inc. New Hampshire
- --------------------------------------------------------------------------------
Crown Vantage - New Hampshire Electric, Inc. New Hampshire
- --------------------------------------------------------------------------------
Gilpin Realty Corp. New York
- --------------------------------------------------------------------------------
Tagsons Papers, Inc. New York
- --------------------------------------------------------------------------------
Annex B
- --------------------------------------------------------------------------------
Entity State Formation
- ------ ---------------
- --------------------------------------------------------------------------------
100 Realty Management LLC New York
- --------------------------------------------------------------------------------
American Tissue Mills of Greenwich LLC New York
- --------------------------------------------------------------------------------
American Tissue Mills of Neenah LLC New York
- --------------------------------------------------------------------------------
Calexico Tissue Company LLC New York
- --------------------------------------------------------------------------------
Coram Realty LLC New York
- --------------------------------------------------------------------------------
Engineers Road, LLC New York
- --------------------------------------------------------------------------------
Grand LLC New York
- --------------------------------------------------------------------------------
Hydro of America LLC Delaware
- --------------------------------------------------------------------------------
Landfill of America LLC Delaware
- --------------------------------------------------------------------------------
Markwood LLC New York
- --------------------------------------------------------------------------------
Paper of America LLC Delaware
- --------------------------------------------------------------------------------
Pulp & Paper of America LLC New York
- --------------------------------------------------------------------------------
Pulp of America LLC Delaware
- --------------------------------------------------------------------------------
Railway of America LLC Delaware
- --------------------------------------------------------------------------------
Saratoga Realty LLC New York
- --------------------------------------------------------------------------------
Unique Financing LLC New York
- --------------------------------------------------------------------------------
CONSENT
AND
INTERCREDITOR AGREEMENT
CONSENT AND INTERCREDITOR AGREEMENT, dated as of July 9 ,1999, among THE
CHASE MANHATTAN BANK, solely as trustee (together with any successors or assigns
in such capacity, the "Trustee") for the holders from time to time of the Notes
(as hereinafter defined) of American Tissue Inc. ("ATH") issued pursuant to the
Indenture (as hereinafter defined), BOISE CASCADE CORPORATION ("Boise"),
AMERICAN TISSUE MILLS OF OREGON, INC. ("ATMO"), and AMERICAN TISSUE CORPORATION
("ATC").
1. DEFINITIONS.
As used in this Agreement:
"Acceptance of Trustee ATMO Collateral in Exchange for Discharge of Trustee
Obligations" has the meaning specified in Section 4.
"Agreement" means this Consent and Intercreditor Agreement.
"ATMO Equipment" means each item of equipment described in Schedule 1 and
all past and future additions, replacements, and modifications thereto.
"Boise Agreement" means the Agreement dated November 23, 1992, between
Boise and ATMO, amended January 1,1999, which amendment modified such Agreement
to, among other things, add ATC as a party.
"Boise Agreements" means, collectively, the Boise Agreement and all
agreements entered into in connection therewith, including those the form of
which was attached as an Exhibit to such Agreement, such as the Warehouse Site
Lease (form of Exhibit G), as amended, and the Memorandum of Lease (form of
Exhibit M).
"Boise Collateral" means (1) the ATMO Equipment, and (2) all proceeds and
products of the foregoing.
"Boise Obligations" means all liabilities and obligations of ATMO and/or
ATC to Boise under and pursuant to the Boise Agreement of whatsoever nature,
whether now existing or hereafter incurred or arising (including fees, costs and
expenses incurred by Boise in connection with the enforcement thereof).
"Boise Security Agreement" means the portion of the Boise Agreement
pursuant to which ATMO grants a security interest in the Boise Collateral (or a
portion thereof) to Boise as security for the Boise Obligations.
<PAGE>
"Collateral" means in the case of Boise, the Boise Collateral, and in the
case of the Trustee, the Trustee ATMO Collateral.
"Creditor" means either or both of Trustee or Boise, as the context
requires.
"Creditors" means both the Trustee and Boise.
"Default Notice" has the meaning specified in Section 3.
"Foreclosure and Sale to a Third Party" has the meaning specified in
Section 4.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.
"Ineligible Transferee" means any Person (1) on Schedule 2 as such schedule
may be revised from time to time with the consent of Trustee (which consent
cannot be unreasonably withheld) to cover other Persons where each such other
Person is a paper manufacturer competing directly with Boise in other than
tissue grades, provided that such Schedule cannot be revised at any time fifteen
(15) days after Agent has provided notice to Boise that the Trustee intends to
enforce any of their rights as the holder of a security interest in the Boise
Agreement, (2) to the best of Trustee's knowledge, which has engaged in or
threatened to engage in any hostile takeovers or is affiliated with any other
Person that has engaged or threatened to engage in any hostile takeover, or (3)
to the best of Trustee's knowledge, been convicted of criminal RICO or criminal
securities fraud or in the case of a corporation where any of the chairman,
president or chief financial officer has been convicted of any criminal RICO or
criminal securities fraud.
"Indenture" means that certain indenture among ATH, ATMO, ATC, the Trustee,
and certain other parties thereto, dated as of the date hereof, as the same may
be amended, amended and restated, supplemented, or otherwise modified from time
to time.
"Lease" means the Lease between Boise and ATMO as evidenced by the
Memorandum of Lease in the form of Exhibit G to the Boise Agreement.
"Mill" means the Boise Mill located at St. Helens, Oregon.
"Note Documents" means the Indenture, the Trustee Security Agreement and
each and every document and agreement executed pursuant to or in connection with
either such Agreement.
"Notes" means the senior secured notes due July 15, 2006 in the aggregate
principal amount of $180,000,000, together with the exchange notes, each issued
pursuant to the Indenture.
-2-
<PAGE>
"Notice of Offer" has the meaning specified in Section 6.
"Obligations" means both the Trustee Obligations and Boise Obligations.
"Offer" has the meaning specified in Section 6.
"Permitted Transferee" means any Person, other than an Ineligible
Transferee, that (1) as of the end of its prior fiscal quarter had both (a) a
Net Worth of $3,000,000 or more, (b) a ratio of Total Liabilities to Net Worth
of not greater than 5 to 1, and (2) Boise does not have a reasonable basis on
which to object to such Person as the Successor under the Boise Agreement.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Private Sale" has the meaning specified in Section 4.
"Public Auction" has the meaning specified in Section 4.
"Real Property" has the meaning specified in the Boise Agreement.
"Sale of ATMO Equipment" has the meaning specified in Section 4.
"Sale Through Sealed Bids" has the meaning specified in Section 4.
"Security Agreement" means either or both of the Trustee Security Agreement
or Boise Security Agreement, as the context requires.
"Security Agreements" means both the Trustee Security Agreement and the
Boise Security Agreement.
"Security Interest" means any perfected and enforceable security interest
of a Creditor in any Collateral however arising, including purchase money
security interests.
"Shared Collateral" means the ATMO Equipment and all proceeds and products
thereof.
"Site" means the Boise facility located at St. Helens, Oregon.
"Successor under the Boise Agreements" means any Person that succeeds to
the rights, duties and obligations of ATMO under the Boise Agreements.
"Total Assets" means the total assets of any Person all as determined in
accordance with GAAP.
-3-
<PAGE>
"Total Liabilities" means the total liabilities of any Person, all as
determined in accordance with GAAP.
"Trustee ATMO Collateral" means (1) the ATMO Equipment, (2) all of ATMO's
right, title and interest in, under and pursuant to the Boise Agreements, (3)
all other property of ATMO in which Trustee obtains a security interest pursuant
to the Note Documents, and (4) all proceeds and products of the foregoing.
"Trustee Control of Trustee ATMO Collateral" has the meaning specified in
Section 4.
"Trustee Obligations" means all indebtedness, liabilities and obligations
of ATH, ATMO, and or ATC to Trustee under, pursuant to or in connection with the
Note Documents of whatsoever nature and howsoever evidenced, whether direct or
indirect, absolute or contingent, now existing or hereafter incurred or arising
(including all renewals, extensions or modifications thereof and all fees, costs
and expenses incurred by Trustee in connection with the preparation,
administration, collection or enforcement thereof), including, without limiting
the generality of the foregoing, pursuant to loans.
"Trustee Security Agreement" means the Security Agreement dated as of June
_____, 1999, pursuant to which ATMO grants a security interest in the Trustee
ATMO Collateral (or a portion thereof) to Trustee as security for the Trustee
Obligations, as amended or modified from time to time.
"Trustee Title to ATMO Collateral" has the meaning specified in section 4.
"Warehouse Site Lease" means the Warehouse Site Lease between Boise and
ATMO, which is in the form of Exhibit G to the Boise Agreement, as amended by
the Amendment dated January 1, 1999.
2. CONSENT TO ASSIGNMENT BY ATMO TO TRUSTEE.
Pursuant to the Note Documents, ATMO is required to and will assign to the
Trustee a security interest in the Trustee ATMO, Collateral. Boise hereby
irrevocably consents to the grant of a security interest by ATMO to the Trustee
in all of the Trustee ATMO Collateral as collateral for all of the Trustee
Obligations.
3. RIGHTS OF TRUSTEE TO CURE DEFAULTS BY ATMO UNDER BOISE AGREEMENTS.
Boise recognizes that the Trustee may wish to protect the collateral value
of the Boise Agreements by curing the defaults thereunder by ATMO. Boise agrees
that the Boise Agreements shall only be terminated or canceled by action of
Boise in accordance with and subject to the provisions of this Agreement. Boise
agrees it will not terminate any of the Boise Agreements due to a breach or
default by ATMO until Boise provides written notice ("Default Notice") of such
breach or default by ATMO to
-4-
<PAGE>
the Trustee, and the Trustee has the right (but not the obligation) to cure the
defaults listed in any Default Notice within thirty (30) days after receipt of
the Default Notice by Trustee (twenty (20) days' notice in the case of a
monetary default) (or, if a nonmonetary default cannot be completely cured
within such 30-day period, such longer period of time as may be reasonably
necessary under the circumstances to cure such default, providing any of the
Trustee has commenced such cure within such thirty (30) day period and is
diligently pursuing such cure); provided, however, if a nonmonetary default is
peculiar to ATMO and not curable by the Trustee, such as a default under Section
14(b) of the Boise Agreement, then notwithstanding Boise's right to terminate
any of the Boise Agreements, such Agreement shall not be terminated, and the
Trustee shall be entitled to exercise its rights under this Agreement. If the
nature of any nonmonetary default on the part of ATMO under the Boise Agreements
is such that it cannot be cured by the Trustee without the Trustee having taken
control of the Boise Agreements and possession of the ATMO Equipment (other than
ATMO's obligations under Exhibit E to the Boise Agreement which arise thirty
(30) days or more after such nonmonetary default by ATMO), then the Trustee's
time to remedy such default shall be extended for such period of time as is
necessary for the Trustee to lawfully obtain control of the Boise Agreements and
possession of the ATMO Equipment. Once such defaults are timely cured by any of
the Trustee, there shall no longer be deemed to be any default under the Boise
Agreements in respect of such defaults so cured. No curing of any defaults under
the Boise Agreements shall be construed as an assumption by the Trustee of any
of the obligations, covenants, or agreements of ATMO under the Boise Agreements.
4. RIGHTS OF THE TRUSTEE ON DEFAULT BY ATMO UNDER NOTE DOCUMENTS.
Boise recognizes that upon a default by ATMO under the Note Documents the
Trustee needs to be able to exercise all of its rights and remedies. Upon a
default by ATMO under the Note Documents, Boise agrees that the Trustee can do
any or all of the following: (1) to make all demands, give all notices, take all
actions and exercise all rights of ATMO under the Boise Agreements; (2) to
obtain all right, title and interest in and to the Boise Agreements and/or the
ATMO, Equipment; and/or (3) to sell, assign or transfer any and all of the ATMO
Equipment and/or the Boise Agreements to a Person, subject to the provisions of
this Agreement.
Upon the Trustee's exercise of its rights as secured party, a variety of
situations can result. One, the Trustee obtains possession and control of the
Trustee ATMO Collateral prior to foreclosure and sale of such Collateral
("Trustee Control of Trustee ATMO Collateral"). Two, the Trustee accepts title
to any or all of the Trustee ATMO Collateral and such Collateral is not taken in
satisfaction of all or any part of the Trustee Obligations ("Trustee Title to
the ATMO Collateral"). Three, the Trustee accepts the Trustee ATMO Collateral in
satisfaction of all or a part of the Trustee Obligations ("Acceptance of Trustee
ATMO Collateral in Exchange for Discharge of Trustee Obligations"). Four, the
Trustee forecloses on the Trustee ATMO Collateral and sells all or portions of
such Collateral to a Person ("Foreclosure and Sale to a Third Party").
-5-
<PAGE>
Five, the Trustee forecloses on the Trustee ATMO Collateral and itself purchases
all or a portion of such Collateral ("Foreclosure and Purchase by the Trustee").
In the case of the Foreclosure and Sale to a Third Party and Foreclosure and
Purchase by the Trustee, the Trustee ATMO Collateral could be sold together or
the ATMO Equipment could be sold separately from the Boise Agreements.
In addition, the foreclosure sale by the Trustee can occur in a variety of
ways. First, the Trustee could hold a public auction and sell the Trustee ATMO
Collateral either together or separately at such public auction ("Public
Auction"). Second, the Trustee could solicit bids from prospective purchasers
and sell the Trustee ATMO Collateral either together or separately to the
highest bidder or bidders that are able to pay the purchase price bid by such
prospective purchaser or purchasers ("Private Sale"). Third, the Trustee could
solicit sealed bids from prospective purchasers and sell the Trustee ATMO
Collateral either together or separately to the highest bidder or bidders that
are able to pay the purchase price bid by such prospective purchaser or
purchasers ("Sale Through Sealed Bids").
With regard to the various situations outlined above, Boise and the Trustee
agree as follows:
First, in the case of a Public Auction, the Trustee will provide at
least five (5) business days prior notice to Boise of the time and place of
such Public Auction;
Second, in the case of a Private Sale where only the ATMO Equipment is
being sold and will be removed from the Site, and the Boise Agreement is
not being assumed by the purchaser of the ATMO Equipment, Trustee will
advise Boise of all such sales and permit Boise to be a prospective
purchaser at such sale, and not sell the ATMO Equipment to another
prospective purchaser unless and until Boise is given the opportunity to
match each such prospective purchaser's bid; and
Third, in the case of a Sale Through Sealed Bids where only the ATMO
Equipment is being sold and will be removed from the Site, and the Boise
Agreement is not being assumed by the purchaser of the ATMO Equipment,
Trustee agrees that all such Sales Through Sealed Bids will be subject to
Boise's Right of First Refusal set forth in Section 6.
5. PROVISIONS REGARDING ATMO EQUIPMENT.
A. With regard to the ATMO Equipment, whether before or after the Boise
Agreement is terminated, Boise and the Trustee agree that Trustee has the right
to (1) inspect, maintain and repair the ATMO Equipment, (2) show the ATMO
Equipment to prospective purchasers of the ATMO Equipment, (3) repossess and
remove the ATMO Equipment (subject to the provisions of this Agreement), and (4)
subject to the terms of this Agreement, conduct a public or private auction
thereof without any restrictions.
-6-
<PAGE>
In addition, Boise and Trustee agree that Trustee will not remove the ATMO
Equipment from the Site before Trustee exercises its rights as the holder of a
security interest in the ATMO Equipment and either sells such ATMO Equipment to
a third party or purchases the ATMO Equipment itself.
B. With regard to the location and storage of the ATMO Equipment before the
Boise Agreement is terminated, Boise and the Trustee agree that the ATMO
Equipment will remain on the Site free of charge at all times (but in no case is
ATMO and ATC relieved of their obligations under the Boise Agreements).
C. With regard to the location and storage of the ATMO Equipment after the
Boise Agreement is terminated, Boise and the Trustee agree as follows:
First, the ATMO Equipment can remain on the Site free of charge at all
times for a maximum of one year following such termination whether the ATMO
Equipment is owned by ATMO and subject to Trustee's security interest,
owned by the Trustee, or owned by a Person as the result of a Foreclosure
and Sale to a Third Party.
Second, Boise shall have no obligation to maintain the ATMO Equipment
during such period, other than during periods of operation, as provided in
the third paragraph below;
Third, if any of the following occur: The Boise Agreement is
terminated due to ATMO's default, Trustee Control of Trustee ATMO
Collateral, Trustee Title to the Equipment, Acceptance of Trustee ATMO
Collateral in Exchange for Discharge of Trustee Obligations, or Foreclosure
and Purchase by the Trustee, or the Trustee otherwise acquires title to,
and the right to possession of, the ATMO Equipment, and then if the Trustee
has not assumed the Boise Agreement, then Boise can, at its sole option,
operate the ATMO Equipment for Boise's account during the period such
Equipment is at the Site, provided that Boise (1) gives the Trustee notice
of its intention to operate the ATMO Equipment, (2) agrees to operate the
ATMO Equipment for an initial three (3) month period and on a
month-to-month basis thereafter, provided, if Boise commences operation of
the ATMO Equipment during any such period it will have operational control
over the ATMO Equipment throughout such entire period (but Boise is not
obligated to continually operate the ATMO Equipment), and (3) agrees to
maintain the ATMO Equipment in at least the same state of repair as the
Equipment was on the date of termination (but in no case shall Boise be
required to make capital improvements or perform any maintenance that was
required to be performed by ATMO on the date the Boise Agreement is
terminated).
Fourth, the Trustee recognizes Boise's concerns if the ATMO Equipment
is to be removed from the Site at such time as Boise is operating the ATMO
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Equipment and selling the tissue produced by such Equipment. Therefore,
Trustee agrees that if the ATMO Equipment is to be sold under such
circumstances to a Person that will remove the ATMO Equipment from the
Site, then the ATMO Equipment can only be removed from the Site upon ninety
(90) days prior notice to Boise, or such lesser time that is needed by
Boise to fulfill commitments it has made to purchasers of tissue produced
by the ATMO Equipment. Boise agrees, promptly upon request, to provide to
the Trustee such information as is necessary for the parties hereto to make
a determination with respect to the extent of such commitments.
6. RIGHT OF FIRST REFUSAL.
If there is to be a Sale Through Sealed Bids, or if at any time after an
Acceptance of Trustee ATMO Collateral in Exchange for Discharge of Trustee
Obligations, or Foreclosure and Purchase by Trustee, Trustee desires to sell,
assign or transfer all or any part of the ATMO Equipment to a third party (other
than an Affiliate of the Trustee) for cash or cash and notes secured by the ATMO
Equipment and where the Boise Agreement is terminated prior to such sale and the
ATMO Equipment is to be removed from the Site by such third party (the "Offer"),
the following shall apply:
(1) The Trustee shall submit to Boise a written notice stating that it
desires to sell the ATMO Equipment, the name of the proposed purchaser, the
price and the payment terms and other terms and conditions of the offer
(the "Notice of Offer"). Such Notice of Offer shall be deemed to be an
irrevocable offer by Trustee to sell the ATMO Equipment to Boise at an
aggregate price equal to the aggregate purchase price applicable to the
third party offer and otherwise on the same terms and conditions applicable
to the Offer.
(2) Boise shall have five business days from the receipt of the Notice
of Offer to accept the terms and conditions set forth therein by giving
written notice thereof to the Trustee.
(3) If Boise agrees to purchase all the ATMO Equipment, then the
Trustee and Boise shall close the purchase within twenty (20) days after
the offer is made (or, if later, by the closing date set forth in the
Offer). Such purchase shall be on the same terms and conditions as those
applicable to the Offer. The consideration paid by Boise shall be paid in
the same forms and in the same proportion as set forth in the Notice of
Offer, provided that Boise may pay more cash than is required by the terms
of the Offer, at Boise's sole option.
(4) If Boise fails to agree to purchase all of the ATMO Equipment
within the time period set out above, the Trustee shall have the right to
consummate the sale or conveyance of all of the ATMO Equipment so long as
(a) the purchaser is the proposed purchaser named in the Notice of Offer,
(b) the price, payment and other terms are at least as favorable to the
Trustee as those applicable to the Offer, and (c) the closing occurs on or
before the date set forth
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<PAGE>
in the Offer, which shall be at least 90 days after the Notice of Offer is
sent to Boise.
7. INSURANCE PROCEEDS.
The parties acknowledge that the provisions of Exhibit F to the Boise
Agreement shall control over any conflicting requirements of any other document,
including, without limitation, the provisions regarding the use of insurance
proceeds to repair, replace, or rebuild the ATMO Equipment and the Real
Property.
8. BOISE'S RIGHT TO PURCHASE TRUSTEE OBLIGATIONS.
If there is an Event of Default and Trustee chooses to exercise its rights
and remedies as a secured party with regard to the Trustee ATMO Collateral, then
Boise shall have the right to purchase the Trustee Obligations (together with
all the documents related to or evidencing such obligations and all of the
Trustee's rights under such documents) for a purchase price equal to the amount
of all such Obligations and the Trustee will sell the Trustee Obligations to
Boise without representation or warranty of any kind other than the ownership of
such Obligations free and clear of any lien, security interest or other
encumbrances.
9. PROVISIONS REGARDING SUCCESSOR UNDER BOISE AGREEMENT.
With regard to the Successor under the Boise Agreement, Boise and the
Trustee agree that since the Trustee recognizes Boise's concerns with regard to
the Successor under the Boise Agreement, that the Boise Agreement can only be
assigned to and assumed by a Permitted Transferee.
10. PROVISIONS REGARDING BOISE AGREEMENT.
With regard to the Boise Agreement, Boise and the Trustee agree as follows:
First, Boise recognizes that the value of the ATMO Equipment may be
enhanced if it is sold with the Boise Agreements; therefore, Boise agrees
that Trustee may assume ATMO's rights, duties and obligations at any time
under the Boise Agreements at any time after the occurrence of an Event of
Default under the Note Documents;
Second, Boise also recognizes that Trustee is not in the tissue
business and, therefore, if it assumes ATMO's rights, duties and
obligations under the Boise Agreements it is doing so to preserve that
asset; however, Trustee or any subsequent purchaser of the ATMO Equipment
may not want to continue the Boise Agreements, and, therefore, Boise agrees
that Trustee can cancel or terminate the Boise Agreements at any time prior
to the sale of the ATMO Equipment (for subsequent removal from the Site)
upon ten (10) days prior written notice to Boise (provided that such
termination shall not prevent Boise
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from claiming damages against ATMO and/or ATC under the Boise Agreement)
and the provisions of Section 5.C hereof shall apply; and
Third, upon any transfer of the rights of ATMO under any Boise
Agreements pursuant to the exercise of the remedies of the Trustee (1) the
Trustee or the Successor under the Boise Agreements shall succeed to all
rights, title and interest of ATMO under and in connection with such Boise
Agreements and shall be obligated to perform all the terms and conditions
of such Boise Agreements, except that the Trustee (but not any Successor
under the Boise Agreement, which shall cure all monetary defaults under the
Boise Agreements on the date of the assignment to the successor) shall not
be required to perform or cause to be performed any of ATMO's obligations
under such Boise Agreements that remain unperformed at the time of such
transfer, and (2) the Trustee, upon the transfer to a Successor under the
Boise Agreement, shall have no liabilities, duties or obligations to Boise
under such Boise Agreements, except as arose during the period in which
rights in such Boise Agreement were transferred to and held by the Trustee
pursuant to clause (1) of this paragraph.
Boise recognizes that the Boise Agreements may, under certain
circumstances, be disaffirmed in a bankruptcy or other proceedings. If a trustee
or person exercising the powers of a trustee in any bankruptcy or insolvency
proceeding rejects or, upon Trustee's request, refuses to assume the Boise
Agreements, if any of the Boise Agreements are rejected by operation of law or
if any of the Boise Agreements are terminated for any other reason (except as a
result of a default thereunder which was curable hereunder or under such Boise
Agreement, but which was not appropriately cured as provided herein or therein),
and if, within thirty (30) days after such termination, the Trustee or its
designees, successors or assigns shall so request, Boise agrees it shall enter
into a new contract with the Trustee or its designees, successors or assignees,
provided (i) the party to the Agreement is a Permitted Transferee, and provided
further, all monetary defaults under such Boise Agreement are cured upon the
commencement of the new contract. In the event a new contract is entered into,
such new contract shall contain similar covenants, agreements, terms, provisions
and limitations as the Boise Agreements.
Boise will not, without the written consent of the Trustee, (1) enter into
any amendment, supplement or other modification of any of the Boise Agreements;
(2) terminate or suspend or consent, or agree to take any action causing the
termination, suspension or assignment of any of the Boise Agreements (except as
expressly permitted by the terms thereof and hereof); or (3) assign any of its
rights, duties or obligations under this Agreement (other than in connection
with a merger or consolidation of Boise where the successor or surviving entity
remains liable on such Boise Agreements and except that an assignment of the
Boise Agreements is expressly permitted in connection with a sale or joint
venture of the St. Helens mill by Boise, provided the assignee assumes Boise's
obligations under this Agreement) or consent or agree to take any action causing
any of the foregoing.
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<PAGE>
Boise represents to the Trustee that: (1) the interest of ATMO in the
Warehouse Site Lease and the Lease is that of a lessee; (2) the Boise
Agreements, including the Warehouse Site Lease and the Lease are in full force
and effect on the date of this Agreement; (3) Boise is not aware of any
condition or event which constitutes an event of default with respect to any of
the Boise Agreements, including the Warehouse Site Lease and the Lease, or
which, after notice or the passage of time or both, would constitute such an
event of default under any of the Boise Agreements, including the Warehouse Site
Lease and the Lease; (4) Boise is the beneficial and record owner of the Real
Property in fee absolute, and there are neither (a) any mortgages, liens, deeds
of trust, or encumbrances thereon in favor of any institutional investor such as
a bank, insurance company, or other financial institution, or any conduit for
any of the foregoing, nor (b) any charges, tenancies, licenses, covenants,
conditions, restrictions, rights-of-way, easements, encroachments or other
restrictions of any nature or character whatsoever that unreasonably restrict or
prevent ATMO's use of the Real Property; and (5) Boise has the full right and
authority to lease the Real Property to ATMO and ATMO may peaceable and quietly
enjoy the Real Property.
11. LIABILITY OF TRUSTEE.
The Trustee and its respective successors and assigns, shall have no right
or power to enforce any of the Boise Agreements, and assume no duty or
obligation thereunder unless and until the Trustee shall have notified Boise
that the Trustee has elected to exercise its rights and remedies as a secured
creditor under this Agreement and to substitute itself in the position of ATMO
under the Boise Agreements and has agreed in a written instrument executed by
the Trustee to be bound by all the terms and conditions of the Boise Agreements
applicable to ATMO.
12. PRIORITY OF SECURITY INTERESTS.
Except as provided in Section 14 hereof, each Creditor agrees that the
Security Interest of the Trustee in the Shared Collateral ranks and will rank in
all respects first and senior in priority, operation and effect to the priority,
operation and effect of the Security Interest of Boise in the same Collateral.
Except as provided in Section 14 hereof, each Creditor agrees that the Security
Interest of Boise in the Shared Collateral ranks and will rank in all respects
behind and junior in priority, operation and effect to the priority, operation
and effect of the Security Interest of Trustee in the same Collateral. Each
Creditor agrees that Boise does not have a Security Interest in the Boise
Agreements. The priorities specified herein are applicable irrespective of any
statement in any Security Agreement or in any other agreement to the contrary,
the time or order or method of attachment or perfection of Security Interests or
the time or order of filing of financing statements or the giving of failure to
give notice of the acquisition or expected acquisition of purchase money or
other security interests. Nothing in this Agreement shall subordinate Boise's
security interest in the ATMO Equipment to other secured parties.
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<PAGE>
Each Creditor agrees that any and all of Boise's rights under any
landlord's lien, right of distraint or levy with regard to any of the Shared
Collateral are subordinate to and will rank in all respects behind and junior in
priority, operation and effect to the Security Interest of Trustee in such
Collateral.
13. EXERCISE OF RIGHTS.
Irrespective of any other agreement or arrangement and so long as the Notes
or any Trustee Obligations remain outstanding, Boise agrees that (1) it will not
commence against ATMO any bankruptcy, insolvency, reorganization, receivership,
relief or similar proceedings or assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of ATMO, and (2) it will not
take any action to enforce any rights or exercise any remedies it may have under
either the Boise Security Agreement or pursuant to any landlord's lien, right of
distraint or levy, against any Boise Collateral.
14. DIVISION OF PROCEEDS.
The proceeds of any sale, disposition or other realization by either
Creditor upon the Shared Collateral (or any portion thereof) will be distributed
in the following order of priorities:
First, to the Trustee in an amount equal to all costs and expenses
incurred by Trustee in connection with or incident to the custody,
preservation, sale of, collection from, or other realization upon any of
the Shared Collateral (but excluding any costs incurred by the Trustee in
the operation of the Shared Collateral, if the Trustee chooses to operate
the Shared Collateral);
Second, Boise and the Trustee shall share all proceeds on a 50-50
basis up to the first $20 million of proceeds in excess of First above;
Boise's and the Trustee's share of any proceeds in excess of the first $20
million shall be applied as set forth below.
Third, to the payment or prepayment of all the Trustee Obligations
until paid and satisfied in full;
Fourth, to the payment or prepayment of all the Boise Obligations, to
the extent not paid from the proceeds received in Second above; and
Fifth, to ATMO or its successors or assigns or to whomever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, any surplus then remaining from such proceeds.
In no event shall Boise's recovery exceed the amount of the Boise
Obligations. Notwithstanding the foregoing Section 14, Trustee acknowledges
that Boise has the right to purchase the ATMO Equipment free and clear of
the
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<PAGE>
Trustee's security interest (except for Trustee's security interest in the
proceeds of such sale) pursuant to Section 15(a) of the Boise Agreement.
15. TURNOVER OF PAYMENTS OR PROCEEDS.
If there shall occur an Event of Default as defined in the Indenture, and
written notice of such Event of Default has been given to Boise, then unless and
until all such Events of Default shall have been cured, or unless and until the
Trustee Obligations shall be paid in full, Boise will not receive or accept any
payment or amount which constitutes Trustee ATMO Collateral (but not including
payments due under the Boise Agreements), or proceeds thereof, including
insurance proceeds, except in trust for Trustee as provided herein, and shall
promptly pay such payment or amount to Trustee.
In the event that Boise shall receive any Trustee ATMO Collateral (but not
including payments due under the Boise Agreement) or proceeds thereof, including
any insurance proceeds, for funds from ATMO as a result of the sale, exchange,
lease or other disposition of the Trustee ATMO Collateral which it is not
entitled to receive under the provisions of this Agreement, such proceeds or
funds shall be received and held in trust by Boise for Trustee, shall be paid
into or placed in a separate deposit account, shall not be commingled with any
other funds or accounts, and shall not be disbursed or withdrawn without the
prior written consent of Trustee. Boise shall promptly notify Trustee of the
receipt of any such proceeds or funds. Furthermore, if any instruments, chattel
paper, money or monies, or documents are at any time or times included in such
Collateral, whether as proceeds or otherwise, which Boise is not entitled to
receive under this Agreement, Boise agrees that it will hold the same in trust
for the benefit of Trustee and will promptly deliver the same to Trustee upon
the receipt thereof from ATMO and, in any event, promptly upon demand therefor
by Trustee.
16. NO REPRESENTATIONS OR WARRANTIES.
The Creditors agree that they have not made to each other nor do they
hereby otherwise make to each other any representations or warranties, express
or implied, nor do they assume any liability to each other with respect to: (1)
the enforceability, validity, value or collectability of the Shared Collateral
(or any portion thereof) or any guaranty or security which may have been granted
to either of them in connection with any of the Obligations; or (2) except as
provided by this Agreement, ATMO's right, title or interest in, or any right to
transfer the Collateral (or any portion thereof).
17. NO LIABILITY.
Neither Creditor shall be liable to the other Creditor for any action or
failure to act, or for any judgment, negligence, or mistake, or oversight
whatsoever on the part of such Creditor or such Creditors agents, officers,
employees or attorneys with respect to any transaction relating to any of the
Obligations owed to it or the enforcement of the Security Interest granted to it
provided such Creditor has not been guilty of gross negligence or willful
misconduct.
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<PAGE>
18. OBLIGATIONS UNDER INTERCREDITOR AGREEMENT NOT AFFECTED.
The Creditors agree that Trustee may, at its sole discretion and without
notice to Boise, take any or all of the following actions with respect to the
Trustee Obligations without affecting any of the Trustee's rights under this
Agreement:
(1) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Trustee Obligations, or any other
amendment or waiver of or any consent to departure from any agreement
related to such Obligations or any Note Document or any other agreements
related thereto;
(2) any release or amendment or waiver of or consent to departure from
any guaranty for all or any of the Trustee Obligations owed to it, or any
release of any Person at any time primarily or secondarily liable for all
or any part of the Trustee Obligations and/or any Collateral or security
thereof;
(3) any alteration or exchange of any Trustee Obligations owed to it,
or release or compromise of any such Obligation;
(4) release its Security Interest in, or surrender, release or permit
any substitution or exchange for, all or any part of any property securing
any such Trustee Obligations;
(5) sell, exchange, release or otherwise deal with all or any part of
the Collateral; or
(6) exercise or refrain from exercising any rights against any Person
liable to such party under the Obligations.
19. [RESERVED].
20. SPECIFIC PERFORMANCE.
Each Creditor is hereby authorized to demand specific performance of this
Agreement at any time when the other Creditor shall have failed to comply with
any of the provisions of this Agreement applicable to such Creditor. Such
Creditor hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
21. AMENDMENT; WAIVER.
No amendment or waiver of and provision of this Agreement shall be
effective unless the same shall be in writing and signed by both Creditors, and
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No delay on the part of any Creditor
in the exercise of any right, power
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<PAGE>
or remedy shall operate as a waiver thereof, nor shall any single or partial
exercise by such Creditor of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
22. NOTICES.
Any notice required or permitted to be given under this Agreement may be,
and shall be deemed, given when deposited via certified mail in the United
States mail, postage prepaid, return receipt requested, or by recognized
overnight delivery service, charges prepaid, or by facsimile (provided that a
copy of all information provided by facsimile is also sent by one of the other
methods permitted under this Section 22), addressed to the applicable party at
the address shown below its signature hereto, or at such other address as it
may, by written notice received by the other party to this Agreement, have
designated as its address for such purpose.
23. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding of the
Creditors and supersedes all prior agreements and understandings of the
Creditors relating to the subject matter herein contained.
24. CAPTIONS.
Section captions used in this Agreement are for convenience only, and shall
not affect the interpretation of the provisions of this Agreement.
25. COUNTERPARTS.
This Agreement may be executed by the parties hereon on any number of
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and same instrument. This Agreement shall become
effective as of the date hereof when one or more counterparts has been executed
and delivered by each of the parties hereto.
26. TERMINATION.
This Agreement shall remain in full force and effect until the repayment in
full of the Trustee Obligations.
27. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
in such state. All terms used herein which are not defined herein and are
defined in the New York Uniform Commercial Code shall have the meanings set
forth therein, unless the
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context otherwise requires. Except as otherwise provided in this Agreement, the
rights and priorities of the Creditors shall be determined in accordance with
applicable law.
28. WAIVER OF JURY TRIAL.
Each of the parties hereto hereby irrevocably waives trial by jury in any
action or proceeding with respect to this Agreement.
29. INFORMATION.
Upon the request of any Creditor, the other Creditor shall use its
reasonable best efforts to provide the other with all reasonable information
relating to the transactions contemplated by this Agreement and with any credit
or other information with respect to any of the Collateral.
30. SUCCESSORS AND ASSIGNS; BENEFIT OF AGREEMENT.
This Agreement is solely for the benefit of the Creditors and their
successors, designees or assigns and no other Persons, including, without
limitation ATC, ATMO, or ATH shall have any benefit, priority or interest under,
or because of the existence of, this Agreement.
31. SEVERABILITY OF PROVISIONS.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to each such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement in any other jurisdiction.
32. CONTROLLING CONTRACT.
In the case of any conflict between this Agreement and any Security
Agreement, this Agreement shall control.
33. EXECUTION BY ATMO, ATC, AND ATH.
By executing this Agreement, ATMO, ATC, and ATH agree to be bound by the
provisions hereof as they relate to the relative rights of the Creditors;
provided however, that solely as between each of ATMO, ATC, and ATH, on the one
hand, and the Creditors, on the other hand, (i) nothing in this Agreement shall
amend, modify, change, or supersede the terms of any Security Agreement or the
Indenture, and (ii) in the event of any conflict or inconsistency between the
terms of this Agreement and any Security Agreement or the Indenture, the terms
of such Security Agreement or Indenture shall govern the relationship between
such Creditors and ATMO, ATC, and ATH, as applicable. Each of ATMO, ATC, and ATH
further agrees that except as expressly provided herein (i) the terms of this
Agreement shall not give ATMO, ATC, and ATH any
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substantive rights against Creditors, and (ii) if any Creditor shall enforce its
rights or remedies in violation of the terms of this Agreement, none of ATMO,
ATC, and ATH shall either raise such violation as a defense to the enforcement
by these Creditors under any Security Agreement or the Indenture, nor assert
such violation as a counterclaim or basis for setoff or recoupment against such
Creditor.
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IN WITNESS WHEREOF, each Creditor has caused this Agreement to be duly
executed this 9th day of July, 1999.
THE CHASE MANHATTAN BANK
By: /s/ Kathleen Perry
-------------------------
Name: Kathleen Perry
Title: Vice President
Address for Notice:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Kathleen Perry
With a copy to: Kelly Drye & Warren
101 Park Avenue
29th Floor
New York, NY 10178
Attention: David Retter
BOISE CASCADE CORPORATION
By: /s/ Irving Littman
-------------------------
Name: Irving Littman
Title: Vice President and
Treasurer
Address for Notice:
Boise Cascade Corporation
Attention General Counsel
1111 West Jefferson Street,
PO Box 50
Boise, ID 83728-0001
Telecopy No: 208/384-4912
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<PAGE>
AMERICAN TISSUE MILLS OF
OREGON, INC.
By: /s/ Mehdi Gabayzadeh
-------------------------
Name: Mehdi Gabayzadeh
Title: President
AMERICAN TISSUE CORPORATION
By: /s/ Mehdi Gabayzadeh
-------------------------
Name: Mehdi Gabayzadeh
Title: President
AMERICAN TISSUE INC.
By: /s/ Mehdi Gabayzadeh
-------------------------
Name: Mehdi Gabayzadeh
Title: President
-18-
<PAGE>
STATE OF NEW YORK )
)ss.
COUNTY OF NEW YORK )
JULY 9 , 1999.
Personally appeared Kathleen Perry, who, being sworn, stated that he/she is
the Vice President, respectively, of THE CHASE MANHATTAN BANK and that the seal
affixed hereto is its seal and that this instrument was voluntarily signed and
sealed on behalf of the corporation by authority of its Board of Directors.
Before me:
/s/ Annabelle DeLuca
-----------------------------------
Notary Public
My Commission expires
ANNABELLE DeLUCA
Notary Public, State of New York
No. 01DE5013758
Qualified in Kings County
Certificate Filed in New York County
Commission Expires July 15, 2001
STATE OF IDAHO )
)ss.
COUNTY OF ADA )
June 23, 1999.
Personally appeared IRVING LITTMAN, who, being sworn, stated that he is the
Vice President and Treasurer of Boise Cascade Corporation and that the seal
affixed hereto is its seal and that this instrument was voluntarily signed and
sealed on behalf of the corporation by authority of its Board of Directors.
Before me:
/s/ Cherie H. Anderson
----------------------------------
Notary Public
[SEAL] My Commission expires: 8/5/2003
CHERIE H. ANDERSON
NOTARY PUBLIC
STATE OF IDAHO
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<PAGE>
STATE OF NEW YORK )
)ss.
COUNTY OF NEW YORK )
July 9, 1999.
Personally appeared Mehdi Gabayzadeh, who, being sworn, stated that he/she
is the President, respectively, of AMERICAN TISSUE MILLS OF OREGON, INC. and
that the seal affixed hereto is its seal and that this instrument was
voluntarily signed and sealed on behalf of the corporation by authority of its
Board of Directors.
Before me:
/s/ Kevin William Wells
----------------------------------
Notary Public
My Commission expires: 9/28/00
KEVIN WILLIAM WELLS
Notary Public, State of New York
No. Q1WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
STATE OF NEW YORK )
)ss.
COUNTY OF NEW YORK )
July 9, 1999.
Personally appeared Mehdi Gabayzadeh, who, being sworn, stated that he/she
is the President, respectively, of AMERICAN TISSUE CORPORATION and that the seal
affixed hereto is its seal and that this instrument was voluntarily signed and
sealed on behalf of the corporation by authority of its Board of Directors.
Before me:
/s/ Kevin William Wells
-----------------------------------
Notary Public
My Commission expires: 9/28/00
KEVIN WILLLIAM WELLS
Notary Public, State of New York
No. Q1WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
-20-
<PAGE>
STATE OF NEW YORK )
)ss.
COUNTY OF NEW YORK )
July 9, 1999.
Personally appeared Mehdi Gabayzadeh, who, being sworn, stated that he/she
is the President, respectively, of AMERICAN TISSUE INC. and that the seal
affixed hereto is its seal and that this instrument was voluntarily signed and
sealed on behalf of the corporation by authority of its Board of Directors.
Before me:
/s/ Kevin William Wells
-----------------------------------
Notary Public
My Commission expires: 9/28/00
KEVIN WILLLIAM WELLS
Notary Public, State of New York
No. Q1WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
-21-
ASSET PURCHASE AGREEMENT
BY AND AMONG
CROWN PAPER CO., CROWN VANTAGE NEW HAMPSHIRE ELECTRIC, INC.
AND BERLIN MILLS RAILWAY, INC., AS SELLER
AND
AMERICAN TISSUE HOLDINGS INC. AND
PULP & PAPER OF AMERICA LLC, AS BUYER
Dated as of March 24, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions.............................................................1
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets.............................................5
2.2 Excluded Assets.........................................................7
2.3 Assumed Liabilities.....................................................8
2.4 Purchase Price.........................................................10
ARTICLE III
RELATED AGREEMENTS
3.1 Related Agreements.....................................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization, Qualification............................................11
4.2 Authority Relative to this Agreement...................................12
4.3 Consents and Approvals.................................................12
4.4 Non-Contravention......................................................13
4.5 Environmental Matters..................................................13
4.6 Licenses and Permits...................................................14
4.7 Compliance with Laws...................................................14
4.8 Financial Statements...................................................15
4.9 Litigation.............................................................15
4.10 Absence of Changes.....................................................16
4.11 Title to Purchased Assets..............................................18
4.12 Real Property..........................................................18
4.13 Leases.................................................................20
4.14 Inventory..............................................................20
4.15 Intellectual Property and Software.....................................20
4.16 Material Contracts.....................................................23
4.17 Maintenance of the Equipment...........................................23
4.18 Sufficiency of Purchased Assets........................................24
4.19 Labor Matters..........................................................24
4.20 Employee Benefit Plans.................................................24
4.21 Taxes..................................................................25
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4.22 Insurance..............................................................25
4.23 Undisclosed Liabilities................................................26
4.24 Powers of Attorney.....................................................26
4.25 Product Warranty.......................................................26
4.26 Product Liability......................................................26
4.27 Finders................................................................26
4.28 Related Party Transactions.............................................26
4.29 Year 2000 Compliance...................................................27
4.30 Books and Records......................................................27
4.31 Shares of ARCO.........................................................27
4.32 Disclosure.............................................................27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization, Qualification............................................28
5.2 Authority Relative to this Agreement...................................28
5.3 Consents and Approvals.................................................29
5.4 Non-Contravention......................................................29
5.5 Litigation.............................................................29
5.6 Finders................................................................30
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business of the Facility....................................30
6.2 Notification...........................................................30
6.3 Forbearances by Seller.................................................31
6.4 Insurance, Landfill, Financial Security................................32
6.5 Negotiations with Others...............................................32
6.6 Investigation of Businesses and Properties.............................32
6.7 Confidentiality........................................................32
6.8 Taxes and Recording Fees...............................................33
6.9 Proration of Lease Payments, Utility Charges and Other Payments........33
6.10 Allocation of Purchase Price...........................................33
6.11 Collection of Accounts Receivable......................................33
6.12 Bulk Sales Laws........................................................34
6.13 Materials Received After Closing.......................................34
6.14 Retention of Books and Records.........................................34
6.15 HSR Filings............................................................34
6.16 Expenses...............................................................34
6.17 Public Announcements...................................................34
6.18 Subsequent Events......................................................35
6.19 Efforts to Consummate..................................................35
6.20 Further Assurances.....................................................36
6.21 Inventory Adjustment...................................................36
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6.22 Real Property Information..............................................37
6.23 Certain Incomplete Deliveries..........................................38
6.24 Pulp Mill Shutdown Costs...............................................38
ARTICLE VII
COVENANTS
7.1 Transition.............................................................39
7.2 Covenant Not To Compete................................................39
7.3 Permit Application.....................................................40
7.4 Tax Clearance..........................................................40
ARTICLE VIII
EMPLOYEES AND EMPLOYEE MATTERS
8.1 Transferred Employees..................................................41
8.2 Employee Benefit Plans.................................................41
8.3 Worker's Compensation..................................................42
8.4 Severance and Vacation Pay.............................................42
8.5 Other Liabilities Relating to Employees................................43
8.6 Administration.........................................................43
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
9.1 Representations and Warranties.........................................43
9.2 Performance of this Agreement..........................................44
9.3 Corporate Authorization................................................44
9.4 Consents and Approvals.................................................44
9.5 Injunction, Litigation.................................................44
9.6 Legislation............................................................44
9.7 Title Insurance, Estoppel Certificates.................................44
9.8 Receipt of Licenses and Permits and Environmental Permits..............45
9.9 Related Agreements, Documents and Instruments..........................45
9.10 No Change..............................................................45
9.11 Payment of Transfer Taxes..............................................45
9.12 Bulk Sales Compliance..................................................45
9.13 Results of Environmental Audit.........................................45
9.14 Opinion of Counsel for Seller..........................................46
9.15 No Material Adverse Change.............................................46
9.16 HSR Act................................................................46
9.17 Termination of Liens...................................................46
9.18 Closing of Sale of Senior Notes........................................46
9.19 Cluster Compliance.....................................................47
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ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLER
10.1 Representations and Warranties.........................................47
10.2 Performance of this Agreement..........................................47
10.3 Limited Liability Company Authorization................................47
10.4 Consents and Approvals.................................................47
10.5 Injunction, Litigation.................................................47
10.6 Legislation............................................................48
10.7 Opinion of Counsel for Buyer...........................................48
10.8 HSR Act................................................................48
ARTICLE XI
CLOSING
11.1 Time and Place of Closing..............................................48
11.2 Deliveries by Seller...................................................48
11.3 Deliveries by Buyer....................................................49
11.4 Deliveries by Seller and Buyer.........................................50
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Seller..............................................50
12.2 Indemnification by Buyer...............................................52
12.3 Third Party Claims.....................................................53
12.4 Limitations on Indemnification.........................................54
12.5 Survival, Investigation................................................54
12.6 Exclusive Remedy. .....................................................54
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination............................................................55
13.2 Effect of Termination..................................................55
13.3 Amendment..............................................................56
13.4 Extension, Waiver......................................................56
13.5 Termination of ATH's Obligations. ....................................56
ARTICLE XIV
GENERAL PROVISIONS
14.1 Option to Purchase Shares of Electric..................................56
14.2 Notices................................................................56
14.3 Interpretation.........................................................57
14.4 Counterparts...........................................................57
14.5 Waiver.................................................................57
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14.6 Modification...........................................................58
14.7 Severability...........................................................58
14.8 Stricken Words or Phrases..............................................58
14.9 Number and Gender......................................................58
14.10 Miscellaneous..........................................................58
14.11 Specific Performance...................................................58
14.12 Governing Law..........................................................58
List of Schedules:
1.1 Persons With "Knowledge"
2.1(i) Real Property
2.1(ii) Equipment
2.1(iv) Environmental Permits
2.1(v) Licenses and Permits
2.1(vi) Intellectual Property
2.1(vii) Utility Agreements
2.1(ix) Prepaid Expenses and Deferred Charges
2.1(x) Assets of Electric and Railway
2.1(xii) Facility Software
2.1(xiii) Shared Software
2.2(iii) Non Assignable Environmental Permits and Licenses and Permits
2.2(vi) Excluded Assets
2.3(a)(i) Industrial Revenue Bonds
4.1(b) Real Property and Assets of Electric
4.1(c) Real Property and Assets of Railway
4.3 Seller Consents and Approvals
4.3 Consents and Approvals of Electric
4.3 Consents and Approvals of Railway
4.5 Environmental Permits
4.6 Licenses and Permits
4.7 Compliance with Laws
4.8 Financial Statements
4.9 Litigation
4.10 Absence of Changes
4.11 Title to Purchased Assets
4.12(c) Real Property Compliance with Laws
4.12(d) Defects Affecting Real Property
4.12(h) Leases, Subleases, Licenses, Covenants, Easements, Concessions
or Other Agreements Affecting Real Property
4.12(i) Underground Storage Tanks
4.13 Leases
4.14 Inventory
4.15(c) Title to Intellectual Property
4.15(e) Shared Software Programs
4.16 Material Contracts
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4.18 Sufficiency of Purchased Assets
4.19 (a) Collective Bargaining Agreements, Employment Contracts and
Consulting Agreements to be Assumed by Buyer
4.19(b) Notices Regarding Labor Matters
4.19(d) Employee Claims
4.20 Employee Benefit Plans
4.21(b) Return Audits
4.22 Insurance
4.25 Seller's Standard Terms and Conditions of Sale
4.28 Related Party Transactions
4.29 Exceptions to Year 2000 Compliance
5.3 Buyer Consents and Approvals
5.5 Litigation Threatened against Buyer
6.6 Scope of Phase II Environmental Audit
7.2(iii) Employees That Seller Will Not Employ
7.2(a) Manufacturing of Target Grades at Berlin-Gorham and other
Crown Mills
8.2 Employee Benefit Plans to be established by Buyer
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of March 24,
1999, is made by and among CROWN PAPER CO., a Virginia corporation ("Crown"),
CROWN VANTAGE NEW HAMPSHIRE ELECTRIC, INC., a New Hampshire corporation and a
wholly-owned subsidiary of Crown ("Electric"), BERLIN MILLS RAILWAY, INC., a New
Hampshire corporation and a wholly-owned subsidiary of Crown ("Railway," and
together with Crown and Electric, collectively, "Seller"), and AMERICAN TISSUE
HOLDINGS INC., a Delaware corporation ("ATH") and PULP & PAPER OF AMERICA LLC, a
New York limited liability company ("PPA" and together with ATH, "Buyer").
RECITALS
Seller desires to sell to Buyer substantially all of the assets of its
integrated pulp and paper mills located in Berlin and Gorham, New Hampshire and
related hydroelectric generating facilities and landfill (collectively, the
"Facility"), and Buyer desires to purchase from Seller such assets, with the
exception of certain excluded assets, upon the terms and conditions and for the
consideration hereinafter set forth, which consideration consists of cash and
the assumption of certain liabilities.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Arbitrator" has the meaning set forth in Section 6.21(a).
"ARCO" has the meaning set forth in Section 2.1(x).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"ATC" has the meaning set forth in Section 6.7.
"ATH" has the meaning set forth in the introductory paragraph of this Agreement.
"Basket" has the meaning set forth in Section 12.1(i).
"Brokerage Agreement" has the meaning set forth in Section 3.1(i).
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"Business" has the meaning set forth in Section 2.1(iii).
"Buyer Indemnified Parties" has the meaning set forth in Section 12.1.
"Buyer" has the meaning set forth in the introductory paragraph of this
Agreement.
"Closing" has the meaning set forth in Section 11.1.
"Closing Date" has the meaning set forth in Section 11.1.
"Closing Inventory Statement" has the meaning set forth in Section 6.21(a)(i).
"Cluster Rule" has the meaning set forth in Section 9.19.
"Compete" has the meaning set forth in Section 7.2.
"Crown" has the meaning set forth in the introductory paragraph of this
Agreement.
"Electric" has the meaning set forth in the introductory paragraph of this
Agreement.
"Employee" has the meaning set forth in Section 8.1.
"Encumbrances" has the meaning set forth in Section 4.11.
"Environmental Laws" has the meaning set forth in Section 4.7.
"Environmental Liabilities" has the meaning set forth in Section 2.3(a)(iii).
"Environmental Permits" has the meaning set forth in Section 2.1(iii).
"Equipment" has the meaning set forth in Section 2.1(ii).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Expert" has the meaning set forth in Section 9.13(a).
"Facility" has the meaning set forth in the Recitals.
"Facility Software" has the meaning set forth in Section 2.1(xii).
"Final Closing Inventory Statement" has the meaning set forth in Section
6.21(a)(ii).
"Financial Statements" has the meaning set forth in Section 4.8.
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"Governmental Authority" has the meaning set forth in Section 4.5.
"Handling Hazardous Substances" has the meaning set forth in Section 4.5.
"Hazardous Emissions" has the meaning set forth in Section 4.5.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Party" has the meaning set forth in Section 12.3.
"Indemnifying Party" has the meaning set forth in Section 12.3.
"Intellectual Property" has the meaning set forth in Section 2.1(vi).
"Inventory" has the meaning set forth in Section 2.1(iii).
"Law" has the meaning set forth in Section 2.3(a).
"Leases" has the meaning set forth in Section 4.13.
"Legal Action" has the meaning set forth in Section 12.3.
"Liabilities" has the meaning set forth in Section 2.3(a).
"Licenses and Permits" has the meaning set forth in Section 2.1(v).
"Material Contracts" has the meaning set forth in Section 4.16.
"Minimum" has the meaning set forth in Section 12.1(i).
"Ordinary Course of Business" has the meaning set forth in Section 2.1(ix).
"Pension Plans" has the meaning set forth in Section 4.20.
"Permitted Exceptions" has the meaning set forth in Section 6.19.
"Publishing Grades" has the meaning set forth in the Strategic Alliance
Agreement.
"Purchase Price" has the meaning set forth in Section 2.4.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchased Hardware and Software" has the meaning set forth in Section 4.29.
"Railway" has the meaning set forth in the introductory paragraph of this
Agreement.
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"Real Property" has the meaning set forth in Section 2.1(i).
"Related Agreements" has the meaning set forth in Section 3.1.
"Related Party" has the meaning set forth in Section 4.28.
"Returns" has the meaning set forth in Section 4.21(b).
"Schedule," together with the numeric designation thereof (e.g., "Schedule
4.3"), means the specifically enumerated Schedule. Except to the extent
otherwise expressly provided herein, each Schedule has been separately delivered
and agreed to as of the date of this Agreement.
"Seller Documents" has the meaning set forth in Section 4.2(a).
"Seller Indemnified Parties" has the meaning set forth in Section 12.2.
"Shared Software" has the meaning set forth in Section 2.1(xiii).
"SEC" means the Securities and Exchange Commission.
"Strategic Alliance Agreement" has the meaning set forth in Section 3.1(i).
"Survival Date" has the meaning set forth in Section 12.5.
"Sustaining Grades" has the meaning set forth in the Brokerage Agreement.
"Taxes" has the meaning set forth in Section 4.21(b).
"Target Grades" has the meaning set forth in the Brokerage Agreement.
"Target Value" has the meaning set forth in Section 6.21.
"To the knowledge of Buyer" means the actual present knowledge of those officers
and employees of Buyer, after due inquiry, listed in Schedule 1.1.
"To the knowledge of Seller" means the actual present knowledge of those
officers and employees of Seller, after due inquiry, listed in Schedule 1.1.
"Transferred Employees" has the meaning set forth in Section 8.1.
"Utility Agreements" has the meaning set forth in Section 2.1(vii).
"WARN Act" means the Worker Adjustment and Retraining Notification Act, as
amended.
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"Welfare Plans" has the meaning set forth in Section 4.20.
"Work" has the meaning set forth in Section 6.24.
"Y2K Remediation Project" has the meaning set forth in Section 4.29.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. At the Closing, Seller will sell, assign,
transfer, grant, convey and deliver to Buyer and/or one or more of its
designees, and Buyer and/or one or more of its designees shall purchase, acquire
and take delivery, or cause one or more of its designees to purchase, acquire
and take delivery, from Seller, for the consideration hereinafter set forth in
Sections 2.3(a) and 2.4, of the following listed assets, properties and rights
of Seller (the "Purchased Assets"):
(i) the real property listed in Schedule 2.1(i) which, together with
the structures, fixtures and other improvements thereon and the
appurtenances thereto and all rights and privileges pertaining thereto, is
hereinafter referred to as the "Real Property";
(ii) the machinery, equipment (including, without limitation,
electronic data processing equipment and peripheral equipment), hydro
electric facilities and transmission system, furniture, vehicles, tools,
supplies, hardware, spare parts and other tangible personal property (other
than the tangible personal property described in other clauses of this
Section 2.1) listed in Schedule 2.1(ii), (hereinafter referred to
collectively as the "Equipment");
(iii) all raw materials, work-in-process, pulp and finished goods
inventories, stores and supplies, wherever located, which are owned by
Seller and are used in the business of the Facility (the "Business") (which
inventories, stores and supplies are hereinafter referred to collectively
as the "Inventory");
(iv) the Environmental Permits and applications held by Seller which
are assignable and relate exclusively to the Purchased Assets and/or the
Business listed in Schedule 2.1(iv), and used herein, "Environmental
Permits" means federal, state and local governmental licenses, permits, and
other authorizations and approvals, whether foreign or domestic, which
relate to the environment or to public health and safety or worker health
and safety as they may be affected by the environment;
(v) the Licenses and Permits and applications held by Seller which are
assignable and relate exclusively to the Purchased Assets and/or the
Business listed in Schedule 2.1(v); as used herein, "Licenses and Permits"
means federal, state
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and local governmental licenses, permits, approvals and authorizations,
whether foreign or domestic, other than "Environmental Permits";
(vi) the Intellectual Property owned or licensed by Seller or which
Seller has the right to use, which is used in or relates to the Business
listed in Schedule 2.1(vi); as used herein, "Intellectual Property" means
(A) all rights and interests of Seller in trade names, trademarks, and
service marks (including trademark and service mark registrations and
applications for registration) related to the Business (but excluding those
relating to Sustaining Grades, Target Grades and Publishing Grades), and
(B) the following other intellectual property rights and interests used in
or related to the Business: patents, patent rights, copyrights, whether
domestic or foreign (as well as applications, registrations, licenses,
franchises and certificates for any of the foregoing), inventions, trade
secrets, proprietary information, goodwill, know-how, shop rights,
technology, drawings, blueprints, specifications, proprietary processes and
all other industrial and intellectual property rights that are used in or
relate to the Business, provided that Seller shall retain a perpetual,
royalty-free, non-exclusive license to use all of the Intellectual Property
rights and interests described in this Section 2.1(vi)(B).
(vii) all rights and interests of Seller in, to and under all Material
Contracts and Leases and all rights and interests of Seller in, to and
under all other contracts and commitments which relate exclusively to the
Purchased Assets or the Business, including, but not limited to, cutting
and timber rights and contracts; and all rights to contracts and agreements
for the provision of gas, water, steam, electricity, telecommunications
services and other utilities (if any) supplied to the Real Property listed
in Schedule 2.1(vii) ("Utility Agreements");
(viii) all books and records (or true and complete copies thereof)
pertaining to the Business, the Purchased Assets and operations of the
Facility, wherever located, including, without limitation, computerized
records, databases and any associated software and documentation as to
assets, liabilities, revenues, expenditures of, and financial transactions,
as to taxes, shipping, supplier lists, Environmental Protection Agency
manifests, etc. used or maintained in the Facility or in connection with
the Business, or otherwise pertaining to the Purchased Assets or the
Business, including, without limitation, operations logs, equipment repair
and maintenance logs, environmental data, books and records relating to or
containing production data, manufacturing and quality control information,
sales or marketing information, customer invoices, customer lists, vendor
and supplier lists and information, and personnel records of those
employees of the Facility who will become Transferred Employees;
(ix) except as otherwise expressly set forth herein, all general
intangibles and other intangible personal property of whatever kind or
character relating to the Business, whether evidenced in writing or not,
including, but not limited to, those categories of prepaid expenses and
deferred charges created in the ordinary course of business consistent with
past custom and practice (including with
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respect to quantity and frequency) ("Ordinary Course of Business"),
databases, proprietary assays, claims, refunds and causes of action
(whether fixed or contingent) of the business listed in Schedule 2.1(ix);
(x) all of the shares of the capital stock of Androscoggin Reservoir
Company ("ARCO") owned by Seller beneficially and/or of record;
(xi) all technical materials and guidelines relating to the Business,
and all brochures, sales literature, promotional material and other
marketing and selling materials relating to pulp and toweling;
(xii) to the extent assignable, transferable or licensable, all rights
and interests of Seller in and to the computer software programs and
databases (and documentation related thereto) that are used exclusively at
the Facility but are not used by Seller in its operations in locations
other than the Facility, as listed in Schedule 2.1(xii) (the "Facility
Software");
(xiii) non-exclusive rights and licenses to use the computer software
programs and databases (and documentation related thereto) that are used at
the Facility and are also used by Seller in its operations in locations
other than the Facility as listed in Schedule 2.1(xiii) (the "Shared
Software"), to the extent that such rights can be granted or licensed;
(xiv) all causes of action, software and equipment warranties and
legal claims relating to the Purchased Assets; and
(xv) except as otherwise expressly provided in this Agreement, all
other assets and rights of every kind and nature, real or personal,
tangible or intangible, other than the Excluded Assets under Section 2.2
hereof, that are owned or claimed by Seller and that are necessary to, or
used by Seller primarily in connection with the Purchased Assets or the
Business, whether or not such Purchased Assets are reflected on the
Financial Statements, or acquired thereafter by Seller.
2.2 Excluded Assets. The following assets relating to the Facility (the
"Excluded Assets") are not included in the Purchased Assets:
(i) all cash and cash equivalents, including cash on hand, in bank
accounts and in the escrow account relating to the Industrial Revenue
Bonds, certificates of deposit, commercial paper and securities (other than
shares of the capital stock of ARCO to be delivered to Buyer or its
designees pursuant to Section 2.1) belonging to Seller, except petty cash
funds located at the offices of the Facility on the date of the Closing;
(ii) all accounts receivable and notes receivable related to the
Business on the date of the Closing;
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(iii) all Environmental Permits and Licenses and Permits held by
Seller which by operation of law are not assignable which are listed in
Schedule 2.2(iii);
(iv) all prepaid expenses and deferred charges relating to the
Facility and belonging to Seller, other than those listed in Schedule
2.1(ix);
(v) all refunds or rebates paid or payable by vendors or suppliers
relating to purchases for the Facility otherwise properly allocable to
periods prior to the Closing; and
(vi) all other assets listed in Schedule 2.2(vi).
2.3 Assumed Liabilities. (a) Except to the extent set forth in paragraph
(b) below, at the Closing, PPA will assume the following specifically listed
actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, assessments, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, debts, liabilities, obligations, taxes,
liens, losses, expenses and fees, including reasonable attorneys' fees, whether
accrued or fixed, absolute or contingent, material or immaterial, or determined
or determinable ("Liabilities"), arising under any federal, state, local or
foreign, statute, law, ordinance, regulation or rule of law (collectively, the
"Law") or otherwise, of Seller which relate to the Purchased Assets and/or the
Business and are not paid or discharged at or before the Closing, and PPA shall
not assume, incur, guarantee or otherwise be obligated with respect to any
Liabilities whatsoever of Seller other than as so stated:
(i) all obligations of Seller relating to the Purchased Assets or the
Business arising from the Material Contracts, Leases and other contracts
and commitments described in Section 2.1(vii), to the extent such
obligations, by their stated terms, are to be performed in the Ordinary
Course of Business subsequent to the Closing, other than Liabilities
arising from breaches thereof or Liabilities accruing thereunder on or
prior to the Closing;
(ii) certain Liabilities of Seller relating to employees and employee
benefits to the extent set forth in Article VIII; and
(iii) except as set forth in Section 9.13, all liabilities and
obligations arising from Hazardous Emissions and Handling Hazardous
Substances at the Facility (whether based in contract, tort, implied or
express warranty, criminal or civil statute or otherwise), under any law,
regulation, policy or guideline, including but not limited to, obligations
to clean up, remedy or otherwise to restore to a former condition, by
itself or jointly with others, any contaminated surface water, ground
water, soil or any natural resources associated therewith, regardless of
whether such liabilities or obligations arose before or after the Closing
(such liabilities and obligations referred to herein as "Environmental
Liabilities").
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The Liabilities hereinabove listed, and to be assumed by PPA, are hereinafter
referred to collectively as the "Assumed Liabilities."
(b) Notwithstanding the provisions of paragraph (a) above, Seller is
retaining, and Buyer is not assuming, and shall not be deemed to have assumed,
any Liabilities of Seller of any kind or nature whatsoever, except those
expressly provided for in Section 2.3(a) above. Without limiting the generality
of the foregoing, except as otherwise set forth in this Agreement and subject to
Section 2.3(a) above, Buyer is not assuming any Liabilities and shall not have
any obligation for or with respect to:
(i) any Liabilities for federal, state and local taxes or assessments,
and related penalties and interest, incurred or suffered by Seller or its
affiliates in the conduct of, or relating to, the Business prior to the
Closing or incurred by Seller with respect to any of the transactions
contemplated hereby including, without limitation, all income, payroll,
value added, sales, use, ad valorem, transfer, franchise, withholding,
property excise taxes, timber tax, worker's compensation tax, governmental
fees or other like assessments or charges of any kind;
(ii) any Liabilities, whether civil or criminal in nature, arising out
of any actual or alleged violation by Seller which occurred, or which are
alleged to have occurred, prior to the Closing, or by any previous owner of
any of the Purchased Assets, of any federal, state or local law, rule,
regulation, judicial or administrative order, judgment or decree, or
governmental permit, license, approval or authorization, with the exception
of Environmental Liabilities;
(iii) any Liabilities of Seller or its affiliates arising from a
breach by Seller or its affiliates prior to the Closing of any contract or
agreement, including, without limitation, Material Contracts and Leases;
(iv) any Liabilities arising under any contract or agreement,
including, without limitation, Material Contracts and Leases, if the rights
of Seller or its affiliates are, for any reason, not transferred to, or the
benefits thereunder are not otherwise made available to, Buyer at the
Closing;
(v) except to the extent expressly otherwise provided in Article VIII
hereof, any Liability in respect of (A) any worker's compensation or
long-term disability for former or present employees of Seller or its
affiliates, whether or not such employees are Transferred Employees, if the
claim arose prior to Closing; (B) any obligation of Seller or its
affiliates to indemnify any person, including, without limitation, by
reason of the fact that such person is or was an officer, director or
employee or agent of Seller or its affiliates; (C) any pension costs for
former or present employees of Seller or its affiliates, whether or not
such employees are Transferred Employees, relating to the period of
employment prior to the Closing, (D) any post-retirement medical benefits
due to former or present employees of Seller, or (E) any severance or
separation pay or allowances for former or present employees of Seller or
its affiliates who are not Transferred Employees.
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(vi) any Liabilities of Seller or its affiliates under unsatisfied
purchase obligations other than the Assumed Liabilities;
(vii) any obligation of Seller or its affiliates under any employment
or consulting agreements or arrangements;
(viii) any Liabilities of Seller or any of its affiliates for any
refunds,
rebates, discounts or other such sums, whether falling due before or after
the Closing;
(ix) any Liabilities of Seller or any of its affiliates, including,
without limitation, inter-company interest payable and accounts payable;
(x) any Liabilities of Seller or its affiliates for legal, accounting
and other professional services rendered to Seller or its affiliates;
(xi) any Liabilities of Seller or its affiliates arising out of any
action, suit, investigation or proceeding to the extent based upon an event
occurring or a claim arising (i) prior to the Closing or (ii) after the
Closing in the case of claims in respect of products or services sold or
provided by Seller prior to the Closing and attributable to acts performed
or omitted by Seller or its affiliates prior to the Closing;
(xii) any other Liabilities of Seller or its affiliates relating to
the Purchased Assets and/or the Business that are incurred prior to the
Closing, including, without limitation, any accounts payable or other
current Liabilities of Seller or its affiliates and any other liabilities
of Seller or its affiliates incurred in connection with its efforts to
consummate the transactions contemplated hereby; and
(xiii) any Liabilities of Seller arising out of indebtedness for
borrowed money, including, without limitation, loans and credit lines of
Seller.
2.4 Purchase Price. The purchase price for the Purchased Assets (the
"Purchase Price"), shall be Forty-Five Million Dollars ($45,000,000), payable in
cash at the Closing by electronic funds transferred to a deposit account with
the financial institution specified by Seller in writing to Buyer no less than
twenty-four (24) hours prior to the Closing. The Purchase Price shall be subject
to the adjustment as set forth in Section 6.21.
ARTICLE III
RELATED AGREEMENTS
3.1 Related Agreements. In connection with the sale and purchase of the
Purchased Assets, the agreements listed in Sections 3.1(i) and 3.1(ii) below
between Crown and PPA will be executed simultaneous with this Agreement and will
become effective as
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of the Closing Date, and Crown and PPA will use reasonable best efforts to enter
into the agreements listed in Section 3.1(iii) below on the Closing Date:
(i) A paper brokerage agreement regarding "Target Grades" and
"Sustaining Grades" of papers produced at the Facility (the "Brokerage
Agreement") and a strategic alliance agreement regarding "Publishing
Grades" of paper produced at the Facility (the "Strategic Alliance
Agreement").
(ii) A pulp purchase agreement regarding pulp produced at the
Facility; and
(iii) Transitional services agreements, pursuant to which each of
Seller and Buyer (and its designees) will provide the other(s) with certain
transitional services relating to the operation and management of the
Business and the corporate operations of Seller following the Closing, such
services to be provided at cost, without profit.
The foregoing agreements are hereinafter referred to collectively as the
"Related Agreements."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer the following:
4.1 Organization, Qualification. (a) Crown is a corporation duly organized,
validly existing and in good standing under the laws of the State of Virginia
and has all requisite corporate power and authority to own all of its properties
and assets, including, without limitation, the Purchased Assets and to carry on
the Business as it is presently being conducted. Seller is duly qualified and in
good standing to do business in New Hampshire and in each other jurisdiction in
which the conduct of the ownership or leasing of its assets or the Business
makes such qualification necessary, except in those jurisdictions where the
failure to be duly qualified and in good standing would not have a material
adverse effect on the Purchased Assets or the Business.
(b) Electric is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Hampshire and a wholly-owned
subsidiary of Crown, and has all requisite corporate power and authority to own,
and does own, all of its properties and assets, including, without limitation,
the assets listed in Schedule 4.1(b), and to carry on its business as it is
presently being conducted. Electric is duly qualified and in good standing to do
business in each other jurisdiction in which the ownership or leasing of its
assets or the conduct of its business makes such qualification necessary, except
in those jurisdictions where the failure to be duly qualified and in good
standing would not have a material adverse effect on the Purchased Assets or its
business.
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(c) Railway is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Hampshire and a wholly-owned
subsidiary of Crown, has all requisite corporate power and authority to own, and
does own, all of its properties and assets, including, without limitation, the
assets listed in Schedule 4.1(c), and to carry on its business as it is
presently being conducted. Railway is duly qualified and in good standing to do
business in each other jurisdiction in which the ownership or leasing of its
assets or the conduct of its business makes such qualification necessary, except
in those jurisdictions where the failure to be duly qualified and in good
standing would not have a material adverse effect on the Purchased Assets or its
business.
4.2 Authority Relative to this Agreement. (a) Seller has all requisite
corporate power and authority under its respective articles of incorporation and
by-laws, each as amended to date, and applicable laws to execute and deliver
this Agreement, the Related Agreements and each other agreement, instrument or
document to be executed and delivered by it hereunder to which it is a party
(collectively, the "Seller Documents") and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by each Seller of the Seller
Documents, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by the Board of Directors of each Seller
and no other corporate proceedings on the part of each Seller are necessary with
respect thereto. Assuming that Buyer has duly authorized the execution and
delivery of the Seller Documents, this Agreement constitutes, and each of the
other Seller Documents, when executed and delivered by Seller, will constitute,
valid and binding obligations of Seller, enforceable in accordance with their
respective terms, except as the same may be limited by (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally or (ii) general principles of equity, whether
considered in a proceeding in equity or law. Other than with respect to
Electric, Railway and ARCO, Crown does not own of record or beneficially, or
have any right or obligation to acquire, directly or indirectly, (i) any shares
of capital stock, or securities convertible into, or exercisable or exchangeable
for, shares of capital stock, of any other corporation, any equity participating
interests in any joint venture, partnership or other non-corporate business
enterprise, relating in either case to the Purchased Assets or the Business.
(b) Neither Electric nor Railway owns of record or beneficially, or has any
right or obligation to acquire, directly or indirectly, (i) any shares of
capital stock, or securities convertible into, or exercisable or exchangeable
for, shares of capital stock, of any other corporation, or (ii) any equity or
participating interests in any joint venture, partnership or other non-corporate
business enterprise, relating in either case to the Purchased Assets or the
Business.
4.3 Consents and Approvals. Except as set forth in Schedule 4.3, there is
no requirement applicable to Seller to make any notification, registration,
qualification or filing with any Governmental Authority or any other third party
as a condition to the lawful consummation by Seller of the transactions
contemplated by the Seller Documents. No order, writ, injunction or decree has
been issued, or is threatened to be issued, by any Governmental Authority
governing or pertaining to the Purchased Assets, or the conduct of
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the Business, which would adversely affect the consummation of the transactions
contemplated by the Seller Documents or the value of the Business or the
Purchased Assets. Except as set forth in Schedule 4.3, there is no requirement
that any party to any Material Contract, Lease, Licenses and Permits, agreement
for the use of Intellectual Property, or loan agreement, to which Seller is a
party or by which it or the Purchased Assets are subject or bound, consent to
the execution by Seller of any of the Seller Documents or the consummation of
the transactions contemplated by the Seller Documents.
4.4 Non-Contravention. Assuming that the consents and approvals set forth
in Schedule 4.3 are obtained, the execution and delivery by each Seller of this
Agreement does not, and the execution and delivery by each Seller of the other
Seller Documents at the Closing and consummation of the transactions
contemplated hereby and thereby will not, (i) violate or result in a breach of
any provision of the respective articles of incorporation or bylaws of each
Seller, each as amended to date, (ii) result in a breach of, or constitute (with
due notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration or otherwise be in conflict with or
result in a loss of contractual benefits) under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which any Seller is a party or by which any
Seller or any of the Purchased Assets may be bound, (iii) violate any order,
writ, injunction, decree, statute, rule, regulation, ordinance, code or other
legal requirement applicable to each Seller, any of the Purchased Assets, or the
Business (excluding from the foregoing clauses (ii) and (iii) such defaults and
violations which would not have a material adverse effect on the Purchased
Assets or the Business), (iv) result in any Encumbrance upon any of the
Purchased Assets or the Facility, or (v) interfere with or otherwise adversely
affect the ability of Buyer and/or any of its designees acquiring the Purchased
Assets to carry on the Business after the Closing Date on substantially the same
basis as it is now conducted by Seller.
4.5 Environmental Matters. Except as set forth in Schedule 4.5, Seller has
obtained all material Environmental Permits required for the lawful operation of
the Purchased Assets and conduct of the Business as it is presently being
conducted, including, without limitation, those relating to (i) emissions,
discharges or threatened discharges of pollutants, contaminants, hazardous or
toxic substances or petroleum or any other waste, substance, material, chemical
or constituent subject to regulation under any Environmental Law ("Hazardous
Materials") into the air, surface water, ground water or the ocean, or on or
into the land ("Hazardous Emissions") and (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials ("Handling Hazardous Substances"). Schedule 2.1(iv) contains
a complete and correct list of all such material Environmental Permits and
applications, all of which are in full force and effect and all of which are
assignable without conditions, unless otherwise indicated therein. To the
knowledge of Seller, and except as identified in Schedule 4.5, Seller is in
substantial compliance with all of the terms and conditions set forth in such
Environmental Permits and are also in substantial compliance with all of the
terms and conditions contained in or required of Seller by any law, regulation,
policy, guideline, order, judgment or decree of any agency, instrumentality,
department, commission, court, tribunal or board of any government, whether
foreign or domestic, national, federal, state, provincial or local (each,
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a "Governmental Authority"), applicable to or having jurisdiction over the
Facility, the Purchased Assets, or the Business which relate to the environment,
including, without limitation, ambient air, surface water, groundwater, land and
subsurface strata, and natural resources such as wetlands flora and fauna, or to
public health and safety or worker health and safety as they may be affected by
the environment including, without limitation, the Resource Conservation and
Recovery Act of 1976, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA) (42 USCA 9601, et. seq.), as
amended, the Superfund Amendments and Reauthorization Act of 1986 (SARA) (Act of
October 17, 1986, Pub. L. No. 99-499 (100 Stat. 1613)), the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, the Pulp and
Paper Cluster Rule (63 FR 18504-18751) (hereinafter referred to, collectively,
as "Environmental Laws"). To the knowledge of Seller (but with respect to
Section 9.13 without regard to Seller's knowledge), and except as identified in
Schedule 4.5, there exist no facts, events or conditions which (x) interfere
with, prevent, or, with the passage of time, could interfere with or prevent
continued substantial compliance by Seller with any of its Environmental Permits
or any of the aforementioned laws, regulations, policies, guidelines, orders,
judgments or decrees, (y) may give rise to any liability on the part of Seller
(whether based in contract, tort, implied or express warranty, criminal or civil
statute or otherwise) under any law, regulation, policy or guideline relating to
the Hazardous Emissions or Handling Hazardous Substances or (z) obligate any of
Seller or, with the passage of time, could cause it to be obligated to clean up,
remedy or otherwise restore to a former condition, by itself or jointly with
others, any contaminated surface water, ground water, soil or any natural
resources associated therewith. Seller has delivered to Buyer true and correct
copies of all environmental site assessments commissioned or performed by or on
behalf of Seller relating to the Purchased Assets or the Business, as listed in
Schedule 4.5.
4.6 Licenses and Permits. Except as set forth in Schedule 4.6, Seller has
obtained all material Licenses and Permits required for the lawful operation of
the Purchased Assets and conduct of the Business as it is presently being
conducted. Schedule 2.1(v) contains a complete and correct list of all such
material Licenses and Permits and applications, all of which are in full force
and effect and, to the knowledge of Seller, are unimpaired by any act or
omission of Seller, its officers, directors, employees or agents, and all of
which are assignable without conditions unless otherwise indicated on Schedule
4.6. No complaint or notice of a violation of any such License or Permit has
been received by Seller or, to the knowledge of Seller, recorded or published,
and no proceeding is pending or, to the knowledge of Seller, threatened, to
revoke, cancel, rescind, modify, or refuse to renew or limit any of the Licenses
and Permits. Seller has no reason to believe that the Licenses or Permits in
effect on the date hereof will not be renewed.
4.7 Compliance with Laws. Except as set forth in Schedule 4.7 or identified
in Schedule 4.5, and in addition to the representations and warranties contained
in Section 4.5 relating to Environmental Permits, those contained in Section 4.6
relating to Licenses and Permits and those contained in Section 4.12 relating to
Real Property, Crown has, and on or after August 25, 1995 Electric and Railway
have, operated the Purchased Assets and the Business in substantial compliance
with all applicable laws, rules, regulations, codes, plans,
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policies, guidelines, injunctions, orders, rulings, judgments or decrees of any
Governmental Authority, applicable to the Purchased Assets or the Business,
including, without limitation, (i) the Occupational Safety and Health Act of
1970, as amended, (ii) Environmental Laws, and (iii) those related to antitrust
and trade matters, civil rights, zoning and building codes, public health and
safety, worker health and safety and labor and nondiscrimination, the failure to
comply with which could reasonably be expected to materially and adversely
affect the earnings, assets, financial condition or operations of the Business
or the Purchased Assets. Seller is not subject to any governmental or private
litigation or proceedings involving a demand for damages or other liability
under Environmental Laws and, to the knowledge of Seller, none are threatened or
anticipated. Furthermore, except as is disclosed in Schedule 4.5 or Schedule
4.7, Seller has not received any citation, notice of fine, penalty or
unsatisfied abatement obligation, notice or orders or other written or oral
communication alleging any presently unresolved non-compliance with any of the
aforementioned laws, regulations, policies, guidelines, orders, judgments or
decrees or which may require cleanup or other remedial work, and no action,
suit, proceeding, hearing, investigation, charge, complaint, demand, or notice
has been filed or commenced against Seller alleging any failure so to comply
and, to the knowledge of Seller, none are threatened or anticipated. Crown has,
and on or after August 25, 1995, Electric and Railway have, timely filed all
material reports required to be filed by them under applicable Environmental
Laws. To the knowledge of Seller, Crown has not, and on or after August 25,
1995, neither Electric nor Railway has, stored or used any pollutants,
contaminants or hazardous or toxic wastes, substances or materials in violation
of any aspect of any Environmental Law under which the Facility is subject.
Crown has not, and on or after August 25, 1995, neither Electric nor Railway
has, buried, dumped, disposed, spilled or released any Hazardous Materials on,
beneath or about the Facility in violation of Environmental Laws that have not
yet been resolved with the applicable Governmental Authority and, except as
disclosed in Schedule 4.5, no releases of Hazardous Materials have occurred at,
on, under or from the Real Property in a manner which would reasonably be
expected to require response or other corrective action under any applicable
Environmental Law.
4.8 Financial Statements. Seller has previously furnished Buyer with true
and complete copies of the following unaudited financial statements for the
Business (collectively the "Financial Statements"): a balance sheet as of
December 27, 1998 and statements of income and cash flow for the fiscal year
ended on such date. The Financial Statements present fairly the financial
position of the Business as of such date and the results of operations and cash
flows for such period and have been prepared in accordance with accounting
principles utilized by Seller for its internal operating and management purposes
applied on a consistent basis.
4.9 Litigation. Except as set forth in Schedule 4.9, there are no material
actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the knowledge of Seller, threatened against Seller,
or relating to the Purchased Assets or the Business, whether at law or in equity
and whether civil or criminal in nature, before any Governmental Authority or
arbitral panel, nor are there any judgments, decrees or orders of any such
Governmental Authority or arbitral panel outstanding against Seller which have,
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or, if adversely determined, could reasonably be expected to have a material
adverse effect on the Purchased Assets or the earnings, assets, financial
condition or operations of the Business, or which seek to prevent, restrict or
delay consummation of the transactions contemplated hereby or fulfillment of any
of the conditions of any of the Seller Documents nor does Seller know of any
reasonable grounds for any such claim, action, suit, proceeding or
investigation.
4.10 Absence of Changes. Except as set forth in Schedule 4.10, since
December 27, 1998, there has not been any material adverse change in the
financial condition, operations or results of operations of the Business or the
Purchased Assets, including, without limitation:
(i) there has not been any change, or development involving a
prospective change, including, without limitation, any damage, destruction
or loss (whether or not covered by insurance), but excluding economic,
political, or other conditions affecting the paper and pulp industry
generally, which affects or, to the knowledge of Seller, can reasonably be
expected to affect, materially and adversely, the Purchased Assets or the
earnings, assets, financial condition or operations of the Business;
(ii) any obligation or liability not in the Ordinary Course of
Business involving more than Two Hundred Thousand Dollars ($200,000)
(whether matured, absolute, accrued, contingent, or otherwise) incurred by
Seller with respect to the Business or the Purchased Assets and neither
Seller nor any third party has imposed any Encumbrance upon the Purchased
Assets;
(iii) there has not been any increase in the compensation of the
employees of the Business, including, without limitation, any increase
pursuant to any bonus, pension, profit sharing or other plan or commitment,
(other than normal increases consistent with past practices and those
required by law or collective bargaining agreements);
(iv) there has not been any amendment to any employment agreement,
consulting agreement, or collective bargaining agreement to which any
employee of the Business is a party, and Seller has not entered into any
such agreement;
(v) Seller has not entered into any sale, transfer, lease, mortgage,
license or assignment of, or granted or imposed or permitted any
Encumbrance upon, any of the assets of the Business, including, without
limitation, the Purchased Assets, other than in the Ordinary Course of
Business;
(vi) Seller has not entered into any agreements, contracts, leases, or
licenses (or series of related agreements, contracts, leases and licenses),
other than in the Ordinary Course of Business, with respect to the Business
or with respect to the Purchased Assets which, individually or in the
aggregate, would be material to the Business or which agreements,
contracts, leases or licenses entered into the Ordinary
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Course of Business could be reasonably expected if performed in accordance
with their terms, to have a material adverse effect on the earnings,
assets, financial condition or operations of the Business;
(vii) no party (including Seller) has accelerated, terminated,
modified, or cancelled, or threatened to accelerate, terminate, modify or
cancel, any agreement, contract, lease, or license (or series of related
agreements, contracts, leases and licenses) to which Seller is a party or
by which it is bound which in the aggregate would have a material affect on
the Purchased Assets or the Business;
(viii) Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other person (or series
of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business with respect to the Purchased Assets or the
Business;
(ix) Seller has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than Five
Hundred Thousand Dollars ($500,000) singly or One Million Dollars
($1,000,000) in the aggregate with respect to the Purchased Assets or the
Facility;
(x) Seller has not delayed or postponed the payment of accounts
payable and other liabilities outside the Ordinary Course of Business with
respect to the Purchased Assets or the Business;
(xi) Seller has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than Two Hundred and Fifty Thousand Dollars ($250,000) or outside the
Ordinary Course of Business with respect to the Business or the Purchased
Assets;
(xii) Seller has not granted any license or sublicense of or
transferred any rights under or with respect to any Intellectual Property
with respect to the Purchased Assets or the Business;
(xiii) Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to the property relating to the
Business or to the Purchased Assets, in excess of Fifty Thousand Dollars
($50,000) per occurrence and One Hundred and Fifty Thousand Dollars
($150,000) in the aggregate;
(xiv) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Business or the Purchased Assets;
(xv) there has not been any material deterioration of relations
between the Facility and its suppliers, customers, or labor unions; and
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(xvi) Seller has not entered into any agreement or commitment to take
any action described in this Section 4.10.
Since December 27, 1998, the Business has been conducted only in the Ordinary
Course of Business and in a manner consistent with past practices.
4.11 Title to Purchased Assets. Seller is the sole lawful owner of, and has
good and valid record and marketable title collectively to, the Purchased
Assets, such as, with respect to the Real Property, would be insurable on a
standard ALTA form policy of title insurance at standard premium rates, and
immediately prior to Closing, Seller will have the full right to sell, convey,
transfer, assign and deliver all of its right, title and interest in the
Purchased Assets owned by it or in which it has an interest and will have such
power without any restrictions of any kind whatsoever. Except for easements,
restrictions and other encumbrances described in Schedule 4.11 or Schedule
4.12(h) and the Assumed Liabilities, all of the Purchased Assets are entirely
free and clear of any security interests, liens, claims, charges, options,
mortgages, debts, leases (and subleases), conditional sales agreements, title
retention agreements, easements, rights-of-way, licenses, covenants, tenancies,
encumbrances of any kind, defects as to title or restrictions on the use and
enjoyment thereof or against the transfer or assignment thereof (collectively,
"Encumbrances"), and there are no filings in any registry of deeds in any
jurisdiction or under the Uniform Commercial Code or similar statute in any
jurisdiction showing Seller as mortgagor or debtor which create or perfect or
which purport to create or perfect any Encumbrance in or on any of the Purchased
Assets. Except as set forth in Schedule 4.11 or Schedule 4.12(h), all leases of
personal property of Seller to be assigned to the Buyer (or its designees)
hereunder are valid and binding in accordance with their respective terms, and
there is not, under any of such leases, any existing default or any condition,
event or act, which with notice or lapse of time, or both, would constitute a
material default or an event of default. Copies of all title insurance policies
and other evidence of title obtained by Seller with respect to the Real Property
have been, or will, in accordance with Section 6.22, be, delivered to Buyer by
Seller. Seller will deliver to Buyer, in accordance with Section 6.22, all
surveys of land and plans, including, without limitation, site plans and
"as-built" plans with respect to the Real Property which are available to Seller
after due inquiry.
4.12 Real Property.
(a) Schedule 2.1(i) includes a complete and accurate legal description of
the Real Property. The Real Property comprises all real properties owned or
leased by Seller which are used by Seller in, or are otherwise necessary for,
the conduct of the Business.
(b) There are no pending or, to Seller's knowledge, contemplated
condemnation or eminent domain proceedings that might reasonably be expected to
affect the Real Property. There are no planned or commenced public improvements
which, to the knowledge of Seller, may result in special assessments or
otherwise affect the Real Property and to the knowledge of Seller there is no
proposed increase in taxes, real estate or otherwise, relating to the Real
Property except as set forth in the Settlement Agreement
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with the City of Berlin, which is referenced in Schedule 4.9 and has been
delivered to Buyer.
(c) Except as set forth in Schedule 4.12(c), the Real Property complies in
all material respects with all regulations, codes, ordinances, and statutes and
other legal requirements of all applicable Governmental Authorities, including,
without limitation, all zoning, building, health, Environmental Laws, sanitary,
and occupational safety and health regulations, laws, and ordinances.
(d) Except as set forth in Schedule 4.12(d), there are no material
structural defects affecting the Real Property (including, without limitation,
the hydroelectric facilities and landfill), all mechanical systems, including,
without limitation, sewer, septic, water, steam, electrical, plumbing, heating,
air conditioning and environmental improvement systems, are adequate in quantity
and quality for normal operations, and the roofs of the buildings located on the
Real Property are free from material defects. Except as set forth in Schedule
4.12(d), Seller has not received any unresolved complaint or notice of violation
from the Federal Occupational Safety and Health Administration, the Federal
Environmental Protection Agency, the New Hampshire Department of Environmental
Services, or any other Governmental Authority relating to the Real Property.
(e) The Real Property has direct and unobstructed access to adequate
electric, gas, water, sewer, steam, and telephone lines, all of which are
adequate for the uses to which such property is currently used by Seller, all of
which services are adequate in accordance with all applicable laws, ordinances,
rules and regulations and are sufficient for the operation and conduct of the
business of the Facility.
(f) The Real Property has full and free vehicular access to and from
adjacent public highways and roads and Seller has no knowledge of any fact or
condition which would result in the termination of such access.
(g) Except as set forth in Schedule 4.11, to the knowledge of Seller, there
are no encroachments on or nuisances affecting adjacent owners' lands by any
portion of any of the improvements located on the Real Property and/or any of
the business conducted at the Facility and there are no encroachments by any of
the improvements located on adjacent owners' lands on any portion of the Real
Property giving rise to any rights or interests of any other person which would
in any way impair the use of the Real Property for Buyer's intended use thereof.
(h) Except as set forth in Schedule 4.12(h), there are no leases,
subleases, licenses, covenants, options, easements, concessions, or other
agreements, written or oral, recorded or unrecorded, granting to any party or
parties the right of use or occupancy of any portion of the Real Property.
(i) Except as set forth in Schedule 4.12(i), to the knowledge of Seller,
none of the Real Property contains any underground storage tanks.
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(j) Except as set forth in Schedule 4.11, none of the Real Property
(whether owned or leased) used in the active conduct of the Business, or any
real property which is the subject of any timber rights or similar agreements,
is subject to any land use change tax under NHRSA 79-A.
4.13 Leases. For Seller's fiscal year ended December 27, 1998, the
aggregate amount of annual rental expense under leases, oral or written, for
real and personal property ("Leases"), was not greater than $1,200,000. Schedule
4.13 sets forth a complete and accurate list of the Leases. Except as set forth
on Schedule 4.13, Seller has not entered into any material lease of real or
personal property, oral or written, with respect to the Business since December
27, 1998. Except as set forth in Schedule 4.13, neither Seller nor any other
party thereto has breached any such Lease and, no event has occurred which, with
the giving of notice or the passage of time, or both, will cause a default
under, or permit the termination, modification or acceleration of any such Lease
by any party thereto. Complete and accurate copies of all of the Leases have
been delivered to Buyer.
4.14 Inventory. The Inventory, in the aggregate, (i) is fit for the purpose
for which it was procured and manufactured and is usable or saleable in the
Ordinary Course of Business, (ii) is sufficient but not excessive in kind or
amount for the conduct of the Business as it is presently being conducted, and
(iii) is carried on the books of Seller at an amount which reflects valuations
not in excess of the lower of cost or market determined in accordance with
generally accepted accounting principles applied on a consistent basis. Schedule
4.14 sets forth a list of locations of Inventory not located on the Real
Property or on real estate subject to a Lease.
4.15 Intellectual Property and Software. (a) Seller owns or has valid
rights to use pursuant to license, agreement or permission each item of
Intellectual Property necessary or desirable for the conduct of the Business as
presently conducted, as listed in Schedule 2.1(vi) without conflict with the
right of others. Each item of Intellectual Property set forth in Schedule
2.1(vi) will be owned or available for use by Buyer on identical terms
immediately subsequent to the Closing Date. Seller has taken all necessary and
desirable action to maintain and protect each item of Intellectual Property that
it owns or uses.
(b) Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties with respect to the Business and none of the directors and officers (and
employees with responsibility for Intellectual Property matters) of Seller has
ever received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Seller must license or refrain from using any Intellectual Property rights
of any third party) that remains unresolved. No third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Business in any manner that remains
unresolved.
(c) Schedule 2.1(vi) identifies each trademark, copyright and patent
registration which is held by Seller with respect to any of the Intellectual
Property,
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identifies each pending patent application or application for registration which
Seller has made with respect to any of the Intellectual Property, and identifies
each license, agreement, or other permission which Seller has granted to any
third party with respect to any of the Intellectual Property (together with any
exceptions). Seller has delivered to the Buyer correct and complete copies of
all such registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete copies
of all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 2.1(vi) also identifies each trade name
or unregistered trademark or service mark used by Seller in the conduct of the
Business, except those used in connection with the Publishing Grades. With
respect to each item of Intellectual Property:
(i) Seller possesses all right, title, and interest in and to the
item, free and clear of any Encumbrance, license, or other restriction,
except as set forth in Schedule 4.15(c);
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and
(iv) Seller has never agreed to indemnify any person for or against
any interference, infringement, misappropriation, violation or other
conflict with respect to the item.
(d) Schedule 2.1(vi) identifies each item of Intellectual Property that any
third party owns and that Seller uses in the conduct of the Business pursuant to
license, sublicense, agreement, or permission. Seller has delivered to the Buyer
correct and complete copies of all such licenses, sublicense, agreements and
permissions (as amended to date). With respect to each such item of Intellectual
Property:
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(ii) the license, sublicense, agreement, or permission will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby;
(iii) no party to the license, sublicense, agreement, or permission is
in breach or default, and no event has occurred which with notice or lapse
of time or both, would constitute a breach or default or an event of
default, or permit termination, modification, or acceleration thereunder;
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(iv) no party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject to
any outstanding injunction, judgment, order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(viii) Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement or permission.
(e) (i) Schedule 2.1(xii) identifies all of the Facility Software and
Schedule 2.1(xiii) identifies all of the Shared Software (other than
off-the-shelf, non-customized programs and databases that are generally
commercially available), and except as set forth in Schedule 4.15(e), Seller
owns outright or holds valid licenses to all copies of the Facility Software and
the Shared Software. To the knowledge of Seller, none of the Facility Software
or Shared Software, and no use by Seller thereof infringes upon or violates any
patent, copyright, trade secret or other proprietary right of any other person,
and no claim with respect to any such infringement or violation is threatened.
Seller has taken all steps reasonably necessary to protect its right, title and
interest in and to the Facility Software and the Shared Software owned by it,
including, without limitation, the use of written agreements containing
appropriate confidentiality provisions with all third parties having access to
the source code relating thereto.
(ii) Except for off-the-shelf, non-customized programs and databases that
are generally commercially available, Seller possesses or has access to
documentation, including, without limitation, source codes for all Facility
Software and Shared Software owned or used by it sufficient to continue to
operate the Business. Upon consummation of the transactions contemplated by this
Agreement, the Buyer will own all the Facility Software and will have a valid
non-exclusive transferable perpetual and fully-paid up right and license to use
all of the Shared Software owned by Seller immediately prior to the Closing,
free and clear of all claims, liens, encumbrances, obligations and liabilities
and, with respect to all agreements for the lease or license of Facility
Software or Shared Software which require consents or other actions as a result
of the consummation of the transactions contemplated by this Agreement in order
for the Buyer to use and operate the same after the Closing Date, Seller will
have obtained such consents or taken such other actions so required. Seller has
fully paid up all licenses with respect to every third party software program
utilized by each in the conduct of the Business.
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(f) The conduct of the Business following the Closing will not interfere
with, infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property or Facility Software or Shared Software rights of third
parties as a result of the continued operation of its business as presently
conducted.
4.16 Material Contracts. Schedule 4.16 sets forth a complete and correct
list of each contract, agreement or commitment, other than Leases, of Seller:
(i) upon which any substantial part of the Business is dependent or
which, if breached, could reasonably be expected to affect, materially and
adversely, the Purchased Assets or the earnings, assets, financial
condition or operations of the Business;
(ii) which provides for aggregate future payments by the Business of
more than One Hundred Thousand Dollars ($100,000), except for purchase
orders or sales orders arising in the Ordinary Course of Business, in which
case they are listed only if any party thereto is obligated to make future
payments pursuant thereto aggregating more than Two Hundred Thousand
Dollars ($200,000);
(iii) which relates to the Purchased Assets and extends more than one
year from the date hereof and is not cancelable by either party on 30 days'
notice;
(iv) which provides for the sale, lease or transfer of any interest
in, after the date hereof and other than in the Ordinary Course of
Business, of any of the Purchased Assets; or
(v) which contains covenants pursuant to which any person has agreed
not to compete with any business conducted by or at the Facility or not
disclose to others information concerning the Purchased Assets or the
Business.
Each of the foregoing is referred to in this Agreement as a "Material Contract."
Except as set forth in Schedule 4.16, all of the Material Contracts are in full
force and effect, no Material Contract has been breached and, to the knowledge
of Seller, no event has occurred which, with or without the giving of notice or
the passage of time or both, would constitute a default by any party thereto.
Complete and correct copies of all the Material Contracts have been delivered to
Buyer.
4.17 Maintenance of the Equipment. The Equipment comprises all of the
equipment owned by Seller at the Facility and used or necessary for the conduct
of the Business as currently conducted. The Equipment is adequate in quantity
and quality to operate and conduct the Business in the ordinary course and in
substantial compliance with all applicable laws, rules and regulations. Without
limiting the foregoing, the Equipment has been maintained and operated in
substantial compliance with the rules and regulations of the Federal
Occupational Safety and Health Administration, the Federal Environmental
Protection Agency and all other federal, state, county, or local agencies or
departments having jurisdiction thereover.
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4.18 Sufficiency of Purchased Assets. With the exception of the Excluded
Assets and other exceptions set forth in Schedule 4.18, the Purchased Assets
include all properties and rights of Seller used in the operation of the
Purchased Assets and the conduct of the Business as it is presently being
conducted.
4.19 Labor Matters. (a) Schedule 4.19(a) sets forth a complete and correct
list of each labor or collective bargaining agreement, employment contract and
independent contractor agreements to be assumed by Buyer covering Employees and
independent contractors of the Business.
(b) Except as set forth in Schedule 4.19(b), Seller has not received notice
of any allegation of unfair labor practices, or of the institution or, to the
knowledge of Seller, threatened institution of any grievance or arbitration
proceedings or of any material violation of agreements, statutes and
governmental regulations relating to employment practices at the Facility that
remain unresolved or that have resulted in a grievance arbitration decision or a
written settlement agreement during the period of five years preceding the
execution of this Agreement. Except as set forth in Schedule 4.19(b), with
respect to the Business, Seller has substantially complied with all applicable
laws and regulations relating to the employment of labor, including, but not
limited to, those related to wages, hours, discrimination, ERISA, and the
payment of Social Security or similar taxes or unemployment or withholding
taxes, and Seller is not liable for any material penalties for failure to comply
with any of the foregoing. Except as set forth in Schedule 4.19(b), Seller has
not committed any unresolved violation of the federal Fair Labor Standards Act
or any other law dealing with such matters at the Facility.
(c) Since January 1, 1998, neither Crown nor Electric has experienced at
the Facility any strike, labor dispute, work stoppage, slow-down or lockout, or
any other event adversely affecting employee relations and there are no such
actions pending or threatened.
(d) Except as set forth in Schedule 4.19(b) or (d), there are no
unresolved, existing, or to Seller's knowledge, potential, claims by any one or
more of Seller's employees or former employees under any applicable occupational
health or safety, equal employment opportunity, or discrimination statutes or
laws relating to employment at the Facility and there have been no claims that
have resulted in a grievance arbitration decision or a written settlement
agreement with respect to the foregoing during the period of five years
preceding the execution of this Agreement.
4.20 Employee Benefit Plans. Schedule 4.20 lists all of the employee
benefit plans and programs, including, without limitation, all retirement,
savings and other pension plans ("Pension Plans"), all health, severance,
insurance, disability and other employee welfare plans ("Welfare Plans") and all
stock option, incentive, vacation and other similar plans that are maintained by
Seller with respect to employees of the Facility or to which Seller has
contributed or is now contributing on behalf of the employees of the Facility,
true and complete copies of which have been delivered to Buyer. Seller has not
ever maintained or made any contribution to, and is not a party to, any
multi-employer plan as defined in Section 3(37) of ERISA regarding the Facility.
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4.21 Taxes. (a) Except as listed in Schedule 4.9, all real property and
personal property taxes, penalties and interest and related charges currently
due with respect to the Purchased Assets and the conduct of the Business have
been paid by Seller, Electric and Railway. All water and sewage and other
municipal charges and assessments, and any interest and/or penalties thereon,
which are currently due with respect to the Facility or any of the Equipment
(whether or not constituting a lien upon any of the Real Property or other
Purchased Assets) have been paid. Except for the real estate transfer tax, the
sale of the Purchased Assets by Seller, Electric and Railway and purchase of the
Purchased Assets by Buyer, pursuant to this Agreement or any of the Related
Agreements will not result in the imposition of any personal property sales tax
or other similar tax upon the transfer of any of the Purchased Assets, by any
federal, state or local taxing authority.
(b) Except as set forth in Schedule 4.9, to the knowledge of Seller, with
respect to the Business and the Purchased Assets: (i) Seller has timely filed,
or caused to be timely filed, all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed with or
supplied to any taxing authority in connection with all taxes, charges, fees,
levies, duties, tariffs, or other assessments, including, without limitation,
income, gross receipts, excise, real and personal property, sales, transfer,
timber, interest and dividends, business profits, use, change in use, ad
valorem, gains, workers compensation, license, payroll and franchise taxes,
imposed by any Governmental Authority, any interest, penalties or additions to
tax attributable to any of the foregoing (collectively, "Taxes"), required to be
filed by Seller, all of which Returns were substantially correct as filed and
correctly reflect the facts regarding the income, business, assets, operations,
activities and status of Seller, as well as any Taxes required to be paid or
collected by Seller and the Returns comply in all respects with all applicable
legal requirements; (ii) except as set forth in Schedule 4.21(b), Seller's
Returns have not been audited by any Governmental Authority, nor is any such
audit scheduled or pending; (iii) there are no outstanding, waivers or
extensions of time relating to the filing of any Return; (iv) any deficiency
assessments, penalties and interest with respect to Seller's Returns have been
paid by Seller; (v) there are no outstanding waivers or comparable consents to
the application of the statute of limitations with respect to any Taxes or
Returns; and (vi) except as set forth in Schedule 4.21(b), there are no tax
sharing or similar agreements with respect to any Taxes paid or payable by
Seller.
(c) With regard to the Facility and the Purchased Assets, except as set
forth in Schedule 4.9, Seller has timely paid and through the Closing Date will
have timely paid, all Taxes due and payable on or before such date.
4.22 Insurance. Schedule 4.22 sets forth the insurance coverage (and
deductibles relating thereto) currently maintained by Seller relating to the
Purchased Assets and the Business. All premiums with respect thereto have been
paid, and Seller has not received any unresolved notice of cancellation or
threatened cancellation of insurance covering any of the Purchased Assets or the
Business. All such policies are in full force and effect and provide insurance,
including, without limitation, liability insurance, in such amounts and against
such risks and liability claims as is customary for companies engaged in similar
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businesses to that of Seller, to protect the employees, properties, assets of
the Purchased Assets and the Business.
4.23 Undisclosed Liabilities. Except as disclosed in this Agreement and
except for the Assumed Liabilities, at the Closing there will be no Liabilities
of Seller which could create an Encumbrance on, or result in a lien on, the
Purchased Assets or the Business (whether absolute, accrued, contingent or
otherwise, and whether due or to become due).
4.24 Powers of Attorney. There are no outstanding powers of attorney
executed with respect to the Business or the Purchased Assets.
4.25 Product Warranty. Each product manufactured, sold, or delivered by
Seller in the conduct of the Business has been manufactured, sold or delivered
in substantial conformity with all applicable contractual commitments and all
express and implied warranties, and Seller has no Liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Purchased Assets
or the Facility giving rise to any Liability) for replacement thereof or other
damages in connection therewith, except for product defects in the Ordinary
Course of Business. No product manufactured, sold, or delivered by Seller in the
conduct of the Business is subject to any guaranty, warranty, or other indemnity
beyond the applicable standard terms and conditions of sale. Schedule 4.25
includes copies of the standard terms and conditions of sale for products
manufactured, sold or delivered by Seller at the Facility (containing applicable
guaranty, warranty, and indemnity provisions).
4.26 Product Liability. To the knowledge of Seller, the Business has no
substantial Liability (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against Seller giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, or delivered by Seller relating to the Facility or
the Purchased Assets.
4.27 Finders. No broker, finder or investment banker is entitled to any fee
or commission from Seller for services rendered on behalf of Seller in
connection with the transactions contemplated by this Agreement, and Seller
shall be solely responsible for, and shall indemnify Buyer from and against, any
Liability with respect to any and all commissions, fees, and other charges
arising out of any claimed retention by Seller of a broker or finder in
connection with the transactions contemplated hereby except to the extent said
party was engaged by or dealt with Buyer.
4.28 Related Party Transactions. Except as set forth in Schedule 4.28, as
to the Business and the Purchased Assets, there are no existing arrangements or
proposed transactions between or among Seller, its parent or any of its
subsidiaries and (i) any officer or director of Seller, its parent or any of its
subsidiaries or any member of the immediate family of any of the foregoing
persons (such officers, directors and family members being hereinafter
individually referred to as a "Related Party"), (ii) any business (corporate or
otherwise) which a Related Party owns, directly or indirectly, or in which a
Related Party
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has an ownership interest, or (iii) between any Related Party and any business
(corporate or otherwise) with which Seller or its subsidiaries regularly does
business.
4.29 Year 2000 Compliance. Seller has put in place and is presently
implementing a project of remediation (the "Y2K Remediation Project") of its
computer hardware as listed in Schedule 2.1(ii), the Facility Software and the
Shared Software (collectively, "Purchased Hardware and Software") in order to
ascertain whether the same is free from the "millennium bug" and, in that
regard, will record, store, process and present calendar dates falling on or
after January, 1, 2000, in the same manner, and with the same functionality, as
calendar dates are recorded, stored, processed and presented on or before
December 31, 1999, with the objective that no functionality will be lost with
respect to the introduction of records containing dates falling on or after
January 1, 2000, and, if any of such Purchased Hardware and Software is so
affected, to remediate the same, with the objective that the Purchased Hardware
and Software will on and after January 1, 2000, be interoperable with other
software used by Buyer which may deliver records to the Purchased Hardware and
Software, receive records from the Purchased Hardware and Software, or interact
with the Purchased Hardware and Software in the course of processing data as set
forth in Schedule 4.29. Seller will diligently continue the Y2K Remediation
Project according to its current plans from the date of execution of this
Agreement through the Closing, and will cooperate with Buyer so that Buyer can
continue to carry out the Y2K Remediation Project after the Closing. Seller
currently estimates that the total cost to complete the Y2K Remediation Project
as presently planned will not exceed $1.25 million.
4.30 Books and Records. The books and records of Seller are complete and
correct in all material respects, have been maintained in accordance with good
business practices, and accurately reflect the basis for the financial
condition, operating results and cash flows set forth in the Financial
Statements, as described in Section 4.8.
4.31 Shares of ARCO. Seller is the sole record and beneficial owner of two
thousand five hundred (2,500) shares of the capital stock of ARCO representing
approximately 25% of the total issued and outstanding shares of the capital
stock of ARCO, free and clear of any restrictions on transfer, Taxes, security
interests, Encumbrances, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that could require
Seller to sell, transfer, or otherwise dispose of any capital stock of ARCO
(other than this Agreement). Seller is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital
stock of ARCO. Buyer shall have the right, under that certain Androscoggin River
Headwater Benefits Agreement dated June 1, 1983, to select a member of the
Engineering Committee of ARCO.
4.32 Disclosure. None of the information furnished by Seller to Buyer in
connection with the representations and warranties contained in this Article IV
or the transactions contemplated by this Agreement or the Related Agreements
contains any untrue statement of a fact or omits to state any fact necessary in
order to make the statements and
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information contained therein not misleading which would have a material adverse
effect on the Purchased Assets or the Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following:
5.1 Organization, Qualification. (a) ATH is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to own all of its properties and
assets and to carry on its business as it is presently being conducted.
(b) PPA is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of New York and has the requisite
power and authority to own all of its properties and assets and to carry on its
business as it is presently being conducted.
5.2 Authority Relative to this Agreement. (a) ATH has all requisite
corporate power and authority under its Certificate of Incorporation and
by-laws, each as amended to date, and applicable laws to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery by ATH of this Agreement, and the performance by it of its obligations
hereunder have been duly authorized by the Board of Directors of ATH and no
other corporate proceedings on the part of ATH are necessary with respect
thereto. Assuming that Seller has duly authorized the execution and delivery of
the Seller Documents, this Agreement constitutes the valid and binding
obligations of ATH, enforceable in accordance with its terms, except as
enforceability may be limited by (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditor's rights generally
or (ii) general principles of equity, whether considered in a proceeding in
equity or law.
(b) PPA has all requisite power and authority under its Articles of
Organization and Operating Agreement and applicable laws to execute and deliver
this Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery by PPA of this Agreement and the Related
Agreements, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by the Managers of PPA and no other
limited liability company proceedings on the part of PPA are necessary with
respect thereto. Assuming that Seller has duly authorized the execution and
delivery of the Seller Documents, this Agreement constitutes, and the Related
Agreements, when executed and delivered by PPA will constitute, valid and
binding obligations of PPA, enforceable in accordance with their terms, except
as the same may be limited by (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar
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law affecting creditor's rights generally or (ii) general principles of equity,
whether considered in a proceeding in equity or law.
5.3 Consents and Approvals. Except as set forth in Schedule 5.3, there is
no requirement applicable to Buyer to make any registration, qualification or
filing with any Governmental Authority or any third party as a condition to the
lawful consummation of the transactions contemplated by this Agreement by Buyer.
No order, writ, injunction or decree has been issued, or is threatened to be
issued, by any Governmental Authority which would adversely affect the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Schedule 5.3, there is no requirement that any party to an agreement to
which Buyer is a party or by which it is bound consent to the consummation of
the transactions contemplated by this Agreement.
5.4 Non-Contravention. (a) Assuming that the consents and approvals set
forth in Schedule 5.3 are obtained, the execution and delivery by Buyer of this
Agreement does not, and the consummation of the transactions contemplated hereby
and thereby will not, (i) violate or result in a breach of any provision of the
Certificate of Incorporation or by-laws of ATH, or (ii) result in a breach of,
or constitute (with due notice or lapse of time, or both) a default (or give
rise to any right of termination, cancellation or acceleration or otherwise be
in conflict with or result in a loss of contractual benefits) under the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Buyer is a party or
by which ATH, or the business conducted by ATH, may be bound, excluding from the
foregoing clauses (i) and (ii), such defaults and violations as would not have a
material adverse effect on the business or properties of ATH.
(b) Assuming that the consents and approvals set forth in Schedule 5.3 are
obtained, the execution and delivery by PPA of this Agreement and the Related
Agreements does not, and the consummation of the transactions contemplated
hereby and thereby will not, (i) violate or result in a breach of any provision
of the Articles of Organization or Operating Agreement of PPA, or (ii) result in
a breach of, or constitute (with due notice or lapse of time, or both) a default
(or give rise to any right of termination, cancellation or acceleration or
otherwise be in conflict with or result in a loss of contractual benefits) under
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which PPA is a
party or by which PPA, or the business conducted by PPA, may be bound, excluding
from the foregoing clauses (i) and (ii) such defaults and violations which would
not have a material adverse effect on the business or properties of PPA.
5.5 Litigation. Except as set forth in Schedule 5.5, there are no material
actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the knowledge of Buyer, threatened against Buyer,
whether at law or in equity and whether civil or criminal in nature, before any
Governmental Authority, nor are there any judgments, decrees or orders of any
such Governmental Authority outstanding against Buyer which seek to prevent,
restrict or delay consummation of the transactions contemplated hereby or
fulfillment of any of the conditions of this Agreement or the
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Related Agreements, nor does Buyer know of any reasonable grounds for any such
claim, action, suit, proceeding or investigation.
5.6 Finders. No broker, finder or investment banker is entitled to any fee
or commission from Buyer for services rendered on behalf of Buyer in connection
with the transactions contemplated by this Agreement, and Buyer shall be solely
responsible for, and shall indemnify Seller from and against any liability in
respect of any and all commissions, fees, and other charges arising out of any
claimed retention by Buyer of a broker or finder in connection with the
transactions contemplated hereby except to the extent said party was engaged by
or dealt with Seller.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business of the Facility. From the date hereof and until the
Closing, Seller will (i) conduct the Business only in the usual and ordinary
course; (ii) maintain in their present condition, except for reasonable wear and
tear, all of the Purchased Assets; (iii) use its best efforts to preserve its
relationships with licensors, suppliers, dealers, customers, Employees, labor
unions, and others having business relationships with the Facility, provided
that Seller shall continue to implement planned reductions in staffing at the
Facility previously disclosed to Buyer so long as such reductions have no
material adverse effect, individually, or in the aggregate, on the Business;
(iv) use its best efforts to assign all Licenses and Permits and obtain all
necessary consents, waivers and approvals; and (v) not change the character of
the Business in any material manner. Seller's management will meet, upon
request, with Buyer on a regular and frequent basis to discuss the general
status of the ongoing operations of the Facility and any material problems
relating to the conduct of its business.
6.2 Notification. Seller shall notify Buyer in writing promptly after
receipt by Seller of any notice of (i) the institution of, or any threat to
institute, any litigation, suit or proceedings before any Governmental Authority
which could have a material effect on the Purchased Assets, the consummation of
the transactions contemplated by the Seller Documents or the Business; (ii) the
entry or imposition of any judgment or lien against any of the Purchased Assets;
(iii) any notice of, or threat of, taking of all or any part of the Real
Property under powers of condemnation or eminent domain; (iv) any notice of
increase or proposed increase in real property tax rates, or tax assessments,
relating to any portion of the Purchased Assets; (v) any notice from any
Governmental Authority or professional environmental engineering firm retained
by Seller of non-compliance with any law (including, without limitation, the
Environmental Laws) relating to the Purchased Assets or the Business; (vi) any
notice from any insurance company or underwriting agency relating to
non-compliance with insurance requirements or standards in respect of any of the
Purchased Assets or the Business; (vii) any notice of breach or default
hereunder or under any mortgage, agreement, or governmental or judicial decree
or order or applicable law, rule or regulation, by which the Business is bound
or affected and which would have an
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effect upon the value or use of the Purchased Assets, or the consummation of the
transactions contemplated by this Agreement; and (viii) any fact, condition or
event which is, or with the lapse of time or giving of notice, or both, would
become a material breach or default or event of default hereunder or which would
render any representation or warranty of Seller hereunder incomplete or
inaccurate and Seller shall take all reasonable action as is necessary to
forthwith remedy such condition, cure such breach or default or event of default
and/or to render any representation, warranty or covenant complete and accurate.
No notification under this Section 6.2 shall be deemed to cure any breach or
default or event of default or render any representation or warranty incomplete
or inaccurate.
6.3 Forbearances by Seller. Except as contemplated by this Agreement, with
regard to the Purchased Assets and the Business, Seller will not, from the date
hereof until the Closing, without the written consent of Buyer, such consent not
to be unreasonably withheld:
(i) incur any material Liability (fixed or contingent), except normal
trade or business obligations incurred in the Ordinary Course of Business
and consistent with past practice and except in connection with this
Agreement and the Related Agreements;
(ii) mortgage, pledge or subject to any Encumbrance, any of the
Purchased Assets;
(iii) sell, transfer, lease or otherwise dispose of any of the
Purchased Assets, except for a fair consideration in the Ordinary Course of
Business and consistent with past practice;
(iv) waive or release any rights of material value or surrender, or
cause to be revoked or otherwise terminate any Licenses and Permits or
other approval, authorization or consent from any court, administrative
agency or other Governmental Authority relating to the Business;
(v) transfer or grant any licenses, patents, inventions, trademarks,
trade names, service marks, copyrights or know-how;
(vi) make or grant any wage, salary or benefit increase or bonus
payment or enter into or amend the terms of any employment contract, or
consulting agreement, or enter into any incentive compensation, profit
sharing, savings deferred compensation, retirement pension or other benefit
plan or arrangement or grant any severance benefits; or pay or agree to pay
any pension or retirement allowance not required by an existing plan or
agreement;
(vii) make any commitments for capital expenditures (including capital
leases) related to the Business, other than in the Ordinary Course of
Business and in the aggregate amount not exceeding Fifty Thousand Dollars
($50,000);
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(viii) enter into any contract (other than purchases under open
purchase orders made in the Ordinary Course of Business) which will
require, in the aggregate, an expenditure of more than Two Hundred and
Fifty Thousand Dollars ($250,000) by the Facility;
(ix) alter in any way the manner in which it has regularly and
customarily maintained the books of account and records of the Facility; or
(x) enter into any contract, transaction or agreement to do any of the
things described in clauses (i) through (ix) above.
6.4 Insurance, Landfill, Financial Security. Seller agrees to use its best
efforts to (i) assist Buyer in placing appropriate insurance coverage for
ownership of the Purchased Assets and operation of the Business and (ii) reduce
the financial security required by the New Hampshire Department of Environmental
Services for operation and closure of the landfill facility included in the
Purchased Assets.
6.5 Negotiations with Others. Seller will not (and Seller will not cause or
permit any of its directors, officers, employees, agents, or representatives to)
(i) solicit, initiate, or encourage the submission of any proposal or offer from
any person relating to the acquisition of the Purchased Assets or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek, initiate or
encourage any of the foregoing. Seller will notify the Buyer immediately if any
person makes any proposal, offer, inquiry or contact with respect to the
foregoing.
6.6 Investigation of Businesses and Properties. From and after the date
hereof until the Closing, Seller will afford Buyer and its attorneys,
accountants, financial advisors and other representatives access at all
reasonable times to its officers, employees, properties, contracts, books,
records and documents of Seller relating to the Purchased Assets and the
Business, and a full opportunity to make such investigation as Buyer shall
desire to make with respect to the Purchased Assets and the Business, including,
without limitation, discussion of any such matters with Seller's officers and
other employees, agents, representatives, creditors and vendors. Notwithstanding
the foregoing, Buyer shall have the opportunity to make an analysis of materials
and conduct certain environmental auditing procedures, the scope of which is set
forth in Schedule 6.6. In addition, Seller will furnish Buyer with such
financial, operating and additional data as Buyer may reasonably request
concerning the operations, properties and personnel of the Business.
6.7 Confidentiality. Seller and Buyer agree to be bound by the terms of the
Confidentiality and Non-Disclosure Agreement by and between Seller and American
Tissue Corporation ("ATC") dated August 1, 1998, except to the extent that any
information otherwise deemed to be confidential is required to be disclosed to
investors in connection with the Company's proposed offering of senior notes
referred to in Section 9.18. The Confidentiality and Non-Disclosure Agreement
shall survive (i) the execution of this Agreement notwithstanding any merger
clause contained herein and (ii) the Closing.
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6.8 Taxes and Recording Fees. (i) All property taxes included in Taxes and
special assessments payable in respect of any of the Real Property, Equipment,
and Inventory transferred in connection with the transactions contemplated
hereby shall be prorated between the parties on the basis of actual days elapsed
between the commencement of the current fiscal tax year and, up to and including
the Closing Date, based on a 365-day year.
(ii) The New Hampshire real estate transfer taxes incurred in connection
with this Agreement and the transactions contemplated hereby will be borne
equally by Buyer and Seller at the time of Closing. Buyer and Seller will file
all necessary tax returns and other documents required to be filed with respect
to all such taxes and filing fees. Buyer will cooperate with Seller to the
extent necessary to enable it to make such filings and join in the execution and
delivery of the New Hampshire Department of Revenue Administration Declaration
of Consideration and Real Estate Questionnaire. Each party will bear its
respective filing and recording fees.
6.9 Proration of Lease Payments, Utility Charges and Other Payments. All
rent accrued on any of the Leases and any utility or similar charge of the
Facility relating to the period prior to the Closing Date will be the liability
of Seller. Any installment of rent due on any of the Leases and any utility or
similar charge payable with respect to the period in which the Closing occurs
shall be prorated between the parties hereto on the basis of the actual number
of days applicable to pre-Closing and post-Closing occupancy or use.
6.10 Allocation of Purchase Price. The parties shall use reasonable efforts
to agree to the allocation of the Purchase Price among the various assets that
constitute the Purchased Assets, and upon such agreement, the parties shall
execute IRS form 8594 in connection therewith. Each of the parties shall respect
such agreed upon allocation for all tax purposes and shall file all returns and
other documents with all taxing authorities on a basis consistent therewith.
6.11 Collection of Accounts Receivable. Following the Closing, Buyer will
afford Seller reasonable access during normal business hours to such of the
records transferred to it as shall be necessary to allow Seller to collect any
accounts receivable arising prior to the Closing. If a debtor on any such
account receivable who is also a debtor to Buyer for debts incurred at or after
the Closing shall make any remittance on amounts due in respect of the business
of the Facility, whether the debt was incurred prior to or subsequent to the
Closing, such remittance shall be deemed to be on account of the earliest
invoice unless the debtor specifically designates to the contrary, in which case
the payment shall be applied in accordance with such designation; provided,
however, that PPA and its employees and agents shall not personally solicit
account debtors to designate payments in a manner that is to the financial
disadvantage of Seller. After the Closing, and in accordance with the foregoing
sentence, Seller will promptly transfer and deliver (properly endorsed, if
necessary) to PPA any checks or other payments (including the cash equivalents
of credits due from vendors, suppliers or shippers) which it receives on account
of goods sold or shipped by PPA and Buyer shall promptly transfer and deliver
(properly endorsed, if necessary) to Seller any checks or other payments
(including the cash
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equivalents of credits due from vendors, suppliers or shippers) which it
receives on account of goods sold or shipped by Seller.
6.12 Bulk Sales Laws. Notwithstanding the provisions of Article XII, Seller
will indemnify and hold harmless Buyer from any and all claims made by creditors
of Seller relating to provisions of the "bulk sales laws" of any state or other
jurisdiction which may be applicable to the transactions contemplated hereby and
from all costs (including reasonable attorneys' fees) incurred in the defense of
any claims made under such laws.
6.13 Materials Received After Closing. Following the Closing, Buyer may
open all mail, telegrams and other communications and packages it receives which
are addressed to Seller and deal with the contents thereof in its discretion to
the extent that the contents thereof relate to the Purchased Assets, the
Business or the Assumed Liabilities. Buyer agrees to deliver to Seller and to
treat confidentially all other such material it receives which are addressed to
Seller and does not relate to the Purchased Assets, the Assumed Liabilities or
the Business.
6.14 Retention of Books and Records. For a period of seven years after the
Closing, the parties shall retain their books or records relating to the
Purchased Assets and the Assumed Liabilities. After such seven-year period, any
party shall provide not less than forty-five (45) nor more than ninety (90)
days' prior written notice to the other parties of any proposed destruction or
disposition of any such books and records. If the recipient of such notice
desires to obtain any of the documents to be destroyed or disposed of, it may do
so by notifying the sender of such notice, in writing, at any time prior to the
scheduled date for such destruction or disposal. The notice must specify the
documents which the requesting party wishes to obtain. The parties shall then
promptly arrange for the delivery of such documents. All out-of-pocket costs
associated with the delivery of the requested documents shall be paid by the
requesting party.
6.15 HSR Filings. Seller and Buyer will each file, or cause to be filed
within fifteen (15) days of the date hereof, with the United States Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice, pursuant to the HSR Act, all requisite documents and notifications in
connection with the transactions contemplated by this Agreement.
6.16 Expenses. Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, attorneys', accountants' and
outside advisers' fees and disbursements, will be paid by the party incurring
such costs and expenses. Buyer shall pay the HSR filing fee.
6.17 Public Announcements. The parties will consult with one another before
issuing any press releases or otherwise making any public statements with
respect to this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby and will not issue any such press release or
make any such public statement
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without the written consent of the other party unless such action is required by
law or by the SEC.
6.18 Subsequent Events. If any event shall occur prior to the Closing
which, had it occurred prior to the execution of this Agreement, should have
been disclosed by a party to this Agreement in a representation and warranty or
otherwise, then, upon the happening of such event, such party shall promptly
disclose the happening of such event to the other parties hereto. No
notification under this Section 6.18 shall be deemed to cure any breach, default
or event of default or render any warranty, covenant or representation true or
otherwise relieve a party from any obligation hereunder.
6.19 Efforts to Consummate. 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 or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including, but not limited to, filing all
such reports, notifications and other filings pursuant to federal, state, local
or governmental regulation and obtaining all necessary consents, waivers,
authorizations, orders, approvals, Licenses and Permits, licenses and/or waivers
of third parties, whether private or governmental, required of it to enable it
to comply with the conditions precedent to consummating the transactions
contemplated by this Agreement and the Related Agreements. Seller agrees to
cooperate fully, and to cause its officers and employees to cooperate fully,
with Buyer and its officers, auditors, legal counsel, investment bankers and
their legal counsel in connection with the financing of the transactions
contemplated hereby including without limitation, an audit to be conducted by
Ernst & Young LLP of the financial statements of the Business for Seller's prior
fiscal years and the preparation of proforma financial statements of the
Business giving effect to the transactions contemplated by this Agreement,
including providing Buyer's officers, auditors, legal counsel, investment
bankers and their legal counsel with such documents and information relating to
such financial statement as they may reasonably request and authorizing Seller's
officers and auditors to fully discuss with Buyer's officers, auditors, legal
counsel, investment bankers and their legal counsel such documents and
information. Each party agrees to cooperate fully with each of the other parties
in assisting them to comply with the provisions of this Section 6.19 and Seller
agrees to take such steps as may be necessary to remove any liens, mortgages,
charges, pledges, security interests or other Encumbrances (other than Permitted
Exceptions) which affect the Purchased Assets. The term "Permitted Exceptions"
as used in this Agreement means (a) statutory liens for current taxes or
assessments not yet due or delinquent; (b) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the Ordinary Course of
Business relating to obligations as to which there is no default on the part of
Seller, provided that the same shall be fully discharged of record before the
Closing; (c) exceptions shown on the surveys furnished by Seller to Buyer or
obtained by Buyer and set forth on Schedule 4.11 or 4.12(h) and agreed to by
Buyer as provided in Section 6.22, and (d) such other liens, imperfections in
title, charges, easements, restrictions and encumbrances which either (i) are
set forth on Schedule 4.11 or 4.12(h) and have been agreed to by Buyer as
provided in Section 6.22 or (ii) do not in the aggregate impair the value of the
Purchased Assets by more than Fifty Thousand Dollars ($50,000). Notwithstanding
the foregoing, no party
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hereto shall be required to initiate any litigation, make any payment or incur
any economic burden (other than as to Buyer with respect to the provision of a
letter of credit regarding the landfill) and except for a payment otherwise then
required to be made by it, to obtain any consent, waiver, authorization, order
or approval. If, despite its efforts, any party is unable to obtain any consent,
waiver, authorization, order or approval, and such failure to obtain such
consent, waiver, authorization, order or approval would have a material adverse
effect on the Purchased Assets or the Business, the other party may terminate
this Agreement and shall have no liability therefor, except as is provided in
Section 13.2.
6.20 Further Assurances. Seller and Buyer will use reasonable best efforts
to implement the provisions of this Agreement and the Related Agreements, and
for such purpose, at the request of any party (or Buyer's designees) will, at or
after the Closing, without further consideration, promptly execute and deliver
such additional documents as the requesting party may reasonably deem necessary
or desirable in order to consummate more effectively the transactions
contemplated hereby and thereby to vest in Buyer title to the Purchased Assets
free and clear of any liens, changes, pledges, security interests or other
Encumbrances.
6.21 Inventory Adjustment. The book value of the Inventory included in the
Purchased Assets at the Closing Date shall be $31.4 million (the "Target
Value"). The Purchase Price will be adjusted to the benefit of Buyer or Seller,
dollar for dollar, to the extent that the value of the Inventory as of the
Closing, as reported in the Final Closing Inventory Statement (as defined
below), is more or less than the Target Value (the "Inventory Adjustment").
(a) Closing Inventory Statement.
(i) Seller shall deliver to Buyer a statement setting forth the value of
the Inventory as of the Closing (the "Closing Inventory Statement"), which
Closing Inventory Statement Seller shall use its best efforts to deliver within
five (5) business days after the Closing Date, but shall deliver no later than
ten (10) business days after the Closing Date. The Closing Inventory Statement
shall be prepared in accordance with generally accepted accounting principles
consistent with the current accounting practices of the Business.
Representatives of Buyer shall be entitled to observe and review the preparation
of the Closing Inventory Statement to whatever extent Buyer may elect.
(ii) The Closing Inventory Statement shall be reviewed by Buyer, and Buyer
may, during the fifteen (15) business day period following the receipt by Buyer
of the Closing Inventory Statement, propose such adjustments (if any) as shall
in its judgment be required to cause the Closing Inventory Statement to properly
reflect the value of the Inventory as of the Closing in the manner provided in
this Section 6.21. In the event that Buyer and Seller are unable to agree upon
any such proposed adjustments within ten (10) business days after they have been
proposed by Buyer as aforesaid then, in such event, the adjustments in dispute
shall be submitted to the accounting firm of KPMG Peat Marwick (the
"Arbitrator") for its consideration and resolution; the fees of the Arbitrator,
the decision of which shall be final and binding upon Buyer and Seller, shall be
paid one-half by each
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of said parties. The Closing Inventory Statement shall become final and binding
upon the parties, (A) if Buyer does not propose any adjustments thereto in
accordance with the terms hereof, on the earlier of the date of written
acceptance thereof by Buyer or fifteen (15) business days after the delivery
thereof to Buyer, or (B) if Buyer proposes adjustments thereto in accordance
with the terms hereof, on the earlier of the date of written acceptance thereof
(as so adjusted) by Buyer and Seller or the date of the receipt by Buyer and
Seller of the decision of the Arbitrator as to any adjustments submitted to it
for resolution. The Closing Inventory Statement, in the form in which it becomes
final and binding upon Buyer and Seller as aforesaid, is hereinafter referred to
as the "Final Closing Inventory Statement". The Final Closing Inventory
Statement shall be delivered by Seller to Buyer within five (5) business days
after it becomes binding upon Buyer and Seller as aforesaid.
(b) Adjustment of the Purchase Price.
(i) If the value of the Inventory as set forth on the Final Closing
Inventory Statement is greater than the Target Value, Buyer shall pay to Seller,
within five (5) business days following the delivery by Seller to Buyer of the
Final Closing Inventory Statement, cash in immediately available funds in an
amount equal to such difference.
(ii) If the value of the Inventory as set forth on the Final Closing
Inventory Statement is less than the Target Value, Seller shall pay to Buyer,
within five (5) business days following the delivery by Seller to Buyer of the
Final Closing Inventory Statement, cash in immediately available funds in an
amount equal to such difference.
6.22 Real Property Information. Notwithstanding anything to the contrary in
Section 4.11 or 4.12(h), Schedules 2.1(i), 4.11 and 4.12(h) (including
satisfaction of Seller's obligation to deliver complete and accurate copies of
policies, plans, title and other documents pursuant thereto) shall be completed
by Seller no later than two (2) weeks following the execution of this Agreement.
Subject to Section 6.19, (i) the Real Property to be listed on Schedule 2.1(i)
shall be sufficient in all material respects, from and after the Closing, for
the operation of the Purchased Assets, the conduct of the Business and Buyer's
intended future operation of the Facility (as previously disclosed to Seller),
and (ii) any Encumbrances listed on Schedule 4.11 or 4.12(h) shall not
materially adversely affect the Purchased Assets, the conduct of the Business
and Buyer's intended future operation of the Facility. Buyer shall have one (1)
week from the time of its receipt of the completed Schedule 2.1(i), 4.11 and
4.12(h) to determine whether the Schedules satisfy the requirements of
subsections (i) and (ii) above and to notify Seller of its determination,
provided that if Seller requires additional time to complete such Schedules or
Buyer requires additional time to complete its review of such Schedules, upon
the giving of written notice to such effect to the other party within the
original time period for its completion or review of such Schedules, such party
will extend such requesting party's completion or review time by one week.
Thereafter, if despite its efforts to remedy any objections Buyer may have based
on clause (i) and/or (ii) of this Section 6.22, Seller is not able to effect
such remedy to Buyer's reasonable satisfaction, Buyer may terminate this
Agreement without liability as permitted by Section 6.19. Buyer's decision to
not terminate shall evidence Buyer's acceptance of the materials listed above
only for purposes of
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proceeding with the transactions contemplated by this Agreement and shall not be
deemed an acceptance of the representations and warranties as true, complete and
correct.
6.23 Certain Incomplete Deliveries. Notwithstanding anything to the
contrary in Sections 4.7, 4.13, 4.16 and 4.19, complete and correct copies of
each agreement and/or lease listed on Schedules 4.7, 4.13, 4.16, 4.19(b) and
4.19(d) shall be delivered by Seller to Buyer no later than two (2) weeks
following the date of execution of this Agreement. Seller's failure to deliver
such agreements and leases within such time period shall constitute a breach of
this Agreement. Following delivery of such agreements and leases to Buyer, Buyer
will have a period of one (1) week to review the same and determine whether any
of such agreements or leases that were either not complete as delivered or not
delivered prior to the execution hereof, taken as a whole or any provision
thereof, would materially adversely affect the good and marketable title,
subject to no liens except as otherwise provided herein, to the Purchased
Assets, the conduct of ongoing operation of the Business or Buyer's intended
future operation of the Facility (as previously disclosed to Seller) and if
Buyer so determines, Buyer may terminate this Agreement without liability as
permitted by Section 6.19.
6.24 Pulp Mill Shutdown Costs. In connection with the annual shut-down of
the pulp mill at the Facility, currently scheduled to commence in the week of
May 17, 1999, Seller will perform, or cause to be performed, certain inspection,
cleaning, maintenance, repair and improvement work which can only be
accomplished during such shut-down (the "Work") and which involves the direct
expenditure of funds by Crown for labor, materials and equipment, which Crown
currently estimates will aggregate Three Million Two Hundred Thousand Dollars
($3,200,000), but which could be more or less than such amount. During the
shut-down period, PPA shall be entitled to have a representative present at the
Facility to verify the Work being performed at the pulp mill. Following the
completion of the mill shut-down, Crown will prepare and submit to PPA a
detailed accounting of all direct costs incurred by Crown in connection with the
performance of the Work, together with copies of all invoices, statements and
certifications sufficient to support the items of expenditure set forth in such
accounting, which accounting shall be certified by Crown's chief accounting
officer to be accurate and complete and to have been prepared from Crown's books
and records maintained in the ordinary course of business. If the Closing
hereunder has occurred prior to completion of the accounting, PPA shall provide
all reasonable assistance, including access to PPA employees and records, to
allow Seller to promptly complete such accounting. Following its receipt of the
accounting, PPA will have a period of 30 days to review such accounting and the
supporting documents and to request and obtain additional information with
respect to the accounting and to discuss with Crown's management personnel
responsible for the shut-down such additional information as to the Work as PPA
may reasonably request. Following the expiration of such 30 day review period,
if PPA is reasonably satisfied with the accounting, PPA will cause to be
remitted to Crown an amount equal to fifty percent (50%) of the total
expenditures for the Work, as specified in such accounting.
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ARTICLE VII
COVENANTS
7.1 Transition. Neither Seller nor Buyer will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the pulp, toweling and
Sustaining Grades businesses conducted at the Facility from maintaining the same
business relationships with the Buyer and such business after the Closing as it
maintained with Seller and such business prior to the Closing. Seller will refer
all customer inquiries relating to the pulp and toweling business to Buyer from
and after the Closing.
7.2 Covenant Not To Compete. (a) Seller will not:
(i) compete (as defined below) with Buyer, during (A) the three (3) year
period commencing on the Closing Date, with respect to any grades of toweling or
tissue; (B) the three (3) year period commencing on the Closing Date, with
respect to Target Grades of paper produced by Crown at the Facility during the
two (2) year period prior to March 9, 1999, and not produced during such two (2)
year period at any other paper mills then operated by Crown or any of its
subsidiaries or affiliates (as indicated on Schedule 7.2(a) hereto, which
Schedule lists all Target Grades produced by Crown at the Facility and at
Crown's other paper mills during such period). The immediately preceding
sentence shall not apply to Publishing Grades. "Compete" means to own, manage,
operate or engage in a business involving the manufacture, converting,
marketing, improvement, development, production, sale or otherwise, of any
grades of the types and grades of paper specified in clauses (A) and (B) above,
throughout the world, directly or indirectly, either as a proprietor, partner,
manager, operator, agent, consultant, broker, stockholder licensor, licensee,
joint venturer, or in any other capacity or means whatsoever; provided, however,
that Seller shall not be deemed to "compete" with respect to the purchase by
Seller of all of the capital stock or all or substantially all of the assets of
an entity that manufactures (X) toweling (provided that toweling does not
constitute more than twenty-five percent (25%) of the total manufacturing
output, on a tonnage basis, of such entity), or (Y) Target Grades of paper
(provided that the combined output of Target Grades, on a tonnage basis, of
Seller and the acquired entity, does not exceed the aggregate output of Seller
and the acquired entity prior to such purchase).
(ii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Buyer and the toweling business of the
Business, and any toweling customer, prospect, supplier or prospective supplier
of Buyer or the toweling business of the Business, or with regard to toweling,
solicit or provide services to, as the case may be, any toweling accounts,
clients, customers or prospects of Buyer or the toweling business of the
Business (or any toweling accounts, clients or customers which were contacted or
solicited by any of them prior to the Closing Date); provided, however, that
Seller shall not be deemed to have done any of the foregoing with respect to the
purchase by Seller of all of the stock or substantially all of the assets of an
entity that
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manufactures toweling provided that toweling does not constitute greater than
twenty-five percent (25%) of the total manufacturing output, on a tonnage basis,
of such entity.
(iii) (x) from the date of execution of this Agreement until the Closing
Date, solicit or transfer any Employee, and (y) during the two (2) year period
commencing on the Closing Date, not solicit for employment any Employee, or hire
or employ any of the persons listed in Schedule 7.2, which shall be updated by
Buyer at the Closing. Buyer shall not without Seller's prior consent, which
shall not be unreasonably withheld, during the periods described in (x) and (y)
above, solicit, hire or employ any person employed by Seller or its affiliates
in its sales and marketing group.
(b) The parties agree that the restrictions contained in this Section 7.2
are a reasonable and necessary protection of the immediate interest of the Buyer
and any violation of these restrictions would cause substantial injury to the
Buyer. It is the desire and intent of the parties that the provisions of Section
7.2(a) shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any portion or portions of Section 7.2(a) shall be adjudicated
to be invalid or unenforceable, Section 7.2(a) shall be deemed amended to delete
therefrom the portion or portions thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
portions of such Sections in the particular jurisdiction in which such
adjudication is made. If there is a breach or threatened breach of any of the
provisions of Section 7.2(a) of this Agreement, Buyer shall be entitled to an
injunction restraining such breach. Nothing herein shall be construed as
prohibiting Buyer from pursuing any other remedies for such breach or threatened
breach.
(c) If, subsequent to the date of this Agreement Seller or its parent
consolidates with, or merges into, another entity, in which Seller or its parent
is not the surviving or continuing entity, or all or a substantial part of the
assets of Seller or its parent are acquired by another entity, the provisions of
Section 7.2(a) and (b) shall survive such transaction and shall be binding and
enforceable against the successor entity, provided that the successor entity
shall not be deemed to have violated such provisions if the successor entity's
combined output, on a tonnage basis, of toweling and for Target Grades does not
exceed the aggregate output of Seller and the other entity prior to the
consolidation, merger or asset acquisition.
7.3 Permit Application. Seller will use its best efforts to assist Buyer in
obtaining any of the Licenses and Permits listed in Schedule 2.1(v) and
Environmental Permits listed in Schedule 2.1(iv) which are not transferable or
assignable to Buyer.
7.4 Tax Clearance. Seller will use its best efforts to deliver to Buyer a
written commitment or other assurances reasonably acceptable to Buyer by the New
Hampshire Department of Revenue Administration that Seller is in good standing
therewith and that Seller has timely filed all Returns required to be filed
therewith or supplied thereto.
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ARTICLE VIII
EMPLOYEES AND EMPLOYEE MATTERS
8.1 Transferred Employees. (i) Seller has delivered to PPA a list of all of
the employees of Crown and Electric who are employed at the Facility (each, an
"Employee" and collectively, the "Employees") as of the most recent date for
which such information is available. PPA shall have the right, upon reasonable
advance notice and in a manner which is not disruptive to the Business,
following the execution of this Agreement, to interview and negotiate with
Employees in order to determine which Employees will be offered employment by
PPA. Immediately prior to Closing, Seller shall terminate the employment of each
of its respective Employees. Ten (10) business days prior to Closing, Seller
shall advise PPA in writing of the number of Employees which constitute at least
ninety percent (90%) of those Employees entitled to protection under the WARN
Act and PPA shall offer employment with Buyer, effective no later than the day
following the Closing Date, to such number of Employees. The process for PPA to
offer re-employment to Employees who are subject to a collective bargaining
agreement after the Closing shall be in accordance with the terms and conditions
of the applicable collective bargaining agreements. Such Employees who are
offered employment by PPA and elect to become employees of PPA are hereinafter
referred to as "Transferred Employees" and shall be deemed to have become
employees of PPA as of the time the Closing becomes effective.
(ii) PPA represents to Seller that it does not intend to implement a "plant
closing" or a "mass layoff" as those terms are defined in the Worker Adjustment
and Retraining Notification Act ("WARN Act") at or in respect of the Facility
within ninety (90) days of the Closing Date. PPA shall be responsible for and
shall indemnify and hold harmless Seller from any and all claims or liability
under the WARN Act arising from (a) a breach of Buyer's agreement with respect
to hiring contained in Section 8.1(i) or (b) a "plant closing" or "mass layoff"
in violation of the WARN Act occurring after the Closing Date.
8.2 Employee Benefit Plans. (i) PPA will establish employee benefit plans
and programs substantially equivalent to the plans and programs listed in
Schedule 8.2 that are presently offered by Seller at the Facility and will
permit each salaried Employee and each hourly Employee of the Business who
becomes a Transferred Employee and who is not covered by one of the collective
bargaining agreements listed in Schedule 4.19(a) to participate in such newly
established employee benefit plans and programs. The Transferred Employees'
accrual of benefits under plans and programs covering employees of Buyer shall
be based solely on their service with PPA after the Closing. For purposes of
calculating and/or satisfying annual deductibles, co-payments, out-of-pocket
maximums and the like under PPA's newly established benefit plans for the year
in which the Closing occurs, Transferred Employees shall receive full credit and
benefit for all otherwise qualifying amounts paid thereby during the calendar
year in which the Closing occurs.
(ii) No assets or Liabilities with respect to Transferred Employees shall
be transferred, as a result of this Agreement, from any of Seller's employee
benefit plans applicable to the Employees of the Business to any plan maintained
or established by Buyer, and Seller shall retain all obligations to fund or
otherwise provide benefits accrued
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by Transferred Employees under its benefit plans prior to the Closing, except as
otherwise expressly provided herein. Benefits under the plans retained by Seller
shall be payable to the Transferred Employees pursuant to the terms of such
plans and shall constitute the only benefits to which the Transferred Employees
are entitled with respect to their service with Seller prior to the Closing,
except as otherwise expressly provided herein, provided nothing in this sentence
shall be deemed an assumption of Liabilities by the Buyer as to Transferred
Employees.
(iii) PPA will assume Seller's obligations under the collective bargaining
agreements listed in Schedule 4.19(a) with respect to Transferred Employees
covered by one or more of such agreements to the extent that the collective
bargaining agreements relate to services rendered for Buyer by Transferred
Employees after the Closing. For purposes of applying the terms and conditions
of such collective bargaining agreements, the employment of each Transferred
Employee shall be deemed to be continuous, and without interruption resulting
from the termination by Seller and rehiring by PPA contemplated under this
Agreement, provided nothing in this sentence shall be deemed an assumption of
pre-Closing Liabilities by PPA as to Transferred Employees. PPA will establish
such benefit plans and arrangements as may be mutually agreed upon by PPA and
the collective bargaining representatives of the Transferred Employees.
8.3 Worker's Compensation. PPA will assume the responsibility for all
worker's compensation claims made by Transferred Employees arising from events
occurring after the Closing and Seller shall indemnify PPA for any claims made
against Buyer for events occurring prior to the Closing. Seller will retain the
responsibility (including claims administration) for all worker's compensation
claims made by its employees or former employees (whether or not Transferred
Employees) that arise from events that occur before the Closing or events
otherwise occurring while the Employees are employed by Seller and PPA shall
indemnify Seller for claims made against Seller for events occurring after the
Closing.
8.4 Severance and Vacation Pay.
(a) Seller will pay severance pay as required under Seller's existing
severance pay programs to all eligible Employees who are not Transferred
Employees and shall indemnify Buyer for severance or other claims made against
Buyer by Employees who are not Transferred Employees. PPA shall reimburse Seller
for severance pay paid by Seller to any Employee who is hired by PPA within
sixty (60) days after the Closing; provided, however, that PPA shall not
reimburse Seller for severance pay paid by Seller to any employee who is hired
by PPA as a less than full time "consultant" and whose earnings are reported to
the Internal Revenue Service by PPA on IRS Form 1099.
(b) With respect to Transferred Employees, PPA will be a successor of
Seller solely with respect to, and will credit each such Transferred Employee,
with any and all accrued vacation time that must be used during such Transferred
Employee's current year of employment by Seller prior to the Closing and that
has not been previously used by such Transferred Employee. The term "current
year of employment" in the foregoing
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sentence shall mean (i) the current calendar year for hourly Transferred
Employees and (ii) the twelve (12) month period commencing with the most recent
anniversary of the date of hire for salaried Transferred Employees. In addition,
with respect to any Transferred Employee who previously was employed at the
Facility by Crown-Zellerbach, if such Transferred Employee shall make a claim
for vacation pay in respect of any period during which he or she was employed by
Crown-Zellerbach, Seller will defend, indemnify and hold PPA harmless from and
against any such losses, liabilities, damages and expenses (including reasonable
attorneys' fees) suffered or incurred by Buyer by reason of such claim without
regard for the limitations set forth in Section 12.4. Within seventy-two (72)
hours after the Closing, Seller will pay to Employees (who are not Transferred
Employees) all unpaid vacation pay accrued prior to the Closing and shall
indemnify Buyer for any claims made by such employees for unpaid vacation pay
(or any other employee benefit(s) accrued as of the Closing) without regard for
the limitations set forth in Section 12.4. Thereafter, Seller will have no
liability for vacation pay for Transferred Employees except as set forth in this
Article VIII.
8.5 Other Liabilities Relating to Employees. Except to the extent otherwise
specifically provided in this Article VIII, PPA shall not assume any obligations
or Liabilities with respect to (i) any pension plan, welfare plan, retiree
medical expenses, or other employee benefit plan or program relating to any
present, former or retired employee of Seller, (ii) any severance or separation
obligation which may result from the consummation of the transactions
contemplated by this Agreement and Seller shall indemnify PPA for any claims by
Employees for such payments; or (iii) any other liabilities or obligations
arising from the employment of Employees through the consummation of the Closing
(whether or not Transferred Employees).
8.6 Administration. PPA and Seller will each make its appropriate employees
available to the other at such reasonable times as may be necessary for the
proper administration by the other of any and all matters relating to employee
benefits, employee grievances and worker's compensation claims affecting the
Employees and former employees of Seller (whether or not Transferred Employees).
If, as a result of the transactions contemplated by this Agreement, reports are
required to be filed with respect to any of Seller's benefit plans, Seller will
file such reports.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject, to the extent not waived by Buyer in writing,
to the satisfaction at or prior to the Closing of each of the following
conditions and, to the extent that satisfaction of any such condition requires
any action on the part of Seller, Seller hereby agrees to take such action:
9.1 Representations and Warranties. The representations and warranties of
Seller contained in Article IV of this Agreement together with the Schedules
thereto, and any other documents executed by or on behalf of Seller from and
after the date hereof,
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including, but not limited to, the Related Agreements through the Closing
pursuant to this Agreement, shall be true and complete in all material respects
as of the date of this Agreement and as of the Closing, as if made on and as of
such date, and Seller shall deliver to Buyer at the Closing a certificate to
that effect signed by its authorized officer.
9.2 Performance of this Agreement. Seller shall have complied in all
material respects with all of its obligations under this Agreement that are to
be performed or complied with by it and prior to the Closing and shall deliver
to Buyer at the Closing a certificate to that effect signed by its Chairman or
President.
9.3 Corporate Authorization. All corporate action required to be taken by
Seller in connection with the transactions contemplated by this Agreement shall
have been taken, all documents incident thereto shall be reasonably satisfactory
in substance and form to Buyer and Buyer shall have received such originals or
copies of such documents as it may reasonably request.
9.4 Consents and Approvals. All consents, authorizations, orders, approvals
or waivers of Governmental Authorities and of individuals or business entities
(including, without limitation, those listed in Schedule 4.3) which Seller is
required to obtain in order to be able to assign or otherwise transfer the
Purchased Assets to Buyer and to permit Buyer and its designees to operate the
Business shall have been obtained and all waiting periods specified by law with
respect thereto shall have expired or terminated.
9.5 Injunction, Litigation. No order, injunction, decree or judgment of any
court or Governmental Authority having jurisdiction shall be in effect which
restrains or prohibits the consummation of the transactions contemplated by this
Agreement or the Related Agreements, or which would limit or affect the ability
of Buyer to own or control the Purchased Assets or to operate the business of
the Facility, and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any such court or Governmental
Authority seeking to prohibit, delay or otherwise prevent or challenging the
validity of the transactions contemplated by this Agreement or the Related
Agreements, or which could in Buyer's judgment have an adverse effect on the
Purchased Assets or the business of the Facility.
9.6 Legislation. No statute, rule, regulation, ordinance or other legal
requirement shall have been proposed or enacted which prohibits or might
prohibit, restrict, delay or otherwise prevent the consummation of the
transactions contemplated by this Agreement or the Related Agreements.
9.7 Title Insurance, Estoppel Certificates. Buyer and/or its designees
shall have received commitments for an ALTA form title insurance policy in all
respects reasonably satisfactory to Buyer and Buyer's lender insuring Buyer, its
designees and its lender's mortgage in fee simple and without standard or
special exceptions, other than the Permitted Exceptions, or other assurances
reasonably satisfactory to it, that Seller has good and marketable title to the
Real Property and that Buyer will acquire good and marketable titles to the Real
Property free and clear of all liens, charges, pledges and other
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Encumbrances, other than Permitted Exceptions. In addition, Seller shall have
obtained executed estoppel certificates reasonably satisfactory in form and
substance to Buyer and its designees and such other information with respect to
the Leases as Buyer may reasonably request.
9.8 Receipt of Licenses and Permits and Environmental Permits. The issuance
or assignment to Buyer and/or its designees of all Licenses and Permits and
Environmental Permits.
9.9 Related Agreements, Documents and Instruments. Seller shall have duly
executed and delivered the Related Agreements. Seller shall have delivered all
Schedules and other disclosures required to be delivered pursuant to the
provisions of this Agreement. Seller shall have executed and delivered such
deeds, bills of sale, and other instruments of assignment and transfer in proper
form to effect the transfer and assignment of the Purchased Assets in accordance
with the provisions of this Agreement and such other documents, certificates or
instruments to be delivered hereunder, all in the form required hereby,
including, without limitation, such customary title affidavits and certificates
as may be required to enable Buyer to procure title insurance in accordance with
Section 9.7 above.
9.10 No Change. From the date of this Agreement to the Closing Date, there
shall not have been any damage, destruction or loss (whether or not covered by
insurance) affecting the Purchased Assets in an aggregate amount in excess of
One Hundred and Fifty Thousand Dollars ($150,000); provided, however, that in
the event of any fire or other casualty resulting in damage, destruction, or
loss not repaired or restored and affecting the Purchased Assets between the
date hereof and the Closing Date, Buyer shall have the election in its sole
discretion (i) not to close hereunder by reason of non-satisfaction of the
condition precedent specified in this Section 9.10, or (ii) to close hereunder
on the basis of accepting such Assets as is, together with the right to receive
all of Seller's insurance proceeds allocable to such damage, destruction or loss
of Assets.
9.11 Payment of Transfer Taxes. Seller shall have paid or provided for
payment of its portion of all transfer taxes payable upon the transfer of the
Real Property and Equipment hereunder.
9.12 Bulk Sales Compliance. Seller shall have complied with the provisions
of the bulk sales laws of applicable states.
9.13 Results of Environmental Audit.
(a) The Environmental Audit and Phase II Assessment (the "Study") to be
conducted for Buyer, the scope of which is set forth in Schedule 6.6, shall have
revealed no violations of the representations and warranties set forth in
Article IV which, individually or in the aggregate, in the reasonable judgment
of Tighe & Bond (or other environmental expert selected by Buyer)(the "Expert")
would be expected to cost in excess of One Million Dollars ($1,000,000) to
address, or if any such violation(s) of such representations and warranties is
found, Seller shall in its sole discretion have agreed in writing to perform or
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pay for all action required to address such violation(s) in a manner reasonably
satisfactory to the Buyer; provided, however, that Seller's cost in such
performance, if any, shall be only that amount in excess of One Million Dollars
($1,000,000) with Buyer being solely responsible for the first One Million
Dollars ($1,000,000) of such amount. For purposes of this Section 9.13, no
specific condition, non-compliance with Environmental Law or release of any
Hazardous Material identified in the Study shall be considered to be a violation
of the representations and warranties set forth in Article IV unless, in the
reasonable judgment of the Expert, such violation would cost in excess of One
Hundred Thousand Dollars ($100,000) to address; provided, however, that the cost
to address items 2(d) and 2(g) on Schedule 4.5 shall be deemed to be only the
cost in excess of the estimated cost specified for such items as set forth in
such Schedule 4.5.
(b) Seller shall provide access to the Real Property and otherwise
cooperate with Buyer in its performance of the Study.
9.14 Opinion of Counsel for Seller. Buyer shall have received an opinion
from Sulloway & Hollis, P.L.L.C., counsel for Seller, addressed to Buyer and
dated the Closing Date, in form and substance reasonably acceptable to Buyer.
9.15 No Material Adverse Change. There shall not have occurred since the
date of the execution of this Agreement, any material adverse change (i) in the
financial condition, results of operations, cash flows or prospects of the
Business or (ii) in the capacity of Seller to conduct the Business in a manner
consistent with past practice, and Seller shall have so certified to Buyer in
writing.
9.16 HSR Act. Buyer, Seller and any other person (as defined in the HSR Act
and the rules and regulations thereunder) which is required in connection with
the transactions contemplated hereby to file a Notification and Report Form for
Certain Mergers and Acquisitions with the United States Department of Justice
and the United States Federal Trade Commission pursuant to Title II of the HSR
Act shall have made such filing, and the applicable waiting period with respect
to each such filing (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
9.17 Termination of Liens. All mortgages, security interests and other
liens on the Purchased Assets shall have been fully and unconditionally
satisfied, discharged, released or terminated at or prior to the Closing and
Buyer and its designees shall have received true and complete copies of all such
mortgage satisfactions, certified copies of filed UCC-3 termination statements
or releases and other evidence satisfactory to Buyer and its designees of
satisfaction, discharge, release or termination.
9.18 Closing of Sale of Senior Notes. Prior to or concurrently with the
Closing, ATH shall have received the net proceeds from the issue and sale of
senior notes in the aggregate principal amount of at least One Hundred and
Seventy-Five Million Dollars ($175,000,000.00) at an interest rate acceptable to
Buyer.
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9.19 Cluster Compliance. Buyer shall have received a satisfactory letter
from a qualified professional environmental engineering firm (the "Cluster
Engineer") regarding the Seller's plans for compliance with the Pulp and Paper
Cluster Rule, 63 Fed. Reg. 18504-18751 promulgated by the United States
Environmental Protection Agency ("Cluster Rule").
ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated by
this Agreement shall be subject, to the extent not waived by Seller in writing,
to the satisfaction at or prior to Closing of each of the following conditions
and, to the extent that satisfaction of any such condition requires any action
on the part of Buyer, Buyer hereby agrees to take such action:
10.1 Representations and Warranties. Except for changes contemplated by
this Agreement, the representations and warranties of Buyer contained in Article
V of this Agreement shall be true and complete in all material respects as of
the date of this Agreement and as of the Closing as if made on and as of such
date, and Buyer shall have delivered to Seller a certificate to that effect
signed by its Manager.
10.2 Performance of this Agreement. Buyer shall have complied in all
material respects with all of its obligations under this Agreement and Buyer
shall have delivered to Seller a certificate to that effect signed by its
Manager.
10.3 Limited Liability Company Authorization. All limited liability company
action required to be taken by PPA in connection with the transactions
contemplated by this Agreement and the Related Agreements shall have been taken,
all documents incident thereto shall be reasonably satisfactory in substance and
form to Seller, and Seller shall have received all such originals or copies of
such documents as it may reasonably request.
10.4 Consents and Approvals. All consents, including, but not limited to,
those listed in Schedule 4.3, and all authorizations, orders or approvals of
Governmental Authorities and of individuals or business entities, including, but
not limited to, the return to Seller of Seller's letter of credit supporting the
landfill permit, which the parties are required to obtain in order to consummate
the transactions contemplated by this Agreement and the Related Agreements shall
have been obtained and all waiting periods specified by law with respect thereto
shall have passed.
10.5 Injunction, Litigation. No order of any court or Governmental
Authority shall be in effect which restrains or prohibits the consummation of
the transactions contemplated by this Agreement and the Related Agreements and
there shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any such court or Governmental Authority seeking to
prohibit or delay or challenging the validity of the transactions contemplated
by this Agreement or the Related Agreements.
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10.6 Legislation. No statute, rule or regulation shall have been proposed
or enacted which does, or might, prohibit, restrict or delay the consummation of
the transactions contemplated by this Agreement or the Related Agreements.
10.7 Opinion of Counsel for Buyer. Seller shall have received an opinion
from Mandel & Resnik P.C., counsel for Buyer, addressed to Seller and dated as
of the Closing Date, in form and substance reasonably acceptable to Seller.
10.8 HSR Act. Buyer, Seller and any other person (as defined in the HSR Act
and the rules and regulations thereunder) which is required in connection with
the transactions contemplated hereby to file a Notification and Report Form for
Certain Mergers and Acquisitions with the United States Department of Justice
and the United States Federal Trade Commission pursuant to Title II of the HSR
Act shall have made such filing, and the applicable waiting period with respect
to each such filing (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
ARTICLE XI
CLOSING
11.1 Time and Place of Closing. The closing (the "Closing") shall take
place at a location mutually agreed upon in writing by Buyer, Buyer's lender,
and Seller at 10:00 a.m. local time on the later of (i) May 27, 1999, (ii) the
next business day after which the last of the closing conditions is fulfilled or
waived, or (iii) such other date as may be mutually agreed upon by the parties
in writing (the "Closing Date"). If the Closing takes place, the Closing and all
of the transactions contemplated by this Agreement and the Related Agreements
shall be deemed to have occurred simultaneously and become effective as of 6:00
a.m. on the Closing Date.
11.2 Deliveries by Seller. At the Closing, Seller shall deliver to Buyer
and/or its designees the following:
(i) quitclaim deeds with covenants concerning Seller's acts duly
executed and in recordable form conveying to Buyer and/or its designees
good and marketable title to the Real Property, free and clear of
Encumbrances other than Permitted Exceptions;
(ii) properly endorsed title certificates transferring the motor
vehicles which are a part of the Purchased Assets to Buyer or its
designees;
(iii) a bill of sale and assignment conveying to Buyer good and
marketable title to the Equipment and Inventory, free and clear of
Encumbrances other than Permitted Exceptions in form reasonably acceptable
to Buyer;
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(iv) the certificates required by Sections 9.1 and 9.2;
(v) evidence that the corporate action described in Section 9.3 has
been taken;
(vi) copies of the consents required by Section 9.4;
(vii) the estoppel certificates required by Section 9.7;
(viii) certificates from the appropriate Governmental Authorities of
(a) Crown's good standing in the State of Virginia and its qualification to
do business in the State of New Hampshire, and (b) Electric's and Railway's
good standing in the State of New Hampshire, and (c) ARCO's good standing
in the State of Maine and qualification to do business in the State of New
Hampshire, as of the most recent date obtainable;
(ix) the opinion of counsel for Seller required by Section 9.14;
(x) title insurance policies relating to the Real Property in
accordance with Section 9.7 above, which shall be obtained by Seller at the
expense of Buyer, such expense to be reimbursed at the Closing;
(xi) an instrument of assignment of all Licenses and Permits and
Environmental Permits in the form and substance reasonably acceptable to
Buyer;
(xii) instruments of assignment of all Intellectual Property, free and
clear of Encumbrances, in the form and substance reasonably acceptable to
Buyer.
(xiii) ) stock certificate(s), or duly executed affidavits of lost
stock certificates (and surety bond, if required by ARCO), representing
2,500 shares of the capital stock of ARCO, together with stock powers duly
executed in blank, with the signatures thereon duly guaranteed by a
commercial bank; and
(xiv) such additional documents as Buyer may reasonably request.
11.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller the
following:
(i) cash in the amount of the Purchase Price in immediately available
funds as set forth in Section 2.4;
(ii) an instrument of assumption of the Assumed Liabilities executed
by PPA in the form and substance reasonably acceptable to Buyer;
(iii) the certificates required by Sections 10.1 and 10.2;
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(iv) evidence that the corporate action on the part of ATH and the
limited liability company action on the part of PPA described in Section
10.3 has been taken;
(v) copies of the consents required by Section 10.4.
(vi) a certificate of the Secretary of State of the State of Delaware
as to the good standing of ATH;
(vii) a certificate of the Secretary of State of the State of New York
as to the good standing of PPA in the State of New York and a certificate
of the Secretary of State of the State of New Hampshire as to its
qualifications to do business in the State of New Hampshire (and other
applicable jurisdictions) as of the most recent date obtainable;
(viii) the opinion of Buyer's counsel required by Section 10.7; and
(ix) such additional documents as Seller may reasonably request.
11.4 Deliveries by Seller and Buyer. At the Closing, Crown and PPA shall
each execute and deliver to the other duly executed copies of the Related
Agreements.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Seller. Subject to the limitations contained in
this Article XII, Seller will indemnify, defend and hold Buyer and its
directors, officers, employees, heirs, assigns and representatives
(collectively, "Buyer Indemnified Parties") harmless from any and all
Liabilities asserted against, resulting to or incurred, suffered or paid,
directly or indirectly, by Buyer Indemnified Parties, arising out of or relating
to:
(i) any misrepresentation contained in, omission from or breach of,
any covenant, representation or warranty made by Seller in any of the
Seller Documents; provided, however, that indemnification for any
violation(s) of the representations and warranties set forth in Sections
4.5 and 4.7 relating to Environmental Laws shall be made only if (a) the
cost for any one violation shall be in excess of $100,000 (the "Minimum"),
and (b) the aggregate of all such violations shall exceed the sum of One
Million Dollars ($1,000,000) (the "Basket"), and, in such event, indemnity
shall be made only for the actual cost of such violations in excess of the
Basket; provided further that the Basket shall include any violations that
may be found pursuant to the Study as set forth in Sections 9.13(a), and
the foregoing Minimum and the Basket shall apply to any matter constituting
a violation of Sections 4.5 and 4.7 regardless of which subsection of this
Section 12.1 is asserted to give rise to Seller's duty to indemnify;
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(ii) the breach of any agreement or undertaking of Seller contained in
any of the Seller Documents;
(iii) any Liability or obligation of Seller (whether absolute,
accrued, contingent or otherwise and whether a contractual or other type of
Liability, obligation or claim) not specifically assumed by Buyer pursuant
to this Agreement;
(iv) except for the Assumed Liabilities, any claims of creditors of
Seller or any other third parties against the Purchased Assets or Buyer's
title to the Purchased Assets (including any Liability of Seller that
becomes a Liability of the Buyer under any bulk transfer law of any
jurisdiction, under any common law doctrine of de facto merger or successor
liability, or otherwise by operation of law);
(v) except to the extent Buyer is responsible for the following
Liabilities under this Agreement, any claims by or on behalf of current or
former employees of Crown or Electric arising out of employment by Crown or
Electric prior to the consummation of the Closing: (a) for wages,
compensation, or benefits of any type under any Employee Benefit Plan; (b)
on account of any alleged or actual contractual or other commitment of
Crown or Electric to such employees; (c) on account of any work related
injuries or illnesses occurring or contracted on or prior to the
consummation of the Closing, including, without limitation any refusal to
rehire claim related thereto; (d) on account of any strike, work stoppage,
slowdown, unfair labor practice allegation or finding, grievance
proceedings, discrimination or hiring claims, or other controversies
involving issues of employment, benefits, hiring practices, or any other
aspect of the employer-employee relationship or any similar event or
condition relating to personnel or employment relations matters; and/or (e)
under any workers' compensation, worker health or safety, equal employment
opportunity, or discrimination statutes or laws of any type or description;
(vi) except to the extent Buyer is responsible hereunder to pay a
portion of New Hampshire real estate transfer tax, as set forth in Section
6.8(ii), any claims for sales and use taxes or any other Taxes made against
Buyer or Buyer's title to the Purchased Assets on account of the
consummation of the transaction contemplated by this Agreement or the
Related Agreements or on account of the Business or operations conducted at
the Facility, including, without limitation, the New Hampshire real estate
transfer tax;
(vii) except for the Assumed Liabilities, any operations or activities
of Seller in connection with ownership or use of the Purchased Assets by
Seller and/or the Business prior to the Closing by Seller;
(viii) except for the Assumed Liabilities, any action, suit or
proceeding commenced before or after the Closing based on an event
occurring or a claim arising on or prior to the consummation of the Closing
relating to Seller, the Purchased Assets or the Business;
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(ix) except to the extent Buyer is responsible for the same under this
Agreement, any claim, Liability, Taxes, tax lien, or Encumbrance arising
from or with respect to property taxes owing on or relating to the
Purchased Assets for periods prior to the Closing; and
(x) any and all actions, suits, proceedings, demands, claims,
assessments, judgments, fines, penalties, costs, damages, losses, charges,
and expenses (including reasonable attorneys' fees, court costs and
disbursements) that Buyer may suffer, sustain, incur, or become subject to
arising out of, based upon, resulting from, or incident to the foregoing.
12.2 Indemnification by Buyer. Subject to the limitations contained in this
Article XII, PPA will indemnify and hold Seller and its directors, officers,
employees, heirs, assigns and representatives (collectively, "Seller Indemnified
Parties") harmless from any and all Liabilities asserted against, resulting to
or incurred, suffered or paid, directly or indirectly, by Seller Indemnified
Parties, arising out of or relating to:
(i) any misrepresentation contained in, omission from or breach of any
covenant, representation or warranty made by Buyer in this Agreement or the
Related Agreements;
(ii) the breach of any agreement or undertaking of Buyer contained
this Agreement or the Related Agreements;
(iii) the failure of PPA to perform any obligation specifically
assumed by it pursuant to the terms of this Agreement;
(iv) any claims by or on behalf of Transferred Employees arising out
of employment by PPA after the consummation of the Closing: (a) for wages,
compensation, or benefits of any type under any employee benefit plan; (b)
on account of any alleged or actual contractual or other commitment of PPA
to such Transferred Employees; (c) on account of any work related injuries
or illnesses occurring or contracted after the consummation of the Closing,
including, without limitation any refusal to rehire claim related thereto;
(d) on account of any strike, work stoppage, slowdown, unfair labor
practice allegation or finding, grievance proceedings, discrimination or
hiring claims, or other controversies involving issues of employment,
benefits, hiring practices, or any other aspect of the employer-employee
relationship or any similar event or condition relating to personnel or
employment relations matters; (e) under any Workers' Compensation, worker
health or safety, equal employment opportunity, or discrimination statutes
or laws of any type or description; and/or (f) retiree medical benefits for
Transferred Employees who retire from the employment of PPA, which benefits
are claimed to have vested or accrued as a result of such Employees'
employment by Seller or its predecessors;
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(v) any operations or activities of PPA in connection with ownership
or use of the Purchased Assets and/or the Business after the Closing; and
(vi) any and all actions, suits, proceedings, demands, claims,
assessments, judgments, fines, penalties, costs, damages, losses, charges,
and expenses (including reasonable attorneys' fees, court costs and
disbursements) that Seller may suffer, sustain, incur, or become subject to
arising out of, based upon, resulting from, or incident to the foregoing.
12.3 Third Party Claims. The obligations and liabilities of a party from
which indemnification is sought (an "Indemnifying Party") to a party seeking
indemnification (an "Indemnified Party") under this Article XII with respect to
any claim, action, suit, proceeding or demand at any time instituted against or
made upon an Indemnified Party for which such Indemnified Party may seek
indemnification hereunder (a "Legal Action") resulting from the assertion of
liability by those not parties to this Agreement (including governmental claims
for penalties, fines and assessments) shall be subject to the following
conditions:
(i) the Indemnified Party shall give prompt written notice to the
Indemnifying Party of the nature of the Legal Action and the amount thereof
to the extent known; provided, however, that the failure to give such
notice shall not affect the rights of the Indemnified Party hereunder
unless such failure materially and adversely affects the Indemnifying
Party;
(ii) if any Legal Action is brought by a third party against an
Indemnified Party, the Legal Action shall be defended by the Indemnifying
Party by counsel of its own choice subject to the consent of the
Indemnified Party, such consent not to be unreasonably withheld. So long as
the Indemnifying Party notifies the Indemnified Party in writing within
fifteen (15) days after the Indemnified Party has given notice of the Legal
Action, the Indemnifying Party will indemnify the Indemnified Party from
and against the entirety of any Liabilities the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Legal Action, and such defense shall include all appeals or
reviews which counsel for the Indemnifying Party shall deem appropriate.
Until the Indemnifying Party shall have assumed the defense of any such
Legal Action, or if the Indemnified Party shall have reasonably concluded
that there are likely to be defenses available to the Indemnified Party
that are different from or in addition to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not be
entitled to assume the defense of such Legal Action and the defense may be
handled by the Indemnified Party), all legal or other expenses reasonably
incurred by the Indemnified Party shall be borne by the Indemnifying Party;
(iii) in any Legal Action initiated by a third party and defended by
the Indemnifying Party (w) the Indemnified Party shall have the right to be
represented by co-advisory counsel and accountants, at its own expense, (x)
the Indemnifying Party shall keep the Indemnified Party fully informed as
to the status of such Legal
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Action at all stages thereof, whether or not the Indemnified Party is
represented by its own counsel, (y) the Indemnifying Party shall make
available to the Indemnified Party, and its attorneys, accountants and
other representatives, all books and records of the Indemnifying Party
relating to such Legal Action and (z) the parties shall render to each
other such assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Legal Action; and
(iv) in any Legal Action initiated by a third party and defended by
the Indemnifying Party, the Indemnifying Party shall not make any
settlement of any claim without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld. Without limiting
the generality of the foregoing, it shall not be deemed unreasonable to
withhold consent to a settlement involving injunctive or other equitable
relief against the Indemnified Party or its assets, employees or business.
12.4 Limitations on Indemnification. Notwithstanding the foregoing
provisions of this Article XII, Seller shall not be liable under Section 12.1
(except with respect to obligations under Sections 12.1(vi) and (ix), and
6.21(b)) and Buyer shall not be liable under Section 12.2 (except with respect
to obligations under Section 6.21(b)) unless and until, and only to the extent
that, the aggregate amount of liability under either of such Sections exceeds
One Hundred and Seventy Five Thousand Dollars ($175,000) and thereafter the
Indemnified Party shall be entitled to indemnification thereunder in an
aggregate amount not to exceed Thirty Million Dollars ($30,000,000); provided,
however, that with respect to Seller's indemnification obligations pursuant to
Sections 12.1(vi) and (ix), and 6.21(b), and Buyer's indemnification obligations
pursuant to Section 6.21(b), (i) there shall be no minimum and no maximum amount
for which either Seller or Buyer shall be liable to indemnify the other, and
(ii) any amount paid by Seller to Buyer under Sections 12.1(vi), (ix) and
6.21(b) shall not be included in, and shall be separate and apart from, the
Thirty Million Dollar ($30,000,000) limitation on indemnification.
12.5 Survival, Investigation. The representations and warranties of the
parties contained in this Agreement shall survive any investigation by any party
and shall not terminate until the third anniversary of the Closing Date (the
"Survival Date") at which time they shall lapse. Notwithstanding the provisions
of the preceding sentence, (i) any representation or warranty in respect of
which indemnification may be sought under Sections 12.1(i) or 12.2(i) shall
survive the Survival Date if written notice, given in good faith, of the
specific breach thereof is given to the Indemnifying Party prior to the Survival
Date, whether or not liability has actually been incurred and (ii) any claim for
which indemnification can be sought under Sections 12.1(vi) and (ix) shall
survive indefinitely, notwithstanding any applicable statute of limitations.
12.6 Exclusive Remedy. Except as provided in Section 7.2(b) and Section
14.11, and except for a breach of Section 6.5 hereof, the sole and exclusive
remedy for any breach of this Agreement (other than a breach of Section 6.5),
including without limitation, any misrepresentation, breach of covenant or
warranty, and for any claim, loss, damages, or Liabilities relating to, arising
out of or otherwise in connection with such breach, shall be
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the right of indemnification as and to the extent set forth in this Article XII,
and in all events subject to all of the limitations herein, Buyer and Seller
waive any and all other remedies available to it at law or in equity (except as
provided in Section 7.2(b) and Section 14.11). Without intending to suggest any
exception to the exclusivity of the foregoing indemnification remedy (other than
in respect of Section 6.3), and subject to Section 7.2(b) and Section 14.11, in
the event that Buyer or Seller shall seek to recover any loss, damage, or
Liability from the other party under any theory of recovery other than the
indemnification as provided in this Article XII, the parties hereby agree that
the limitations and protections afforded to an Indemnifying Party by the
provisions of Sections 12.4, 12.5, and 12.6 shall be equally applicable to any
claim sought to be recovered under such theory. The foregoing sentence shall not
be applicable to any claim for breach of any provision of Article VII. This
Section 12.6 shall survive any termination of this Agreement.
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual consent of the Boards of Directors, Executive Committees
or Managers of Seller and Buyer.
(ii) by Seller if there has been a breach by Buyer of a
representation, warranty or agreement contained herein or if any condition
contained in this Agreement or the Related Agreements which must be met by
Buyer becomes impossible to fulfill within a reasonably short period of
time;
(iii) by Buyer if there has been a breach by Seller of any
representation or warranty or agreement contained herein or if any
condition contained in this Agreement or the Related Agreements which must
be met by Seller or any of the conditions contained in Article IX have not
been met or, becomes impossible to fulfill within a reasonably short period
of time, or if Buyer is unable to obtain such consents, authorization
orders or approvals as may be necessary to permit it to conduct the
business of the Facility; and
(iv) by Seller or Buyer if the Closing has not occurred by 11:59 p.m.
New Hampshire time, July 29, 1999.
13.2 Effect of Termination. If this Agreement is terminated as provided in
Section 13.1, it shall become wholly void and of no further force and effect and
there shall be no further liability or obligation on the part of any party
hereto except to pay such expenses as are required of it, but such termination
shall not constitute a waiver by any party of any claim it may have for damages
caused by reason of a material breach of a representation or warranty made by
another party hereto.
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13.3 Amendment. This Agreement, the Related Agreements and the Schedules
hereto may be amended at any time prior to Closing provided that any such
amendment is approved in writing by each of the parties hereto. All
representations and warranties which are true and correct as modified and
approved in writing by the party to whom the representation and warranty is made
shall be deemed true and correct for the purposes of Sections 9.1 and 10.1.
13.4 Extension, Waiver. At any time prior to the Closing any party to this
Agreement which is entitled to the benefits thereof may (i) extend the time for
the performance of any of the obligations of another party hereto, (ii) waive a
breach of a representation or warranty of another party hereto, or (iii) waive
compliance of another party hereto with the Agreement or conditions contained
herein. Any such extension or waiver shall be valid if set forth in a written
instrument signed by the party giving the extension or waiver.
13.5 Termination of ATH's Obligations. Upon the closing of the transactions
contemplated by this Agreement and/or the documents contemplated hereto, ATH
shall be relieved and released of any and all obligations, understandings and
liabilities of any nature whatsoever relating to or in connection with such
transactions.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Option to Purchase Shares of Electric. Notwithstanding anything herein
to the contrary, Buyer may elect, in its sole and absolute discretion, upon
notice to Seller not less than ten (10) days prior to the Closing, to purchase
all of the outstanding shares of capital stock of Electric rather than
purchasing the assets of Electric constituting Purchased Assets, in which case
(i) Buyer shall assume solely the Assumed Liabilities with respect to Crown and
Railway specified in Section 2.3, and (ii) Seller will make such representations
as are necessary and appropriate to reflect the change from a sale of assets to
a sale of shares.
14.2 Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally, (ii)
delivered via one-day overnight courier, (iii) transmitted by telefax, or (iv)
mailed by registered or certified mail (return receipt requested and postage
prepaid) to the following listed persons at the addresses and telefax numbers
specified below, or to such other persons, addresses or telefax numbers as a
party entitled to notice shall give, in the manner hereinabove described, to the
others entitled to notice:
(a) If to Seller to:
Crown Paper Co.
300 Lakeside Drive
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Oakland, CA 94612-3592
Attention: General Counsel
Telefax No.: (510) 874-3595
with a copy to:
Sulloway & Hollis, P.L.L.C.
9 Capitol Street, P.O. Box 1256
Concord, NH 03302-1256
Attention: John M. Sullivan, Esq.
Telefax No.: (603) 226-2404
(b) If to Buyer:
Pulp & Paper of America LLC
135 Engineers Road
Hauppauge, NY 11788
Attention: Mr. Mehdi Gabayzadeh
Telefax No.: (516) 435-8980
with a copy to:
Mandel & Resnik P.C.
220 East 42nd Street
New York, NY 10017
Attention: Nicholas J. Kaiser, Esq.
Telefax No.: (212) 573-0067
If given personally or transmitted by telefax, a notice shall be deemed to have
been given when it is received. If given by one-day overnight courier, notice
shall be deemed to have been given on the next business day following delivery
to the courier. If given by mail, it shall be deemed to have been given on the
third business day following the day on which it was posted. Notices and other
communications given by attorneys for Seller and Buyer shall be deemed given by,
respectively, Seller and Buyer.
14.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
14.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.5 Waiver. No waiver of any of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, whether of similar or different nature, unless so
expressly stated in writing.
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14.6 Modification. This Agreement may not be orally cancelled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by all of the
parties to this Agreement.
14.7 Severability. If any provision of this Agreement is found to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
of this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.
14.8 Stricken Words or Phrases. If any words or phrases in this Agreement
shall have been stricken out or otherwise eliminated, whether or not any other
words or phrases have been added, this Agreement shall be construed as if the
words or phrases so stricken out or otherwise eliminated had never appeared in
this Agreement.
14.9 Number and Gender. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
14.10 Miscellaneous. This Agreement and all Schedules hereto and the other
Seller Documents and the instrument of Assumption to be delivered at the Closing
by Buyer (i) constitute the entire agreement of the parties as to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof;
(ii) are not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; and (iv)
shall not be assigned by operation of law or otherwise without the prior written
consent of the parties hereto.
14.11 Specific Performance. Seller acknowledges that the acquisition of the
Purchased Assets is a vital, necessary and unique part of the Buyer's strategic
plan, and that any breach of this Agreement by Seller could not be adequately
compensated by monetary damages. Accordingly, if Seller breaches its obligations
under this Agreement, the Buyer shall be entitled, in addition to any other
remedies that it may have, to enforcement of this Agreement by a decree of
specific performance requiring Seller to fulfill its obligations under this
Agreement.
14.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. Buyer and Seller
hereby expressly consent to the jurisdiction of the Supreme Court of the State
of New York with respect to any action or proceeding between Buyer and Seller
with respect to this Agreement or any rights or obligation of such party
pursuant to this Agreement and each of Buyer and Seller agrees that the venue
shall lie in Suffolk County, New York. Each party to this Agreement waives trial
by jury in any such action or proceeding and consents to the service of process
in any such action or proceeding in the manner provided for notices and other
communications in Section 14.2.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and their corporate seals to be hereto affixed and attested by their
duly authorized officers.
Crown Paper Co.
By /s/ Robert A. Olah
---------------------------------
Robert A. Olah
President
Berlin Mills Railway, Inc.
By /s/ Robert A. Olah
---------------------------------
Robert A. Olah
President
Crown Vantage New Hampshire
Electric, Inc.
By /s/ Robert A. Olah
---------------------------------
Robert A. Olah
President
American Tissue Holdings Inc.
By /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
President
Pulp & Paper of America LLC
By /s/ Mehdi Gabayzadeh
---------------------------------
Mehdi Gabayzadeh
Manager
INSTRUMENT OF ASSUMPTION OF LIABILITIES
This INSTRUMENT OF ASSUMPTION OF LIABILITIES ("Instrument of Assumption")
is made this 9th day of July, 1999, by PULP & PAPER OF AMERICA LLC, a New York
limited liability company ("PPA"), and PPA's wholly owned subsidiaries PULP OF
AMERICA LLC, a Delaware limited liability company ("Pulp"), PAPER OF AMERICA
LLC, a Delaware limited liability company ("Paper"), HYDRO OF AMERICA LLC, a
Delaware limited liability company ("Hydro"), LANDFILL OF AMERICA LLC, a
Delaware limited liability company ("Landfill"), and RAILWAY OF AMERICA LLC, a
Delaware limited liability company ("RR") (PPA, Pulp, Paper, Hydro, Landfill and
RR are sometimes referred to collectively herein as "Buyer"), jointly and
severally, in favor of Crown Vantage Inc. and its wholly owned subsidiaries
CROWN PAPER CO., a Virginia corporation ("Crown"), CROWN VANTAGE-NEW HAMPSHIRE
ELECTRIC, INC., a New Hampshire corporation ("Electric"), and BERLIN MILLS
RAILWAY, INC., a New Hampshire corporation ("Railway") (Crown, Electric and
Railway are sometimes referred to collectively herein as "Seller").
RECITALS
A. PPA and Seller are parties to an Asset Purchase Agreement dated as of
March 24, 1999, among PPA, American Tissue Holdings, Inc. (a Delaware
corporation and PPA's parent) and Seller (the "APA"). Capitalized terms used in
this Instrument of Assumption shall have the same meaning as they have in the
APA unless provided otherwise herein.
B. All of the terms and conditions set forth in the APA, other than those
which have been waived, have been complied with and the parties now desire to
complete the transactions contemplated thereby.
<PAGE>
C. The APA provides, among other things, that for the consideration
provided therein, Buyer will assume certain of the Liabilities of Seller
relating to Crown's integrated pulp and paper mills in Berlin and Gorham, New
Hampshire and the related operations of Electric and Railway (the "Business").
The term "Liabilities" as used herein and in the APA means actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
assessments, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, debts, liabilities, obligations, taxes, liens, losses,
expenses and fees, including reasonable attorneys' fees, whether accrued or
fixed, absolute or contingent, material or immaterial, or determined or
determinable arising under any federal, state, local or foreign, statute, law,
ordinance, regulation or rule of law.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Buyer (meaning each of PPA, Pulp, Paper, Hydro, Landfill and RR, jointly
and severally) hereby assumes the following Liabilities of Seller which relate
to the Purchased Assets and/or Business and which are not paid or discharged at
or before the Closing:
(i) All Liabilities of Seller relating to the Purchased Assets or the
Business arising from the Material Contracts, Leases, Utility Agreements,
and other contracts and commitments which relate exclusively to the
Purchased Assets or the Business, to the extent such obligations, by their
stated terms, are to be performed in the Ordinary Course of Business
subsequent to the Closing, other than Liabilities arising from breaches
thereof or Liabilities accruing thereunder on or prior to the Closing.
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(ii) All Liabilities of Seller under its collective bargaining
agreements with UPIU Local 75 (expiration date June 24, 2002) and OPEIU
Local 6 (expiration date July 14, 2002) with respect to Transferred
Employees covered by one or more of such agreements to the extent that such
agreements relate to services rendered for Buyer by Transferred Employees
after the Closing. For purposes of applying the terms and conditions of
such collective bargaining agreements, the employment of each Transferred
Employee shall be deemed to be continuous, and without interruption
resulting from the termination by Seller and rehiring by Buyer contemplated
under the APA, provided nothing in this sentence shall be deemed an
assumption of pre-Closing Liabilities by the Buyer as to Transferred
Employees.
(iii) With respect to Transferred Employees, Buyer will be a successor
of Seller solely with respect to, and will credit each such Transferred
Employee with, any and all accrued vacation time that must be used during
such Transferred Employee's current year of employment by Seller prior to
the Closing and that has not been previously used by such Transferred
Employee. The term "current year of employment" in the foregoing sentence
shall mean (A) for hourly Transferred Employees, the current calendar year,
and (B) for salaried Transferred Employees, the twelve (12) month period
commencing with the most recent anniversary of the individual's date of
hire. In addition, with respect to any Transferred Employee who previously
was employed at the Facility by Crown-Zellerbach, if such Transferred
Employee shall make a claim for vacation pay in respect of any period
during which he or she was employed by Crown Zellerbach, Seller will
defend, indemnify and hold Buyer harmless from and against any
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such losses, liabilities, damages and expenses (including reasonable
attorneys' fees) suffered or incurred by Buyer by reason of such claim
without regard to the limitations set forth in Section 12.4 of the APA.
(iv) All Liabilities arising from (A) emissions, discharges or
threatened discharges of pollutants, contaminants, hazardous or toxic
substances or petroleum or any other waste, substance, material, chemical
or constituent subject to regulation under any Environmental Law
("Hazardous Materials") into the air, surface water, ground water or the
ocean, or on or into the land ("Hazardous Emissions") and (B) the
manufacture, processing, distribution, use, treatment storage, disposal,
transport or handling of Hazardous Materials ("Handling Hazardous
Substances") at the Facility (whether based in contract, tort, implied or
express warranty, criminal or civil statute or otherwise), under any law,
regulation, policy or guideline including but not limited to obligations to
clean up, remedy or otherwise to restore to a former condition, by itself
or jointly with others, any contaminated surface water, ground water, soil
or any natural resources associated therewith, regardless of whether such
liabilities or obligations arose before or after the Closing (such
Liabilities referred to herein as "Environmental Liabilities"), provided,
however, that Buyer will not be responsible for costs of those specific
remedial actions that Seller has prior to Closing agreed in writing to
perform.
(v) Without limiting the generality of the foregoing, all Liabilities
of Seller (as successor to James River Paper Company, Inc.) pursuant to the
Gulf Island Pond Oxygenation Project Agreement of General Partnership and
the related Operating Agreement, both dated January 9, 1991.
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2. Notwithstanding the provisions of Section 1 above, Seller is retaining,
and Buyer is not assuming, and shall not be deemed to have assumed, any
Liabilities of Seller of any kind or nature whatsoever, except those expressly
provided for in Section 1 of this Instrument of Assumption. Without limiting the
generality of the foregoing, except as otherwise set forth in this Instrument of
Assumption and subject to Section 1 above, Buyer is not assuming any Liabilities
and shall not have any obligation for or with respect to:
(i) any Liabilities for federal, state and local taxes incurred by
Seller in the conduct of, or relating to, the business of the Facility
prior to the Closing or incurred by Seller with respect to any of the
transactions contemplated hereby including, without limitation, all income,
payroll, value added, sales, use, ad valorem, transfer, franchise,
withholding, property excise taxes, timber tax, worker's compensation tax,
governmental fees or other like assessments or charges of any kind;
(ii) any Liabilities, whether civil or criminal in nature, arising out
of any actual or alleged violation by Seller which occurred, or which are
alleged to have occurred, prior to the Closing, or by any previous owner of
any of the Purchased Assets, of any federal, state or local law, rule,
regulation, judicial or administrative order, judgment or decree, or
governmental permit, license, approval or authorization with the exception
of Environmental Liabilities;
(iii) any Liabilities of Seller or its affiliates arising from a
breach by Seller or its affiliates prior to the Closing of any contract or
agreement, including, without limitation, Material Contracts and Leases;
(iv) any Liabilities arising under any contract or agreement,
including,
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without limitation, Material Contracts and Leases, if the rights of Seller
or its affiliates are, for any reason, not transferred to, or the benefits
thereunder are not otherwise made available to, Buyer at the Closing;
(v) any Liability in respect of (A) any worker's compensation claims
by former or present employees of Seller or its affiliates, whether or not
such employees are Transferred Employees, that arise from events occurring
prior to the Closing or events otherwise occurring while the Employee is
employed by Seller; (B) any obligation of Seller or its affiliates to
indemnify any person, including, without limitation, by reason of the fact
that such person was an officer, director or employee or agent of Seller or
its affiliates; (C) any employee benefit costs for former or present
employees of Seller, whether or not such employees are Transferred
Employees, accrued by such employees during employment prior to the
Closing, (D) any post-retirement medical benefits due to former or present
employees of Seller, provided, however, that Buyer shall indemnify Seller
against any claims for such benefits made by Transferred Employees who
retire from employment with Buyer and claim that such post-retirement
medical benefits vested or accrued as a result of such employees'
employment by Seller or its predecessors, or (E) any severance or
separation pay or allowances for former or present employees of Seller or
its affiliates who are not Transferred Employees;
(vi) any Liabilities of Seller or its affiliates under unsatisfied
purchase obligations other than the Assumed Liabilities;
(vii) any obligation of Seller or its affiliates under any employment
or consulting agreements or arrangements;
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(viii) any Liabilities of Seller or its affiliates for any refunds,
rebates, discounts or other such sums, whether falling due before or after
the Closing;
(ix) any Liabilities of Crown, Electric or Railway to one another or
to any of their affiliates, including, without limitation, inter-company
interest payable and accounts payable;
(x) any Liabilities of Seller or its affiliates for legal, accounting
and other professional services rendered to Seller or its affiliates;
(xi) any Liabilities of Seller or its affiliates arising out of any
action, suit, investigation or proceeding to the extent based upon an event
occurring or a claim arising (A) prior to the Closing or (B) after the
Closing in the case of claims in respect of products or services sold or
provided by Seller prior to the Closing and attributable to acts performed
or omitted by Seller or its affiliates prior to the Closing;
(xii) any other Liabilities of Seller or its affiliates relating to
the Purchased Assets and/or the Business that are incurred prior to the
Closing, including, without limitation, any accounts payable or other
current Liabilities of Seller or its affiliates and any other liabilities
of Seller or its affiliates incurred in connection with its efforts to
consummate the transactions contemplated hereby; and
(xiii) any Liabilities of Seller or its affiliates arising out of
indebtedness for borrowed money, including, without limitation, loans and
credit lines of Seller.
3. The assumption by Buyer of the Liabilities of Seller set forth in
Section 1 in this Instrument of Assumption shall not be construed to defeat,
impair or limit in any way any rights of Buyer to dispute with the obligee
thereof the validity or amount thereof, but in the event
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Buyer chooses to contest or dispute the validity or amount of any such
liability, Buyer agrees to indemnify and hold Seller harmless from any liability
arising from such contest or dispute. As to any Liabilities of Seller which are
not expressly assumed by Buyer hereunder, Buyer shall retain its indemnification
rights arising under the APA.
4. Buyer agrees that, from time to time after the delivery of this
Instrument of Assumption, it will, at the request of Seller and without further
consideration, promptly take such further action and execute and deliver such
additional documents as Seller may reasonably deem necessary in order to more
fully effectuate the assumption of liabilities provided for herein.
5. The provisions of this Instrument of Assumption are intended to be
binding upon Buyer, its successors and assigns, and are for the benefit of
Seller, its successors and assigns.
6. This Instrument of Assumption may not be orally canceled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding unless in writing and signed by all of the parties
hereto.
7. If any provision of this Instrtunent of Assumption is found to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
hereof shall nevertheless be binding upon the parties with the same effect as
though the void or unenforceable part had been severed and deleted.
8. This Instrument of Assumption shall be governed by and construed in
accordance with the internal laws of the State of New York. Buyer and Seller
hereby expressly consent to the jurisdiction of the Supreme Court of the State
of New York with respect to any action or proceeding between Buyer and Seller
with respect to this Instrument of Assumption or any rights or obligation of
such party pursuant to this Instrument of Assumption and each of Buyer and
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Seller agrees that the venue shall lie in Suffolk County, New York. Each party
to this Instrument of Assumption waives trial by jury in any such action or
proceeding and consents to service of process in any such action or proceeding
in the manner provided for notices and other communications in Section 14.2 of
the APA.
IN WITNESS WHEREOF, each of PPA, Pulp, Paper, Hydro, Landfill and RR has
caused this instrument to be signed by its Manager on the date first above
written.
PULP & PAPER OF AMERICA LLC
By /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, Manager
PULP OF AMERICA LLC
By /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, Manager
PULP OF AMERICA LLC
By /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, Manager
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<PAGE>
HYDRO OF AMERICA LLC
By /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, Manager
LANDFILL OF AMERICA LLC
By /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, Manager
RAILWAY OF AMERICA LLC
By /s/ Mehdi Gabayzadeh
---------------------------
Mehdi Gabayzadeh, Manager
STATE OF NEW YORK
COUNTY OF NEW YORK
On this 9th day of July, 1999, before me, the undersigned officer,
personally appeared Mehdi Gabayzadeh, who acknowledged himself to be the Manager
of each of Pulp & Paper of America LLC, Pulp of America LLC, Paper of America
LLC, Hydro of America LLC, Landfill of America LLC and Railway of America, LLC,
each a limited liability company, and that he, as Manager thereof, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained on behalf of each of the foregoing limited liability companies.
/s/ Kevin William Wells
-----------------------
Notary Public
Kevin William Wells
Notary Public, State of New York
No. 01WE6013947
Qualified in New York County
Commission Expires Sept. 28, 2000
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PULP PURCHASE AGREEMENT
This PULP PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 24th day of March, 1999 by and between CROWN PAPER CO. ("Buyer"), a
corporation with its principal offices at 300 Lakeside Drive, Oakland,
California 94612, and PULP & PAPER OF AMERICA LLC ("Seller"), having its
principal offices at 135 Engineers Road, Hauppauge, New York 11788.
W I T N E S S E T H:
WHEREAS, Buyer desires to obtain and purchase a three-year supply of
northern bleached hardwood kraft pulp and northern bleached softwood kraft pulp,
and Seller wishes to supply and sell same; and
WHEREAS, Seller and Buyer intend to establish a mutual understanding
concerning such sales and purchases and, in so doing, and in performing
hereunder, meet the parties' respective needs for a well-defined and stable
relationship in an atmosphere of close cooperation and mutual trust and
reliance; provided, however, that the parties do not intend to create a legal
partnership or joint venture.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
1. Goods. The goods to be provided hereunder are northern bleached hardwood
kraft pulp and northern bleached softwood kraft pulp produced at Seller's
Berlin, New Hampshire mill (the "Mill") which meet specifications as agreed upon
from time to time by Buyer and Seller that are consistent with the then existing
process capabilities of the Mill (each, a "Good" and collectively, the "Goods").
2. Term. This Agreement is effective upon its execution by the parties and
continues thereafter for a period of three (3) years from the date hereof (the
"Term") unless canceled as provided in Section 9 below.
3. Quantity. During the Term, Seller shall produce and sell to Buyer, and
Buyer shall order and purchase from Seller, an aggregate volume of Goods of
forty thousand (40,000) Air Dried Short Tons ("ADST") during each twelve (12)
month period following the execution of this Agreement for which this Agreement
is in effect (the "Committed Volume"). Buyer agrees to purchase, and Seller
agrees to sell, ten thousand (10,000) ADST in each calendar quarter ("Committed
Quarterly Volume") provided, however, that the Committed Quarterly Volume shall
be prorated for the incomplete portion of the first and last calendar quarter of
the Term. Simultaneous with the execution hereof, Buyer will provide Seller with
its estimated pulp purchases in each month of the first calendar quarter
commencing after the date of this Agreement, and thereafter Buyer shall provide
thirty (30) days prior notice to Seller of its estimated pulp purchases in each
month
<PAGE>
of the next succeeding calendar quarter, and Buyer and Seller shall otherwise
cooperate to plan production by Seller of Goods under this Agreement; provided,
however, that Seller shall not be obligated to sell to Buyer northern bleached
softwood kraft pulp unless Seller has determined that it will produce northern
bleached softwood kraft pulp at the Mill during such calendar quarter.
4. Pricing. During the Term, price(s), payment terms, freight terms and
discount shall be as follows:
(a) The price for each Good shall be the price as published in the
"Price Watch" section of Pulp and Paper Week, as adjusted monthly and
subject to discounts calculated in accordance with Section 4(b) below,
provided that if the price for any item of the Goods is stated in Price
Watch as a range of prices, the price hereunder shall be the midpoint of
such range.
(b) Prices for the Goods shall be subject to discounts determined as
follows:
(i) during the first twenty-four month period of the Term, the
discount shall be [REDACTED]; and
(ii) during the final twelve month period of the Term, the
discount shall be [REDACTED].
The foregoing discounts shall be taken from the published price as set forth in
Section 4(a).
(c) Seller shall provide monthly summary billing with payment terms of
net twenty (20) days from the date of such billing. Each monthly summary
billing shall be transmitted to Accounts Payable at the "ship to" mill.
Payment terms are firm for the entire Term unless changed by mutual written
agreement of the parties. If Buyer shall fail to make a payment for the
Goods delivered by Seller to Buyer hereunder when due, then until such
payment has been made (i) such unpaid balance shall bear interest from the
original due date of such payment at two (2%) percent over the prime rate
of Citibank, N.A., or any successor thereof, in effect from time to time
and (ii) Seller shall be under no obligation to make further deliveries of
Goods hereunder until such overdue payment, with interest as provided
herein, is made.
(d) Delivery to Buyer's designated "ship to" mills is for the account
of Seller and included in the price calculated according to Sections 4(a)
and 4(b) above (i.e., freight terms are F.O.B. the place of destination
with respect to those destinations listed on Schedule A annexed hereto and
made a part hereof).
5. Quality. Seller and Buyer shall implement quality improvement teams and
shall mutually establish quality standards for the Goods which will utilize
statistical process control techniques and measure performance in order to
endeavor to improve quality. Seller shall endeavor to require similar programs
of its suppliers and subsuppliers of goods intended for resale to Buyer or
incorporation into the Goods. Quality measurements and improvement initiatives
may include without limitation: "Order Fill Rates"; "On Time Deliveries"; "Order
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<PAGE>
Cycle Time Reduction"; "Error Rates"; "Buyer Inventory Reduction"; "Use
Surveys"; and "Reduction of Administrative Burden".
6. Warranty; Limitation on Liability.
(a) Seller warrants to Buyer that all Goods shall meet the quality and
grade specifications as agreed from time to time by Buyer and Seller and
that all Goods delivered to Buyer shall, upon delivery and transfer of
title to Buyer, be free of any encumbrances on title.
NO OTHER WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, IN FACT OR
BY LAW, WHETHER OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR
USE OR OTHERWISE, SHALL SUBSIST HEREUNDER OR HAS OR IS MADE BY SELLER
NOTWITHSTANDING ANY PROVISION OF THE UNIFORM COMMERCIAL CODE ("UCC") TO THE
CONTRARY. REPLACEMENT OF THE GOODS IS THE EXCLUSIVE REMEDY. IN NO EVENT
SHALL SELLER BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR
PROFITS ARISING OUT OF, RELATING TO OR IN CONNECTION WITH ANY BREACH OF ANY
WARRANTY ON ANY GOODS HEREUNDER. BUYER IS NOT OBLIGATED TO ACCEPT GOODS NOT
CONFORMING WITH THE RELEVANT GRADE SPECIFICATIONS SET FORTH IN THE PURCHASE
ORDERS; PROVIDED THAT SELLER WILL NOT ACCEPT THE RETURN OF ANY
NONCONFORMING GOODS AFTER THEY HAVE BEEN PROCESSED BY BUYER OR BUYER'S END
USER.
SELLER SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN
FURNISHING GOODS OR ANY OTHER PERFORMANCE UNDER OR PURSUANT TO THIS
AGREEMENT.
(b) SELLER SHALL HAVE NO LIABILITY TO BUYER AND BUYER SHALL HAVE NO
LIABILITY TO SELLER HEREUNDER FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES ARISING OUT OF ANY ACT OR OMISSION OF EITHER PARTY
HEREUNDER ATTRIBUTABLE TO ANY CLAIM FOR BREACH OF CONTRACT, TORT OR OTHER
CAUSE OF ACTION.
7. Reports. Within thirty (30) days after the close of each calendar
quarter, Seller shall provide Buyer with a report which details Buyer's
purchases of the Goods by item and quantity, showing total tonnage shipped,
total dollars invoiced, returns, percent of on-time and on-quality orders and
such other information as Buyer and Seller may mutually determine is
appropriate. Reports shall be sent to Buyer's respective purchase locations, and
a report detailing Buyer's total purchases shall be sent to Buyer's primary
contact listed in Section 10.1.
8. Force Majeure. Buyer and Seller shall not be liable to each other for
any failure or delay in delivering or acceptance of the Goods where such failure
or delay is due to any cause or contingency beyond that party's reasonable
control, including without
3
<PAGE>
limitation: acts of God; acts or omissions of civil or military authority; fire;
flood; tempest; epidemic; earthquake; volcanic activity; quarantine restriction;
labor dispute (e.g., lockout, strike, work stoppage or slowdown, or grievance);
embargo; war; political strife; compliance with any regulation or directive of
any national, state or local government, or any department or agency thereof; or
any other cause which by the exercise of reasonable diligence the affected Party
is unable to overcome (collectively referred to as a "Force Majeure Event").
Each party shall use its best efforts to minimize the duration and consequences
of any failure or delay in delivery or acceptance of delivery resulting from a
Force Majeure Event and shall give the other party immediate notice of a Force
Majeure Event and of the time when the party affected by such Force Majeure
Event is no longer affected. These causes will not excuse Buyer from paying
amounts due to Seller through any available lawful means acceptable to Seller.
9. Cancellation. Either party may cancel this Agreement under any one of
the following circumstances: (i) if the other party shall default in the
performance of any of its material agreements or obligations herein and such
default continues for (A) fifteen (15) days in the case of a monetary default or
(B) sixty (60) days as to any other default, after receipt of written notice of
cancellation from the other party; provided, however, in the case of a
nonmonetary default, if such default cannot be cured within such sixty (60) day
period, if the defaulting party shall promptly commence, within such sixty (60)
day period, the steps necessary to cure such default and shall thereafter
proceed with due diligence to complete the steps necessary to cure such default
as expeditiously as possible, and thereby upon such cure, notice of cancellation
hereof shall be deemed rescinded; and (ii) if a party liquidates or winds up all
or a material portion of its business, dissolves or terminates its existence,
becomes insolvent or unable to pay its debts as they mature, commits any act of
bankruptcy, makes an arrangement, composition or assignment for benefit of
creditors, files, has filed against it or consents to filing of any petition in
bankruptcy for liquidation or reorganization, or otherwise is the subject of any
insolvency proceeding of any kind or nature, immediately upon receipt by such
party of written notice of cancellation from the other party. Any such
termination of this Agreement shall not constitute a waiver by either party of
its other rights and remedies hereunder, at law, in equity or otherwise.
10. General Provisions.
10.1 Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally, (ii)
delivered via one-day overnight courier, (iii) transmitted by telefax, or (iv)
mailed by registered or certified mail (return receipt requested and postage
prepaid) to the following listed persons at the addresses and telefax numbers
specified below, or to such other persons, addresses or telefax numbers as a
party entitled to notice shall give, in the manner hereinabove described,
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<PAGE>
to the others entitled to notice:
a. If to Buyer:
Crown Paper Co.
300 Lakeside Drive
Oakland, CA 94612-3592
Attention: General Counsel
Telefax No.: (510) 874-3595
b. If to Seller:
Pulp & Paper of America LLC
135 Engineers Road
Hauppauge, NY 11788
Attention: Mehdi Gabayzadeh
Telefax No.: (516) 435-8980
with a copy to:
Mandel & Resnik P.C.
220 East 42nd Street
New York, New York 10017
Attention: Nicholas J. Kaiser, Esq.
Telefax No.: (212) 573-0067
If given personally or transmitted by telefax, a notice shall be deemed to have
been given when it is received. If given by one-day overnight courier, notice
shall be deemed to have been given on the next business day following delivery
to the courier. If given by mail, it shall be deemed to have been given on the
third business day following the day on which it was posted. Notices and other
communications given by attorneys for Seller and Buyer shall be deemed given by,
respectively, Seller and Buyer.
10.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
10.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.4 Waiver. No modification or waiver of, amendment to or release from any
provision of this Agreement nor a waiver of or release from any breach or
default hereunder shall be of any force or effect unless contained in a writing
which is signed by the party who is sought to be bound thereby or be held or
considered to be a modification or waiver of, or amendment to or release from
any other provision nor a waiver of or release from any other breach or default.
No modification or waiver of, amendment to or release from any provision of this
Agreement nor a waiver of or release from any breach or default
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<PAGE>
hereunder shall result from any different or conflicting provisions or any
printed provisions of any subsequently dated sales or purchase order, order
acknowledgment, or a confirmation thereof, for the Goods. The parties
contemplate that from time to time such forms may be utilized, and the
provisions of this Agreement shall supersede and control such forms.
10.5 Modification. This Agreement may not be orally canceled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by all of the
parties to this Agreement.
10.6 Severability. If any provision of this Agreement is found to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
of this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.
10.7 Number and Gender. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
10.8 Entire Agreement. This Agreement (i) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof;
(ii) is not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; (iv) shall be
binding upon and shall inure to the benefit of a person or business entity
acquiring one or more of the "ship to" mills designated in Schedule A hereto,
with such acquirer obligated to purchase for the remainder of the term and under
the terms and conditions of this Agreement, the fraction of the Committed Volume
that has as numerator the volume of Goods shipped to the acquired mill(s) during
the twelve (12) month period immediately prior to such acquisition and as
denominator the total volume of Goods shipped to all the "ship to" mills
designated in Schedule A during the same period; and (v) shall not be assigned
by operation of law or otherwise without the prior written consent of the
parties hereto, not to be unreasonably withheld.
10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. Seller and Buyer
hereby expressly consent to the jurisdiction of the Supreme Court of the State
of New York with respect to any action or proceeding between Seller and Buyer
with respect to this Agreement or any rights or obligation of such party
pursuant to this Agreement and each of Seller and Buyer agrees that the venue
shall lie in Suffolk County.
10.10 Dispute Resolution. Seller and Buyer shall attempt in good faith to
resolve all disputes under this Agreement by mutual agreement before initiating
any legal action or attempting to enforce any rights or remedies hereunder;
provided that nothing herein shall prevent either party from giving notice at
any time of cancellation as provided in Section 9 above. In the event of a
dispute, and as a required precondition to initiating legal action (other than
for an injunction or restraining or protective order), either party must give
notice to the other party, and within five (5) days after receipt of the notice,
Buyer's
6
<PAGE>
procurement representative and his/her corresponding functional-level
counterpart at Seller shall discuss and attempt to resolve the dispute either in
person or by teleconference. If a resolution mutually recognized as such by both
parties is not achieved within ten (10) days thereafter, the dispute shall be
referred to the senior officers including Chief Operating Officers and Chief
Executive Officers of the parties. If within fifteen (15) days after referral
the dispute remains unresolved, both parties may pursue any or all rights and
remedies as may exist at law or in equity, as affected by this Agreement. If
either party fails to meet or discuss a dispute as provided above, such party
covenants not to commence a suit as to that dispute, other than for an
injunction or restraining or protective order. The failure or refusal of either
party to meet and discuss any dispute as provided above shall entitle the other
party immediately to commencement of a suit as to the dispute. Nothing herein
shall prevent either party, at any time, from suggesting referral of any dispute
to mediation before a mutually acceptable mediator under mutually acceptable
rules and procedures.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CROWN PAPER CO.
By: /s/ Robert A. Olah
------------------------------
Robert A. Olah
President
PULP & PAPER OF AMERICA LLC
By: /s/ Mehdi Gabayzadeh
------------------------------
Mehdi Gabayzadeh
Manager
7
PAPER BROKERAGE AGREEMENT
This Agreement dated on March 24, 1999, by and between Pulp & Paper of
America LLC, a New York limited liability company ("PPA"), having its principal
place of business at 135 Engineers Road, Hauppauge, New York, and Crown Paper
Co., a Virginia corporation ("Crown"), having its principal place of business at
300 Lakeside Drive, Oakland, California.
R E C I T A L S
The parties hereto are parties to that certain Asset Purchase Agreement,
dated even date herewith, by and among Crown, Crown Vantage New Hampshire
Electric, Inc. and Berlin Mills Railway, Inc., as Seller, and American Tissue
Holdings Inc. and PPA, as Buyer (the "Asset Purchase Agreement"), pursuant to
which PPA will purchase from Seller and subsequently will own and operate a pulp
and paper mill located in Berlin and Gorham, New Hampshire ("B/G") and require
assistance in the sales and marketing of the B/G Sustaining Grades and B/G
Target Grades produced at such mill.
Crown has an experienced sales and marketing staff and desires to act as
broker and sales representative for such B/G Sustaining Grades and B/G Target
Grades.
Now, therefore, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, PPA and Crown mutually agree as follows:
1. Definitions. The following terms, as used herein, have the following
meanings:
"Accountant" has the meaning set forth in Section 4.4 below.
"B/G" means the mill owned by PPA and located in Berlin and Gorham, New
Hampshire.
"B/G Sustaining Grades" shall mean Sustaining Grades manufactured by PPA at
B/G.
"B/G Target Grades" shall mean Target Grades manufactured by PPA at B/G.
"Commissionable Sales" means Gross Sales billed to third parties less
freight charges, returns, allowances (including terms allowances) and
adjustments.
"Confidential Information" has the meaning set forth in Section 11 hereof.
"Crown" means Crown Paper Co.
"Gross Sales" means the gross amount charged to third parties prior to any
reductions.
<PAGE>
"PPA" means Pulp & Paper of America LLC, doing business in Berlin and
Gorham, New Hampshire.
"Products" means B/G Sustaining Grades and B/G Target Grades, collectively.
"Net Sales" means the Gross Sales prices actually paid by third parties for
all Products sold and shipped less freight charges, returns, allowances,
adjustments and commissions.
"Services" means the services to be rendered by Crown to PPA, as set forth
in Section 3.
"Sustaining Grades" means the total output of paper manufactured at B/G
which is not either (i) produced on the number 9 paper machine, (ii) the subject
of the Strategic Alliance Agreement which has been entered into by the parties
hereto of even date, (iii) Target Grades as defined herein, or (iv) job lot or
broke. Sustaining Grades includes, but is not limited to, the types of papers
listed on Schedule B annexed hereto and made a part hereof.
"Target Grades" means the types of paper listed on Schedule A annexed
hereto and made a part hereof.
2. Engagement.
2.1. Except as provided in Section 5 below, during the term of this
Agreement, PPA engages Crown as its exclusive sales representative with respect
to the sales of all B/G Target Grades and B/G Sustaining Grades on the terms
stated in this Agreement and Crown accepts such engagement.
2.2. During the term of this Agreement, Crown shall provide the Services
set forth in Section 3 below. PPA shall be under no obligation to accept or
implement any of the advice provided with the Services, and all decisions to be
made with respect thereto shall be made by PPA in its sole and absolute
discretion.
3. Services to be Rendered. During the term of this Agreement, Crown shall
use its best efforts to perform the following marketing and sales services to
PPA ("Services") at Crown's sole cost and expense (including, without
limitation, sales, marketing and freight expenses):
(a) sell annually an aggregate of no less than 130,000 tons of Products for
each twelve (12) month period during the term of this Agreement, with the
foregoing sales comprising no less than 30,000 tons of B/G Target Grades at the
applicable market prices in effect from day to day;
(b) maintain and upgrade the sale of the historic mix of B/G Target Grades;
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<PAGE>
(c) provide marketing services designed to maximize sales of high margin
B/G Target Grades produced in accordance with marketing and operating plans
adopted by PPA;
(d) making all sales of Products on such terms including price as are
required by PPA;
(e) maintaining sufficient communications with PPA to assist PPA in
coordinating manufacturing and sales efforts of Products;
(f) quarterly review and assessment of customer lists and B/G Target Grades
and B/G Sustaining Grades production allocations, and discussions thereof with
PPA;
(g) advise PPA of periodic B/G Target Grades and B/G Sustaining Grades
production decisions regarding tonnage, distribution by grade, customer base,
freight costs, machine-hour contribution, and other strategic considerations;
(h) advise PPA with respect to customer rejections or quality problems to
ensure strong relations with customers and that problems are resolved
efficiently and with the least possible cost to PPA;
(i) coordinate customer shipments and assist PPA and customers with pick up
appointments, freight rates, and delivery times required consistent with
customer service responsibilities;
(j) advise PPA of market developments, competitive activity, and customer
reports, including customer observations and feedback related to Products
quality and service;
(k) service all customers consistent with normal industry practices,
including, without limitation, market development, complaint investigation and
resolution and quality issues.
(l) prepare a market survey relating to all Products, including information
such as key personnel, Products end-use, and current supplier base;
(m) prepare a marketing plan listing prospective accounts;
(n) develop and implement a communication strategy for announcing new
Products grade focus and marketing arrangements;
(o) promote and market Products to prospective customers;
(p) assist PPA in developing a planned phase-in of the tradenames,
trademarks, logos and trade styles of PPA in accordance with Section 8.2 below;
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<PAGE>
(q) establish and monitor market trials of Products, including provision of
feedback to PPA and recommendations to PPA for further products development by
PPA, if advisable;
(r) adjust sales and marketing efforts as reasonably requested by PPA to
align with future B/G operating capacity fluctuations effected by PPA;
(s) forward immediately to PPA all orders obtained for B/G Target Grades
and B/G Sustaining Grades;
(t) submit on a timely basis invoices as designated by PPA, which will
require payment to PPA, to purchasers of B/G Target Grades and B/G Sustaining
Grades; and
(u) maintain complete and accurate books and records concerning all orders,
order tracking, delivery and sales of B/G Target Grades and B/G Sustaining
Grades.
4. Commissions.
4.1. Subject to the limitations set forth in Section 6 below and except as
set forth in Section 5 below, Crown shall be paid a commission of [REDACTED] of
the Commissionable Sales price of Products sold during the term of this
Agreement.
4.2. PPA will use commercially reasonable efforts to within ten (10) days,
but in any event will deliver to Crown not later than fifteen (15) days, after
the end of each month during the term of this Agreement, an accounting of all
Products sold, and invoices paid, during the preceding month which are
Commissionable Sales, and will pay such commission to Crown.
4.3. PPA shall bear the risk of non-payment for all Products sold pursuant
to this Agreement.
4.4. At any time during the term of this Agreement, PPA shall permit Crown
to audit, by a mutually acceptable independent public accountant ("Accountant"),
PPA's books and records insofar as they relate to the Products to ensure the
correctness and accuracy of the commissions paid to Crown under this Agreement.
PPA shall maintain complete records of its sales of the Products hereunder for
at least six (6) months after the end of the Term. Upon reasonable advance
notice, the Accountant may perform on-site audits during normal business hours
so as to minimize disruption to PPA. If as a result of the audit, the Accountant
determines that the commissions payable by PPA to Crown under this Agreement
must be adjusted in order to conform to the provisions of this Agreement, then
the Accountant shall disclose the adjustment amount required. Otherwise, the
Accountant will report that the Agreement is being fairly administered. All
other information about specific accounts will be held in confidence by the
Accountant.
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<PAGE>
5. Limitations on Exclusivity of Arrangement.
5.1. During the first twenty-four (24) months of the term of this
Agreement, Crown shall have the exclusive benefit of, and be entitled to
commissions on, all sales made of all Products as set forth in Section 4 above.
For clarification, if PPA places any sales of Products through another broker or
uses its own employees to make sales of Products during the first twenty-four
(24) months of the term of this Agreement, it shall be entitled to do so, but
shall pay to Crown the commission as set forth in Section 4.1 above.
5.2. From time-to-time during the twenty-fifth (25th) through the
thirty-sixth (36th) month of the term hereof, provided Crown has received no
less than six (6) months advance written notice, PPA may reduce the tonnage sold
through Crown and thereby reduce its commission obligations to Crown on (i) up
to 20,000 tons of B/G Sustaining Grades, which PPA may sell directly or through
a third party and for which Crown shall have no rights to payment under Section
4 above nor obligations to sell or service; plus (ii) an unlimited amount of
tonnage of grades of paper which (x) have not been manufactured historically at
B/G and (y) which are either (I) consumed by PPA in its own converting
operations or (II) are sold by PPA, directly or through a third party and for
which Crown shall have no rights to payment under Section 4 above nor
obligations to sell or service.
6. Obligations of PPA.
6.1. PPA agrees to manufacture Products; to use commercially reasonable
efforts to have available as required sufficient qualities (consistent with
historic B/G production) and quantities of Products to support Crown's sales
efforts; and to arrange for delivery of Products as provided in each sales
order.
6.2. PPA will exercise commercially reasonable efforts to support Crown's
sales efforts. PPA shall, together with Crown, within established profitability
guidelines, set and maintain a pricing structure consistent with the market for
the Products.
6.3. To the extent Crown incurs any costs in warehousing either B/G Target
Grades or B/G Sustaining Grades, PPA shall pay its allocable portion of such
warehousing expenses to be determined on a tonnage basis. PPA will use
commercially reasonable efforts to pay such warehousing expenses within ten (10)
days of the date of invoice, but shall in any event pay such warehousing
expenses within fifteen (15) days of the date of invoice.
6.4. PPA will agree to an efficient methodology for handling customer
claims and returns of Products. Such methodology will provide Crown's
salespersons with certain parameters of discretion and will require PPA to
respond expeditiously to requests from Crown which fall outside of Crown's
permitted discretion.
6.5. PPA will provide Crown within thirty (30) days following the end of
each calendar quarter with a statement reconciling production of B/G Target
Grades and B/G Sustaining Grades with Gross Sales, Commissionable Sales, and Net
Sales during the quarter just ended.
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<PAGE>
7. Good Faith Performance and Non-Competition Covenant. Subject to the
terms set forth in Section 7.2 of the Asset Purchase Agreement, PPA and Crown
each acknowledge that in addition to being involved in the business of selling
and marketing paper, Crown manufactures and may continue to manufacture during
the term of this Agreement and thereafter, some, but not all, of the Target
Grades and Sustaining Grades at its own mills. In order to limit the potential
for conflicts between PPA and Crown during the term of this Agreement, Crown
agrees to exercise good faith in the performance of its obligations herewith.
Specifically, Crown agrees that during the term of this Agreement, it shall
conduct its own manufacturing operations and its sales efforts for PPA
consistent with the following market practices:
(a) Crown shall use best efforts to maintain and upgrade the sale of the
historic mix of Target Grades at market prices produced at B/G and provide the
Services set forth in Section 3 above;
(b) with respect to those Target Grades which Crown has not historically
produced at its mills (other than B/G), as set forth on Schedule C annexed
hereto and made a part hereof, Crown shall neither commence the manufacture of
such products nor attempt to discourage a purchaser of B/G Target Grades from
purchasing such products from PPA;
(c) when and if Crown is presented with an order for a specific Target
Grade or Sustaining Grade which is produced by both Crown and PPA, Crown shall
not unfairly discriminate against PPA in the placement of business between B/G
and Crown's paper mills. In this respect, Crown will use commercially reasonable
efforts to allocate orders, in the aggregate, which would be produced at B/G and
other Crown mills in reasonable proportion to past practices, allowing for
variations in grade, basis weight, color, quality, demands and customer demands,
and freight logic, but without regard for selling price. From time-to-time Crown
will review with PPA how orders for overlapping grades were allocated between
B/G and other Crown mills.
8. Tradenames; Marks; Phasing of Transition.
8.1. For the term of this Agreement, PPA and Crown grant to each other
limited, nonexclusive, royalty-free licenses to their respective trademarks,
tradenames, logos and trade styles used in the sale and marketing of B/G Target
Grades and/or B/G Sustaining Grades, which license shall be used only in
furtherance of the goals and objectives of this Agreement; provided, however,
that neither PPA nor Crown may use any or all of the trademarks, tradenames,
logos and trade styles of the other in connection with the sale and marketing of
any products other than B/G Target Grades and/or B/G Sustaining Grades.
8.2. The parties hereto agree that initially B/G Target Grades and B/G
Sustaining Grades shall be manufactured, sold, invoiced, labeled and identified
as Crown products to assure or enhance market acceptance. However, the parties
agree that during the term of this Agreement, the parties shall implement a
planned phase-in of the tradenames, trademarks, logos and trade styles of PPA to
facilitate PPA's transition and entrance into the
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<PAGE>
marketplace for Target Grade and Sustaining Grade papers. Specifically, Crown
shall commence the phase in of PPA's trademarks, tradenames, logos and trade
styles no later than the thirteenth (13th) month of this Agreement, and such
implementation shall be completed no later than the twenty-fifth (25th) month of
this Agreement.
9. Independent Parties. PPA and Crown are independent contracting parties.
Nothing in this Agreement will be construed to make either PPA or Crown an
employee, franchisee, joint venturer, partner or legal representative of the
other. Except as otherwise provided in this Agreement, Crown shall not represent
itself to have any authority to act on PPA's behalf.
10. Indemnification.
10.1. Crown Indemnification. Crown shall indemnify, defend, and hold PPA,
its employees and agents harmless from and against any and all liabilities,
damages, injuries, suits, judgments, claims, causes of action, and expenses
(including reasonable attorneys' fees, court costs and out-of-pocket expenses),
suffered or incurred by PPA as a result of (i) a breach of any representation or
warranty made by Crown hereunder, or (ii) any act or deed, whether by way of
tort or contract, committed or omitted by Crown, its employees or agents in the
performance of this Agreement, except for acts or deeds committed or omitted by
Crown in reliance on representations and warranties made to Crown by PPA
pursuant to this Agreement.
10.2. PPA Indemnification. PPA shall indemnify, defend, and hold Crown, its
employees and agents harmless from and against any and all liabilities, damages,
injuries, claims, suits, judgments, claims, causes of action, and expenses
(including reasonable attorneys' fees, court costs and out-of-pocket expenses),
suffered or incurred by Crown as a result of (i) a breach of any representation
or warranty made by PPA hereunder, or (ii) any act or deed, whether by way of
tort or contract, committed or omitted by PPA, its employees or agents in the
performance of this Agreement, except for acts or deeds committed or omitted by
PPA in reliance on representations and warranties made to PPA by Crown pursuant
to this Agreement.
10.3. NEITHER PARTY WILL HAVE ANY LIABILITY TO THE OTHER PARTY OR THIRD
PARTIES FOR ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES FOR THE BREACH OF ANY WARRANTY OR COVENANT HEREUNDER.
11. Confidentiality.
11.1. Each party shall regard and treat as confidential and proprietary all
of the information communicated to it by the other party in connection with this
Agreement (which information shall at all times remain the property of the
disclosing party), which information is referred to herein as "Confidential
Information." Confidential Information includes such information disclosed by a
party orally or visually, directly or indirectly. Confidential Information of a
party is also deemed to include pricing information, customer
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<PAGE>
information, identification of problems to be solved, areas for process, product
and equipment improvements, and Confidential Information of third parties, which
are observed, identified or disclosed under or as a result of this Agreement.
Nothing contained in this Agreement shall be interpreted to impose upon either
party hereto the obligation to share its Confidential Information with the other
party hereto.
11.2. During the term of this Agreement and following termination thereof
for a two year period thereafter, neither party shall, without the other's prior
written consent, at any time disclose any portion of such Confidential
Information to third parties.
11.3. Each party shall disseminate Confidential Information of the other
party to its employees, agents and subcontractors only on a "need-to-know"
basis, and shall use the same degree of care in protecting such Confidential
Information of the other party as it does for its own information of like kind.
Each party shall cause each of its employees, agents and subcontractors who has
access to such Confidential Information to comply with the terms and provisions
of this Section in the same manner as it is bound hereby, with it remaining
responsible for the actions and disclosures of any such employees, agents and
subcontractors.
11.4. Notwithstanding the foregoing, a party's obligations pursuant to this
Section 11 shall not apply to (i) information that, at the time of disclosure,
is, or after disclosure becomes, part of the public domain other than as a
consequence of a breach of this Agreement, (ii) information that was known or
otherwise available to the receiving party prior to the disclosure by the
disclosing party, (iii) information disclosed by a third party to the receiving
party after the disclosure by the disclosing party, if such third party's
disclosure does not violate any obligation of the third party to the disclosing
party, or (iv) information that is independently developed by the receiving
party.
12. Term; Termination. This Agreement will terminate on the first to occur
of:
12.1. Three (3) years from the effective date, as set forth in Section 13
below; or
12.2. The occurrence of any one of the following events: (i) if the other
party shall default in the performance of any of its material agreements,
obligations or covenants herein and such default continues for (A) fifteen (15)
days in the case of a monetary default or (B) sixty (60) days as to any other
default, after receipt of written notice of cancellation from the other party;
provided, however, in the case of a nonmonetary default, if such default cannot
be cured within such sixty (60) day period, if the defaulting party shall
promptly commence, within such sixty (60) day period, the steps necessary to
cure such default and shall thereafter proceed with due diligence to complete
the steps necessary to cure such default as expeditiously as possible, thereby
upon such cure, notice of cancellation hereof shall be deemed rescinded; or (ii)
if a party liquidates or winds up all or a material portion of its business,
dissolves or terminates its existence, becomes insolvent or unable to pay its
debts as they mature, commits any act of bankruptcy, makes an arrangement,
composition or assignment for the benefit of creditors, files, has filed against
it or consents to the filing of any petition in bankruptcy for liquidation or
reorganization, or
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<PAGE>
otherwise is the subject of any insolvency proceeding of any kind or nature,
immediately upon receipt by such party of written notice of cancellation from
the other party. Any such termination of this Agreement shall not constitute a
waiver by either party of its other rights and remedies hereunder, at law, in
equity or otherwise.
13. Effective Date of Agreement. Notwithstanding any contrary provision
herein, this Agreement shall come into force and be effective only upon, and as
of, the Closing on the Closing Date of the Asset Purchase Agreement.
14. General Provisions.
14.1. Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally, (ii)
delivered via one-day overnight courier, (iii) transmitted by telefax, or (iv)
mailed by registered or certified mail (return receipt requested and postage
prepaid) to the following listed persons at the addresses and telefax numbers
specified below, or to such other persons, addresses or telefax numbers as a
party entitled to notice shall give, in the manner hereinabove described, to the
others entitled to notice:
If to Crown to:
Crown Paper Co.
300 Lakeside Drive
Oakland, CA 94612-3592
Attention: General Counsel
Telefax No.: (510) 874-3595
with a copy to:
Sulloway & Hollis, P.L.L.C.
9 Capitol Street, P.O. Box 1256
Concord, NH 03302-1256
Attention: John M. Sullivan, Esq.
Telefax No.: (603) 226-2404
If to PPA:
Pulp & Paper of America LLC
135 Engineers Road
Hauppauge, NY 11788
Attention: Mr. Mehdi Gabayzadeh
Telefax No.: (516) 435-8980
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<PAGE>
with a copy to:
Mandel & Resnik P.C.
220 East 42nd Street
New York, New York 100 17
Attention: Nicholas J. Kaiser, Esq.
Telefax No.: (212) 573-0067
If given personally or transmitted by telefax, a notice shall be deemed to have
been given when it is received. If given by one-day overnight courier, notice
shall be deemed to have been given on the next business day following delivery
to the courier. If given by mail, it shall be deemed to have been given on the
third business day following the day on which it was posted. Notices and other
communications given by attorneys for PPA and Crown shall be deemed given by,
respectively, PPA and Crown.
14.2. Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
14.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.4. Waiver. No waiver of any of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, whether of similar or different nature, unless so
expressly stated in writing.
14.5. Modification. This Agreement may not be orally canceled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by all of the
parties to this Agreement.
14.6. Severability. If any provision of this Agreement is found to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
of this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.
14.7. Number and Gender. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
14.8. Miscellaneous. This Agreement (i) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof;
(ii) is not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; and (iv)
shall not
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<PAGE>
be assigned by operation of law or otherwise without the prior written consent
of the parties hereto, which shall not be unreasonably withheld.
14.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. PPA and Crown hereby
expressly consent to the jurisdiction of the Supreme Court of the State of New
York with respect to any action or proceeding between PPA and Crown with respect
to this Agreement or any rights or obligation of such party pursuant to this
Agreement and each of PPA and Crown agrees that the venue shall lie in Suffolk
County.
14.10. Force Majeure. Neither party will be liable for any failure or delay
in performing an obligation under this Agreement that is due to causes beyond
its reasonable control, such as natural catastrophes, governmental acts or
omissions, laws or regulations, labor strikes or difficulties, transportation
stoppages or slowdowns or the inability to procure parts or materials. These
causes will not excuse PPA from paying accrued amounts due to Crown through any
available lawful means acceptable to Crown.
In witness whereof, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PULP & PAPER OF AMERICA LLC
By: /s/ Mehdi Gabayzadeh
------------------------
Mehdi Gabayzadeh
Manager
CROWN PAPER CO.
By: /s/ Robert A. Olah
------------------------
Robert A. Olah
President
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STRATEGIC ALLIANCE AGREEMENT
This Agreement dated March 24, 1999, by and between Pulp & Paper of America
LLC, a New York limited liability company, or its designee ("PPA"), having its
principal place of business at 135 Engineers Road, Hauppauge, New York, and
Crown Paper Co., a Virginia corporation ("Crown"), having its principal place of
business at 300 Lakeside Drive, Oakland, California.
R E C I T A L S
The parties hereto are parties to that certain Asset Purchase Agreement,
dated as of even date herewith, by and among Crown, Crown Vantage New Hampshire
Electric, Inc. and Berlin Mills Railway, Inc., as Seller and American Tissue
Holdings Inc. and PPA, as Buyer (the "Asset Purchase Agreement") pursuant to
which Buyer will purchase from Seller and subsequently will own and operate a
pulp and paper mill located in Berlin and Gorham, New Hampshire ("B/G").
Crown has historically manufactured certain Publishing Grades (as defined
in Section 1 below) of papers at B/G (as defined in Section 1 below) and at its
paper mills located in Massachusetts, Michigan and New Jersey.
Following the closing of the sale and purchase transactions under the Asset
Purchase Agreement (the "Closing"), Crown and PPA desire to create a strategic
alliance whereby PPA will continue to manufacture those Publishing Grades that
were manufactured by B/G prior to the Closing (the "B/G Publishing Grades") for
a specified period to continue Crown's existing Publishing Grades business and
permit Crown's other mills to commence the manufacture of the B/G Publishing
Grades in an orderly manner.
PPA is willing to continue to manufacture the B/G Publishing Grades at B/G
upon the terms and subject to the conditions hereinafter set forth.
Accordingly, in consideration of the foregoing recitals and the mutual
covenants set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, PPA and Crown agree as
follows.
1. Definitions. The following terms, as used herein, have the following
meanings:
"B/G" means the pulp and paper mills located in Berlin and Gorham, New
Hampshire, respectively, currently owned by Crown and proposed to be sold to PPA
pursuant to the Asset Purchase Agreement.
<PAGE>
"B/G Publishing Grades" means the Publishing Grades manufactured at B/G
prior to the Closing.
"Confidential Information" has the meaning set forth in Section 12 hereof.
"Closing" means the closing of the transactions contemplated by the Asset
Purchase Agreement.
"Crown" means Crown Paper Co.
"Crown Orders" has the meaning set forth in Section 5(b).
"Crown Trademarks" means Crown's trademarks, tradenames, logos and trade
styles used in the sale and marketing of B/G Publishing Grades.
"Marketing Period" means the three year period ending on the third
anniversary of the Closing.
"PPA" means Pulp & Paper of America LLC, or its designee.
"Publishing Grades" means all text and cover grade papers and all
lightweight opaque papers, whether or not such papers carry or are sold under
one of Crown's registered trademarks, listed on Schedule A annexed hereto and
made a part hereof.
"Services" means the services to be rendered by Crown to PPA, as set forth
in Section 2(b) of this Agreement.
2. Obligations of Crown.
(a) Subject to Section 8(b), for each 12 month period during the Marketing
Period, Crown will submit purchase orders to PPA for a minimum of 20,000 tons of
B/G Publishing Grades at the applicable market prices determined pursuant to
Section 5(a) hereof, and to the extent PPA accepts such orders, PPA will sell to
Crown and Crown will purchase from PPA a minimum of 20,000 tons of B/G
Publishing Grades during the applicable 12-month period.
(b) During the Marketing Period, Crown will use its best efforts to provide
the following marketing and sales services to PPA ("Services"), at Crown's sole
cost and expense (including, without limitation, the sales and marketing
expenses), including, without limitation:
(i) maintain and upgrade sales to Crown customers of the historic mix
of B/G Publishing Grades;
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<PAGE>
(ii) advise PPA regarding periodic B/G Publishing Grades production
decisions regarding tonnage, distribution by grade and by type within any
grade, customer base, freight costs, and other strategic considerations;
(iii) coordinate customer shipments and assist PPA and customers with
pick up appointments, freight rates, and delivery times required consistent
with customer service responsibilities;
(iv) advise PPA of market developments, competitive activity, and
customer reports, including customer observations and feedback related to
B/G Publishing Grades quality and service;
(v) service all Crown customers consistent with normal industry
practices, including, without limitation, market development, complaint
investigation and resolution, and quality issues.
(vi) develop and implement a communication strategy for announcing new
B/G Publishing Grades focus and marketing arrangements;
(vii) establish and monitor market trials of B/G Publishing Grades,
including provision of feedback to PPA and recommendations to PPA for
further products development by PPA, if advisable;
(viii) adjust sales and marketing efforts as reasonably requested by
PPA to align with future B/G operating capacity fluctuations effected by
PPA consistent with the terms and conditions of this Agreement;
(ix) maintain personnel and expenditures sufficient to fulfill Crown's
obligations under this Agreement;
(x) provide PPA quarterly with B/G Publishing Grades anticipated sales
and consult with PPA regarding same;
(xi) maintain communications with PPA to assist PPA in coordinating
its manufacturing efforts with Crown's selling efforts with respect to B/G
Publishing Grades;
(xii) forward immediately to PPA all purchase orders for B/G
Publishing Grades provided such orders shall be subject to review and
approval by PPA;
(xiii) maintain complete and accurate books and records concerning all
orders for B/G Publishing Grades, as well as order tracking, sales and
shipments of B/G Publishing Grades and provide PPA with monthly reports
with respect thereto and permit PPA and its auditors to review such
records, from time to time;
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<PAGE>
(xiv) advise PPA with respect to rejection or quality problems by
Crown customers as to B/G Publishing Grades to maintain strong relations
with such customers and resolve problems efficiently and with the least
possible cost to all parties; and
(xv) bear and maintain at levels sufficient to fulfill Crown's
obligations hereunder all marketing, promotional and selling expenses
relating to sales of B/G Publishing Grades to Crown customers.
(c) At the end of the Marketing Period, PPA will sell to Crown and Crown
will purchase from PPA at the then current market prices all B/G Publishing
Grades which (i) were manufactured by PPA during the Marketing Period, (ii) are
held in inventory by PPA at the end of the Marketing Period, and (iii) are
identified by, or contain, Crown Trademarks (as defined in Section 3 below). The
parties will cooperate and plan production and inventory levels in order to
minimize the quantity of papers subject to the foregoing sale and purchase
obligation.
3. Tradenames; Marks.
Crown grants to PPA, only during the Marketing Period, a limited,
non--exclusive, royalty-free license to use Crown's trademarks, tradenames,
logos and trade styles used in the sale and marketing of B/G Publishing Grades
(collectively, "Crown Trademarks"), which license shall be used only in
furtherance of the goals and objectives of this Agreement.
4. Obligations of PPA.
(a) PPA agrees to use its best efforts to manufacture B/G Publishing
Grades; to use its best efforts to have, as and when required, sufficient
quality and quantities of B/G Publishing Grades to support Crown's purchase
requirements; and to arrange for delivery of the B/G Publishing Grades as
provided in each Crown Order (as defined below) accepted by PPA. PPA shall be
responsible for the payment of manufacturing and warehousing expenses,
including, but not limited to, the acquisition of all raw materials, the
provision of labor by PPA's employees, and the maintenance and repair of PPA's
plant, machinery and related equipment.
(b) PPA will use reasonable best efforts to support Crown's efforts to
market B/G Publishing Grades to its customers.
(c) To the extent Crown incurs any costs in warehousing B/G Publishing
Grades, PPA shall pay its allocable portion of such warehousing expenses with
respect to such B/G Publishing Grades, to be determined on a tonnage basis. PPA
will use commercially reasonable efforts to pay such warehousing expenses within
ten (10) days of the date of invoice, but shall in any event pay such
warehousing expenses within fifteen (15) days of the date of invoice. Freight
charges to ship B/G Publishing Grades to warehouses shall be for the account of
PPA.
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<PAGE>
5. Pricing and Order Processing.
(a) PPA and Crown will determine the applicable prices of each of the B/G
Publishing Grades from time-to-time, provided that in the event of any dispute
between PPA and Crown respecting the price of any B/G Publishing Grade or type
within such Grade, the determination of PPA shall prevail. Each order received
by PPA from Crown for B/G Publishing Grades must be producible by PPA on the
then existing paper machines at B/G.
(b) Crown will, from time-to-time, during the Marketing Period, order B/G
Publishing Grades for the accounts of Crown customers by submitting the purchase
orders of Crown customers, endorsed or otherwise identified by Crown as being an
order subject to this Agreement so long as each such order (each, a "Crown
Order") complies with the requirements of the second sentence of this Section
5(b). All Crown Orders for B/G Publishing Grades shall be subject to approval by
PPA, in its sole discretion, provided that if PPA rejects a Crown Order based on
the prices of the B/G Publishing Grades specified therein or does not specify a
reason for its rejection of such Order, such Order shall, nevertheless, be
deemed to have been submitted in partial satisfaction of the 20,000 ton annual
quota specified in Section 2(a) if the prices in such Order for B/G Publishing
Grades equal or exceed the then current market prices for such B/G Publishing
Grades pursuant to Section 5(a). Any Crown Order not rejected by PPA within
three (3) business days shall be deemed to have been accepted.
(c) Crown shall submit Crown Orders for the purchase of B/G Publishing
Grades to PPA for approval by facsimile transmission or by electronic mail,
which Orders shall set forth the following information and such additional
descriptive information regarding the goods to be sold as Crown deems
appropriate: (a) the type of B/G Publishing Grades to be purchased, described by
appropriate product code for such goods; (b) the quantity of such goods to be
purchased expressed in cartons or hundred weight; (c) the price or prices to be
paid expressed as "$/hundred weight or $/carton"; (d) the date upon which such
goods are to be shipped; (e) an order number; (f) a date; (g) shipping
information and freight charges; (h) payment terms; and (i) if the Crown Order
number specified in clause (e) is a Crown Order number, a reference to the Crown
customer's purchase order number. Except for the foregoing information required
to be contained in a Crown Order, no additional terms or conditions contained in
any such Crown Order (or any confirmation or acknowledgement thereof) shall be
terms between Crown and PPA with respect to the purchase and sale of such goods,
except as otherwise agreed in a writing signed by both parties.
6. Invoicing; Payment; Monthly Accounting.
(a) Invoices relating to Crown Orders will be rendered to Crown when the
goods are shipped by PPA to Crown customers reflecting the price, freight
charges, payment terms and other relevant terms contained in the relevant Crown
Order, provided, however, that the payment terms of each such invoice shall in
no event be more favorable to Crown than "2%/20, net 45". Crown shall be
entitled to deduct from the amount due on each invoice [REDACTED] of the selling
price (excluding freight charges for delivery to Crown's customer and cash
discount) of the B/G Publishing Grades to which the invoice pertains.
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<PAGE>
(b) Not later than the fifteenth (15th) day of each calendar month, PPA
will render a statement in respect of the preceding calendar month, setting
forth the aggregate amount paid by Crown during such preceding month on
outstanding PPA invoices, identifying the specific PPA invoices relating to
Crown Orders paid during such preceding month, and any adjustments in respect of
invoices submitted to Crown or amounts paid thereon by Crown that are necessary
to conform prior invoices or payments to the provisions of this Agreement. Any
amounts due to Crown reflected on such monthly statement shall be remitted
together with the statement, and any amount due to PPA shall be paid by Crown
within ten (10) days of receipt of such statement.
7. Inspection; Warranties; Returns.
PPA warrants to Crown that all B/G Publishing Grades meet the quality and
grade specifications as agreed from time to time between PPA and Crown and that
all grades delivered to Crown or Crown's customer will upon transfer of title to
Crown or such customer, be free of liens and other encumbrances.
NO OTHER WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, IN FACT OR BY
LAW, WHETHER OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR USE OR
OTHERWISE, SHALL SUBSIST HEREUNDER OR HAS OR IS MADE BY PPA, NOTWITHSTANDING ANY
PROVISION OF THE UNIFORM COMMERCIAL CODE ("UCC") TO THE CONTRARY. REPLACEMENT OF
THE GOODS IS THE EXCLUSIVE REMEDY. IN NO EVENT SHALL PPA BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR PROFITS ARISING OUT OF RELATING TO OR IN
CONNECTION WITH ANY BREACH OF ANY WARRANTY ON ANY GOODS HEREUNDER. CROWN IS NOT
OBLIGATED TO ACCEPT GOODS NOT CONFORMING WITH THE RELEVANT GRADE SPECIFICATIONS
SET FORTH IN THE CROWN ORDERS; PROVIDED THAT PPA WILL NOT ACCEPT THE RETURN OF
ANY NON-CONFORMING GOODS AFTER THEY HAVE BEEN PROCESSED BY CROWN OR CROWN'S
CUSTOMER.
PPA WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN FURNISHING
GOODS OR ANY OTHER PERFORMANCE UNDER OR PURSUANT TO THIS AGREEMENT. IN ANY
EVENT, PPA'S MAXIMUM LIABILITY UNDER ALL CIRCUMSTANCES FOR BREACH OF WARRANTY
HEREUNDER SHALL BE REPLACEMENT OF, OR A CREDIT IN THE AMOUNT OF THE INVOICE
PRICE FOR, THE NON-CONFORMING GOODS.
8. Exclusivity of Alliance.
(a) During the first twenty-four (24) months of the Marketing Period, PPA
shall not, other than pursuant to this Agreement, directly or indirectly, enter
into, or in any manner take part in the manufacture or sale of Publishing
Grades. During such period, PPA shall label all B/G Publishing Grades with Crown
Trademarks (as agreed between Crown and PPA).
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<PAGE>
Should PPA sell or attempt to sell Publishing Grades in contravention of this
Agreement, Crown shall be entitled to both injunctive relief and monetary
damages as remedies.
(b) From time to time during the twenty-fifth (25th) through thirty-sixth
(36th) month of the Marketing Period, provided Crown has received no less than
six (6) months advanced written notice, PPA may diminish the exclusivity of this
Agreement for B/G Publishing Grades and commence a transition towards production
of B/G Publishing Grades other than pursuant to this Agreement and in direct
competition with Crown. Under such circumstances, PPA may sell directly for its
own account up to 5,000 tons of B/G Publishing Grades (the "Transitional
Tonnage") during such third year in which case Crown's minimum purchase
obligation pursuant to Section 2(a) shall be reduced by the amount of such
Transitional Tonnage. PPA's sales of Transitional Tonnage shall not be subject
to Section 6 above and shall not be deemed a violation of PPA's agreement set
forth in Section 8(a) (i.e., Crown will not be entitled to compensation in
respect of any sales of Transitional Tonnage). Crown shall have no rights or
obligations with respect to the production, sales or service of the Transitional
Tonnage. The Transitional Tonnage must be labelled as a product of PPA. PPA
shall not utilize any Crown Trademarks with respect to the Transitional Tonnage.
9. Good Faith Performance.
Subject to terms set forth in Section 7.2 of the Purchase Agreement, PPA
acknowledges that Crown manufactures and may continue to manufacture during the
term of this Agreement and thereafter, at its other mills, Publishing Grades,
which compete with B/G Publishing Grades. In order to limit the potential for
conflicts between PPA and Crown during the term of this Agreement, Crown agrees
to exercise good faith in the performance of its obligations. Specifically,
Crown covenants and agrees that during the Marketing Period, Crown will conduct
its business consistent with the requirements that when and if Crown is
presented with a customer order for a specific Publishing Grade which can be
produced by both Crown and PPA, Crown shall not unfairly discriminate against
PPA in the placement of business for Publishing Grades between B/G and Crown's
paper mills. In this respect, Crown will use commercially reasonable efforts to
allocate orders, in the aggregate, which would be produced at B/G and other
Crown mills in reasonable proportion to past practices, allowing for variations
in grade, basis weight, color, quality, demands and customer demands, and
freight logic, but without regard for selling price. From time-to-time Crown
will review with PPA how orders for overlapping grades were allocated between
B/G and other Crown mills.
10. Independent Parties.
PPA and Crown are independent contracting parties. Nothing in this
Agreement will be construed to make either PPA or Crown an employee, franchisee,
joint venturer, partner or legal representative of the other. Except as
otherwise provided in this Agreement, Crown shall not represent itself to have
any authority to act on PPA's behalf.
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<PAGE>
11. Indemnification.
(a) Crown shall indemnify, defend, and hold PPA, its employees and agents
harmless from and against any and all liabilities, damages, injuries, suits,
judgments, claims, causes of action, and expenses (including reasonable
attorneys' fees, court costs and out--of-pocket expenses), suffered or incurred
by PPA as a result of (i) a breach of a material covenant made by Crown
hereunder, or (ii) any act or deed, whether by way of tort or contract,
committed or omitted by Crown, its employees or agents in the performance of
this Agreement, except for acts or deeds committed or omitted by Crown in
reliance on representations and warranties made to Crown by PPA pursuant to this
Agreement.
(b) Except as otherwise set forth in Section 7, PPA shall indemnify,
defend, and hold Crown, its employees and agents harmless from and against any
and all liabilities, damages, injuries, claims, suits, judgments, claims, causes
of action, and expenses (including reasonable attorneys' fees, court costs and
out-of-pocket expenses), suffered or incurred by Crown as a result of (i) a
breach of any material covenant made by PPA hereunder, or (ii) any act or deed,
whether by way of tort or contract, committed or omitted by PPA, its employees
or agents in the performance of this Agreement, except for acts or deeds
committed or omitted by PPA in reliance on representations and warranties made
to PPA by Crown pursuant to this Agreement.
(c) NEITHER PARTY WILL HAVE ANY LIABILITY TO THE OTHER PARTY OR THIRD
PARTIES FOR ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES FOR THE BREACH OF ANY WARRANTY OR COVENANT HEREUNDER.
12. Confidentiality.
(a) Each party shall regard and treat as confidential and proprietary all
of the information communicated to it by the other party in connection with this
Agreement (which information shall at all times remain the property of the
disclosing party), which information is referred to herein as "Confidential
Information." Confidential Information includes such information disclosed by a
party orally or visually, directly or indirectly. Confidential Information of a
party is also deemed to include pricing information, customer information,
identification of problems to be solved, areas for process, product and
equipment improvements, and Confidential Information of third parties, which are
observed, identified or disclosed under or as a result of this Agreement.
Nothing contained in this Agreement shall be interpreted to impose upon either
party hereto the obligation to share its Confidential Information with the other
party hereto.
(b) During the Marketing Period and for a two year period thereafter,
neither party shall, without the other's prior written consent, at any time
disclose any portion of such Confidential Information to third parties.
(c) Each party shall disseminate Confidential Information of the other
party to its employees, agents and subcontractors only on a "need-to-know"
basis, and shall use the
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<PAGE>
same degree of care in protecting such Confidential Information of the other
party as it does for its own information of like kind. Each party shall cause
each of its employees, agents and subcontractors who has access to such
Confidential Information to comply with the terms and provisions of this Section
in the same manner as it is bound hereby, with it remaining responsible for the
actions and disclosures of any such employees, agents and subcontractors.
(d) Notwithstanding the foregoing, a party's obligations under Sections
12(a),(b) and (c) shall not apply to (i) information that, at the time of
disclosure, is, or after disclosure becomes part of, public domain other than as
a consequence of a breach of this Agreement, (ii) information that was known or
otherwise available to the receiving party prior to the disclosure by the
disclosing party, (iii) information disclosed by a third party to the receiving
party after the disclosure by the disclosing party, if such third party's
disclosure does not violate any obligation of the third party to the disclosing
party, (iv) information that is independently developed by the receiving party,
(v) information required to be disclosed by the order or process of court or
other governmental authority of competent jurisdiction, or (vi) necessary to be
disclosed in the connection with the prosecution or defense of any litigation
between the parties hereto.
13. Term; Termination. This Agreement will terminate on the first to occur
of:
(a) three (3) years from the effective date as set forth in Section 14
hereof; or
(b) the occurrence of any one of the following events: (i) if the other
party shall default in the performance of any of its material agreements,
obligations or covenants herein and such default continues for (A) fifteen (15)
days in the case of a monetary default or (B) sixty (60) days as to any other
default, in each case, after receipt of written notice of default from the other
party; provided, however, in the case of a nonmonetary default, if such default
cannot be cured within such sixty (60) day period, if the defaulting party shall
promptly commence, within such sixty (60) day period, the steps necessary to
cure such default and shall thereafter proceed with due diligence to complete
the steps necessary to cure such default as expeditiously as possible, thereby
upon such cure, notice of cancellation hereof shall be deemed rescinded; or (ii)
if a party liquidates or winds up all or a material portion of its business,
dissolves or terminates its existence, becomes insolvent or unable to pay its
debts as they mature, commits any act of bankruptcy, makes an arrangement,
composition or assignment for the benefit of creditors, files, has filed against
it or consents to the filing of any petition in bankruptcy for liquidation or
reorganization, or otherwise is the subject of any insolvency proceeding of any
kind or nature, immediately upon receipt by such party of written notice of
cancellation from the other party. Any such termination of this Agreement shall
not constitute a waiver by either party of its other rights and remedies
hereunder, at law, in equity or otherwise.
14. Effective Date of Agreement. Notwithstanding any contrary provision
herein, this Agreement shall only come into force and be effective upon, and as
of, the Closing under the Purchase Agreement, and otherwise shall have no force
or effect.
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<PAGE>
15. General Provisions.
(a) Notices. All notices required to be given hereunder shall be in writing
and shall be deemed to have been given if (i) delivered personally, (ii)
delivered via one-day overnight courier, (iii) transmitted by telefax, or (iv)
mailed by registered or certified mail (return receipt requested and postage
prepaid) to the following listed persons at the addresses and telefax numbers
specified below, or to such other persons, addresses or telefax numbers as a
party entitled to notice shall give, in the manner hereinabove described, to the
others entitled to notice:
If to Crown to:
Crown Paper Co.
300 Lakeside Drive
Oakland, CA 94612-3592
Attention: General Counsel
Telefax No.: (510) 874-3595
with a copy to:
Sulloway & Hollis, P.L.L.C.
9 Capitol Street, P.O. Box 1256
Concord, NH 03302-1256
Attention: John M. Sullivan, Esq.
Telefax No.: (603) 226-2404
If to PPA:
Pulp & Paper of America LLC
135 Engineers Road
Hauppauge, NY 11788
Attention: Mr. Mehdi Gabayzadeh
Telefax No.: (516) 435-8980
with a copy to:
Mandel & Resnik P.C.
220 East 42nd Street
New York, New York 10017
Attention: Nicholas J. Kaiser, Esq.
Telefax No.: (212) 573-0067
If given personally or transmitted by telefax, a notice shall be deemed to have
been given when it is received. If given by one-day overnight courier, notice
shall be deemed to have been given on the next business day following delivery
to the courier. If given by mail, it shall be deemed to have been given on the
third business day following the day on which it was posted.
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<PAGE>
Notices and other communications given by attorneys for PPA and Crown shall be
deemed given by, respectively, PPA and Crown.
(b) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Waiver. No waiver of any of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, whether of similar or different nature, unless so
expressly stated in writing.
(e) Modification. This Agreement may not be orally canceled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by all of the
parties to this Agreement.
(f) Severability. If any provision of this Agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.
(g) Number and Gender. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
(h) Miscellaneous. This Agreement (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and thereof; (ii)
is not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; (iv) shall be
binding upon and shall inure to the benefit of a person or entity acquiring all
or substantially all of Crown's Publishing Grade business or the Crown
Trademarks; and (v) shall not be assigned by operation of law or otherwise
without the prior written consent of the parties hereto, which consent shall not
be unreasonably withheld.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York. PPA and Crown hereby
expressly consent to the jurisdiction of the Supreme Court of the State of New
York with respect to any action or proceeding between PPA and Crown with respect
to this Agreement or any rights or obligation of such party pursuant to this
Agreement and each of PPA and Crown agrees that the venue shall lie in Suffolk
County. The parties hereto waive trial by jury
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<PAGE>
in any such action or proceeding and consent to the service of process in any
such action or proceeding in manner specified in Section 15(a).
(j) Force Majeure. Neither party will be liable for any failure or delay in
performing an obligation under this Agreement that is due to causes beyond its
reasonable control, such as natural catastrophes, governmental acts or
omissions, laws or regulations, labor strikes or difficulties, transportation
stoppages or slowdowns or the inability to procure parts or materials. These
causes will not excuse Crown from paying accrued amounts due to PPA through any
available lawful means acceptable to PPA.
In witness whereof, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PULP & PAPER OF AMERICA LLC
/s/ Mehdi Gabayzadeh
---------------------------------------
By: Mehdi Gabayzadeh
Its: Manager
CROWN PAPER CO.
/s/ Robert A. Olah
---------------------------------------
By: Robert A. Olah
Its: President and Chief Executive
Officer
- 12 -
This Lease made the first day of August 1998, between Lakeview Real Estate LLC -
a New York Limited Liability Company having an office at 135 Engineers Road,
Hauppauge, New York. hereinafter referred in as LANDLORD, and American Tissue
Mills of Neenah LLC - a New York Limited Liability Company having an office at
135 Engineers Road, Hauppauge, New York. hereinafter jointly, severally and
collectively referred to as TENANT.
Witnesseth, that the Landlord hereby leases to the Tenant, and the Tenant
hereby hires and takes from the Landlord in the building known as ______________
to be used and occupied by the tenant for any lawful purpose and for no other
purpose, for a term to commence on August 1 1998, and to end on July 31, 2018,
unless sooner terminated as hereinafter provided, at the ANNUAL RENT of One
million two hundred sixty seven thousand, eight hundred forty five dollars
($1,267,845) with an increase to one million three hundred thirty one thousand
two hundred thirty seven dollars hundred thirty one thousand two hundred thirty
seven dollars ($1,331,237) on August 1, 2003 with an increase to one million
three hundred ninety four thousand six hundred thirty dollars ($1,394,630) on
August 1, 2008 with an increase to one million four hundred fifty eight thousand
twenty two dollars ($1,458,022) on August 1, 2013. all payable in equal monthly
installments in advance on the first day of each and every calendar month during
said term, except the first installment, which shall be paid upon the execution
hereof.
THE TENANT JOINTLY AND SEVERALLY COVENANTS:
FIRST.--That the Tenant will pay the rent as above provided.
REPAIRS
SECOND.--That, throughout said term the Tenant will take good care of the
demised premises, fixtures and appurtenances, and all alterations, additions and
improvements to either; make all repairs in and about the same necessary to
preserve them in good order and condition, which repairs shall be, in quality
and class, equal to the original work; promptly pay the expense of such repairs;
suffer no waste or injury; give prompt notice to the Landlord of any fire that
may occur;
ORDINANCES AND VIOLATIONS
execute and comply with all laws, rules, orders, ordinances and regulations at
any time issued or in force (except those requiring structural alterations),
applicable to the demised premises or to the Tenant's occupation thereof, of the
Federal, State and Local Governments, and of each and every department, bureau
and official thereof, and of the New York Board of Fire Underwriters;
ENTRY
permit at all times during usual business hours, the Landlord and
representatives of the Landlord to enter the demised premises for the purpose of
inspection, and to exhibit them for purposes of sale or rental; suffer the
Landlord to make repairs and improvements to all parts of the building, and to
comply with all orders and requirements of governmental authority applicable to
said building or to any occupation thereof; suffer the Landlord to erect, use,
maintain, repair and replace pipes and conduits in the demised premises and to
the floors above and below;
INDEMNIFY LANDLORD
forever indemnify and save harmless the Landlord for and against any and all
liability, penalties, damages, expenses; and judgments arising from injury
during said term to person or property of any nature, occasioned wholly or in
part by any act or acts, omission or omissions of the Tenant, or of the
employees, guests, agents, agents, assigns or undertenants of the Tenant and
also for any matter or thing growing out of the occupation of the demised
premises or of the streets, sidewalks or vaults adjacent thereto; permit, during
the six months next prior to the expiration of the term the usual notice "To
Let" to be placed and to remain unmolested in a conspicuous place upon the
exterior of the demised premises; repair, at or before the end of the term, all
injury done by the installation or removal of furniture and property; and at the
end of the term to quit and surrender the demised premises with all alterations,
additions and improvements in good order and condition.
MOVING INJURY SURRENDER
THIRD.--That the Tenant will not disfigure or deface any part of the
building, or suffer the same to be done, except so far as may be necessary to
affix such trade fixtures as are herein consented to by the Landlord; the Tenant
will not obstruct or permit the obstruction of the street or sidewalk adjacent
thereto; will not do anything, or suffer anything to be done upon the demised
premises which will increase the rate of fire insurance upon the building or any
of its contents, or be liable to cause structural injury to said building;
NEGATIVE COVENANTS
will not permit the accumulation of waste or refuse matter and will not, without
the written consent of the Landlord first obtained in each case, either sell,
assign, mortgage or transfer this lease, underlet the demised premises or any
part thereof, permit the same or any part thereof to be occupied by anybody
other than the Tenant and the Tenant's employees, make any alterations in the
demised premises, use the demised premises or any part thereof for any purpose
other than the one first above stipulated, or for any purpose deemed extra
hazardous on account of fire risk, nor in violation of any law or ordinance.
OBSTRUCTION SIGNS
That the Tenant will not obstruct or permit the obstruction of the light, halls,
stairway or entrances to the building, and will not erect or inscribe any sign,
signals or advertisements unless and until the style and location thereof have
been approved by the Landlord; and if any be erected or inscribed without such
approval, the Landlord may remove the same.
AIR CONDITIONING
No water cooler, air conditioning unit or system or other apparatus shall be
installed or used without the prior written consent of Landlord.
IT IS MUTUALLY COVENANTED AND AGREED, THAT
FIRE CLAUSE
FOURTH.--If the demised premises shall be partially damaged by fire or
other cause without the fault or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, the damages shall be repaired by and
at the expense of Landlord and the rent until such repairs shall be made shall
be apportioned according to he part of the demised premises which is usable by
Tenant. But if such partial damage is due to the fault or neglect of Tenant,
Tenant's servants, employees, agents, visitors or licensees, without prejudice
to any other rights and remedies of Landlord and without prejudice to the rights
of subrogation of Landlord's insurer, the damages shall be repaired by Landlord
but there shall be no apportionment or abatement of rent. No penalty shall
accrue for reasonable delay which may arise by reason of adjustment of insurance
on the part of Landlord and/or Tenant, and for reasonable delay on account of
"labor troubles", or any other cause beyond Landlord's control. If the demised
premises are totally damaged or are rendered wholly untenantable by fire or
other cause, and if Landlord shall decide not to restore or not to rebuild the
same, or if the building shall be so damaged that Landlord shall decide to
demolish it or to rebuild it, then or in any of such events Landlord may, within
ninety (90) days after such fire or other cause, give Tenant a notice in writing
of such decision, which notice shall be given as in Paragraph Twelve hereof
provided, and thereupon the term of this lease shall expire by lapse of time
upon the third day after such notice is given, and Tenant shall vacate the
demised premises and surrender the same to Landlord. If Tenant shall not be in
default under this lease then, upon the termination of this lease under the
conditions provided for in the sentence immediately preceding, Tenant's
liability for rent shall cease as of the day following the casualty. Tenant
hereby expressly waives the provisions of Section 227 of the Real Property Law
and agrees that the foregoing provisions of this Article shall govern and
control in lieu thereof. If the damage or destruction be due to the fault or
neglect of Tenant the debris shall be removed by, and at the expense of, Tenant.
EMINENT DOMAIN
FIFTH.--If the whole or any part of the premises hereby demised shall be
taken or condemned by any competent authority for any public use or purpose then
the term hereby granted shall cease from the time when possession of the part so
taken shall be required for such public purpose and without apportionment of
award, the Tenant hereby assigning to the Landlord all right and claim to any
such award, the current rent, however, in such case to be apportioned.
LEASE NOT IN EFFECT
SIXTH.--If, before the commencement of the term, the Tenant be adjudicated
a bankrupt, or make a "general assignment," or take the benefit of any insolvent
act, or if a Receiver or Trustee be appointed for the Tenant's property, or if
this lease or the estate of the Tenant hereunder be transferred or pass to or
devolve upon any other person or corporation, or if the Tenant shall default in
the performance of any agreement by the Tenant contained in any other lease to
the Tenant by the Landlord or by any corporation of which an officer of the
Landlord is a Director, this lease shall thereby, at the option of the Landlord
be terminated and in that case, neither the Tenant nor anybody claiming under
the Tenant shall be entitled to go into possession of the demised premises.
DEFAULTS
If after the commencement of the term, any of the events mentioned above in this
subdivision shall occur, or if Tenant shall make default in fulfilling any of
the covenants of this lease, other than the covenants for the payment of rent or
"additional rent" or if the demised premises become vacant or deserted,
TEN DAY NOTICE
the Landlord may give to the Tenant ten days' notice of intention to end the
term of this lease, and thereupon at the expiration of said ten days' (if said
condition which was the basis of said notice shall continue to exist) the term
under this lease shall expire as fully and completely as if that day were the
date herein definitely fixed for the expiration of the term and the Tenant will
then quit and surrender the demised premises to the Landlord, but the Tenant
shall remain liable as hereafter provided.
<PAGE>
POSSESSION BY LANDLORD
If the Tenant shall make default in the payment of the rent reserved
hereunder, any item of "additional rent" herein mentioned, or any part of either
or in making any other payment herein provide for, or if the notice last above
provided for shall have been given and if the condition which was the basis of
said notice shall exist at the expiration of said ten days' period, the Landlord
may immediately, or at any time thereafter, re-enter the demised premises and
remove all persons and all or any property therefrom, either by summary
dispossess proceedings, or by any suitable action or proceeding at law, or by
force or otherwise, without being liable to indictment, prosecution or damages
therefor, and re-possess and enjoy said premises together with all additions,
alterations and improvements.
RE-LETTING
In any such case or in the event that this lease be "terminated" before the
commencement of the term, as above provided, the Landlord may either re-let the
demised premises or any part or parts thereof for the Landlord's own account, or
may, at the Landlord's option, re-let the demised premises or any part or parts
thereof as the agent of the Tenant, and receive the rents therefor, applying the
same first to the payment of such expenses as the Landlord may have incurred,
and then to the fulfillment of the covenants of the Tenant herein, and the
balance, if any, at the expiration of the term first above provided for, shall
be paid to the Tenant. Landlord may rent the premises for a term extending
beyond the term hereby granted without releasing Tenant from any liability.
WAIVER BY TENANT
In the event that the term of this lease shall expire as above in this
subdivision "Sixth" provided, or terminate by summary proceedings or otherwise,
and if the Landlord shall not re-let the demised premises for the Landlord's own
account, then, whether or not the premised be re-let, the Tenant shall remain
liable for, and the Tenant hereby agrees to pay to the Landlord, until the time
when this lease would have expired but for such termination or expiration, the
equivalent of the amount of all of the rent and "additional rent" reserved
herein, less the avails of reletting, if any, and the same shall be due and
payable by the Tenant to the Landlord on the several rent days above specified,
that is, upon each of such rent days the Tenant shall pay to the Landlord the
amount of decifiency then existing. The Tenant hereby expressly waives any and
all right of redemption in case the Tenant shall be dispossessed by judgment or
warrant of any court or judge, and the Tenant waives and will waive all right to
trial by jury in any summary proceedings hereafter instituted by the Landlord
against the Tenant in respect to the demised premises. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning.
REMEDIES ARE CUMULATIVE
In the event of a breach or threatened breach by the Tenant of any of the
covenants or provisions hereof, the Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity, as if re-entry,
summary proceedings and other remedies were not herein provided for.
LANDLORD MAY PERFORM
SEVENTH.--If the Tenant shall make default in the performance of any
covenant herein contained, the Landlord may immediately, or at any time
thereafter, without notice, perform the same for the account of the Tenant. If a
notice of mechanic's lien be filed against the demised premises or against
premises of which the demised premises are part, for, or purporting to be for,
labor or material alleged to have been furnished, or to be furnished to or for
the Tenant at the demised premises, and if the Tenant shall fall to take such
action as shall cause such lien to be discharged within fifteen days after the
filling of such notice, the Landlord may pay the amount of such lien or
discharge the same by deposit or by bonding proceedings, and in the event of
such deposit or bonding proceedings, the Landlord may require the lienor to
prosecute an appropriate action to enforce the lienor's claim. In such case, the
Landlord may pay any judgment recovered on such claim.
ADDITIONAL RENT
Any amount paid or expense incurred by the Landlord as in this subdivision of
this lease provided, and any amount as to which the Tenant shall at any time be
in default for or in respect to the use of water, electric current or sprinkler
supervisory service, and any expense incurred or sum of money paid by the
Landlord by reason of the failure of the Tenant to comply with any provision
hereof, or in defending any such action, shall be deemed to be "additional rent"
for the demised premises, and shall be due and payable by the Tenant to the
Landlord on the first day of the next following month, or, at the option of the
Landlord, on the first day of any succeeding month. The receipt by the Landlord
of any installment of the regular stipulated rent hereunder or any of said
"additional rent" shall not be a waiver of any other "additional rent" then due.
AS TO WAIVERS
EIGHTH.--The failure of the Landlord to insist, in any one or more instance
upon a strict performance of any of the covenants of this lease, or to exercise
any option herein contained, shall not be construed as a waiver or a
relinquishment for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the Landlord of
rent, with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach and no waiver by the Landlord of any provision hereof
shall be deemed to have been made unless expressed in writing and signed by the
Landlord. Even though the Landlord shall consent to an assignment hereof no
further assignment shall be made without express consent in writing by the
Landlord.
COLLECTION OF RENT FROM OTHERS
NINTH.--If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than the Tenant the Landlord
may collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, and no such collection shall be
deemed a waiver of the covenant herein against assignment and underletting, or
the acceptance of the assignee, under-tenant or occupant as tenant, or a release
of the Tenant from the further performance by the Tenant of the covenants herein
contained on the part of the Tenant.
MORTGAGES
TENTH.--This lease shall be subject and subordinate at all times, to the
lien of the mortgages now on the demised premises and to all advances made or
hereafter to be made upon the security thereof, and subject and subordinate to
the lien of any mortgage or mortgages which at any time may be made a lien upon
the premises. The Tenant will execute and deliver such further instrument or
instruments subordinating this lease to the lien of any such mortgage or
mortgages as shall be desired by any mortgagee or proposed mortgagee. The Tenant
hereby appoints the Landlord the attorney-in-fact of the Tenant, irrevocable, to
execute and deliver any such instrument or instruments for the Tenant.
IMPROVEMENTS
ELEVENTH.--All improvements made by the Tenant to or upon the demised
premises, except said trade fixtures, shall when made, at once be deemed to be
attached to the freehold, and become the property of the Landlord, and at the
end or other expiration of the term, shall be surrendered to the Landlord in as
good order and condition as they were when installed, reasonable wear and
damages by the elements excepted.
NOTICES
TWELFTH.--Any notice or demand which under the terms of this lease or under
any statute must or may be given or made by the parties hereto shall be in
writing and shall be given or made by mailing the same by certified or
registered mail addressed to the respective parties at the addresses set forth
in this lease.
NO LIABILITY
THIRTEENTH.--The Landlord shall not be liable for any failure of water
supply or electrical current, sprinkler damage, or failure of sprinkler service,
nor for injury or damage to person or property caused by the elements or by
other tenants or persons in said building, or resulting from steam, gas,
electricity, water, rain or snow, which may leak or flow from any part of said
buildings, or from the pipes, appliances or plumbing works of the same, or from
the street or sub-surface, or from any other place, nor from interference with
light or other incorporeal hereditaments by anybody other than the Landlord, or
caused by operations by or for a governmental authority in construction of any
public or quasi-public work, neither shall the Landlord be liable for any latent
defect in the building.
NO ABATEMENT
FOURTEENTH.--No diminution or abatement of rent, or other compensation
shall be claimed or allowed for inconvenience or discomfort arising from the
making of repairs or improvements to the building or to its appliances, nor for
any space taken to comply with any law, ordinance or order of a governmental
authority. In respect to the various "services," if any, herein expressly or
impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed
that there shall be no diminution or abatement of the rent, or any other
compensation, for interruption or curtailment of such "service" when such
interruption or curtailment shall be due to accident, alterations or repairs
desirable or necessary to be made or to inability or difficulty in securing
supplies or labor for the maintenance of such "service" or to some other cause,
not gross negligence on the part of the Landlord. No such interruption or
curtailment of any such "service" shall be deemed a constructive eviction. The
Landlord shall not be required to furnish, and the Tenant shall not be entitled
to receive, any of such "services" during any period wherein the Tenant shall be
in default in respect to the payment of rent. Neither shall there be any
abatement or diminution of rent because of making of repairs, improvements or
decorations to the demised premises after the date above fixed for the
commencement of the term, it being understood that rent shall, in any event,
commence to run at such date so above fixed.
RULES, ETC.
FIFTEENTH.--The Landlord may prescribe and regulate the placing of safes,
machinery, quantities of merchandise and other things. The Landlord may also
prescribe and regulate which elevator and entrances shall be used by the
Tenant's employees, and for the Tenant's shipping. The Landlord may make such
other and further rules and regulations as, in the Landlord's judgment, may
from time to time be needful for the safety, care or cleanliness of the
building, and for the preservation of good order therein. The Tenant and the
employees and agents of the Tenant will observe and conform to all such rules
and regulations.
SHORING OF WALLS
SIXTEENTH.--In the event that an excavation shall be made for building or
other purposes upon land adjacent to the demised premises or shall be
contemplated to be made, the Tenant shall afford to the person or persons
causing or to cause such excavation, license to enter upon the demised premises
for the purpose of doing such work as said person or persons shall deem to be
necessary to preserve the wall or walls, structure or structures upon the
demised premises from injury and to support the same by proper foundations.
VAULT SPACE
SEVENTEENTH.-- No vaults or space not within the property line of the
building are leased hereunder. Landlord makes no representation as to the
location of the property line of the building. Such vaults or space as Tenant
may be permitted to use or occupy are to be used or occupied under a revocable
license and if such license be revoked by the Landlord as to the use of part or
all of the vaults or space Landlord shall not be subject to any liability;
Tenant shall not be entitled to any compensation or reduction in rent nor shall
this be deemed constructive or actual eviction. Any tax, fee or charge of
municipal or other authorities for such vaults or space shall be paid by the
tenant for the period of the Tenant's use or occupancy thereof.
ENTRY
EIGHTEENTH.--That during seven months prior to the expiration of the term
hereby granted, applicants shall be admitted at all reasonable hours of the day
to view the premises until rented; and the Landlord and the Landlord's agents
shall be permitted at any time during the term to visit and examine them at any
reasonable hour of the day, and workmen may enter at any time when authorized by
the Landlord or the Landlord's agents, to make or facilitate repairs in any part
of the building; and if the said Tenant shall not be personally present to open
and permit an entry into said premises, at any time, when for any reason an
entry therein shall be necessary or permissible hereunder, the Landlord or the
Landlord's agents may forcibly enter the same without rendering the Landlord or
such agents liable to any claim or cause of action for damages by reason thereof
(if during such entry the Landlord shall accord reasonable care to the Tenant's
property) and without in any manner affecting the obligations and covenants of
this lease; it is, however, expressly understood that the right and authority
hereby reserved, does not impose, nor does the Landlord assume, by reason
thereof, any responsibility or liability whatsoever for the care or supervision
of said premises, or any of the pipes, fixtures, appliances or appurtenances
therein contained or therewith in any manner connected.
NO REPRESENTATIONS
NINETEENTH.--The Landlord has made no representations or promises in
respect to said building or to the demised premises except those contained
herein, and those, if any, contained in some written communication to the
Tenant, signed by the Landlord. This instrument may not be changed, modified,
discharged or terminated orally.
ATTORNEY'S FEES
TWENTIETH.--If the Tenant shall at any time be in default hereunder, and if
the Landlord shall institute an action or summary proceeding against the Tenant
based upon such default, then the Tenant will reimburse the Landlord for the
expense of attorney's fees and disbursements thereby incurred by the Landlord,
so far as the same are reasonable in amount. Also so long as the Tenant shall be
a tenant hereunder the amount of such expenses shall be deemed to be "additional
rent" hereunder and shall be due from the Tenant to the Landlord on the first
day of the month following the incurring of such respective expenses.
POSSESSION
TWENTY-FIRST.--Landlord shall not be liable for failure to give possession
of the premises upon commencement date by reason of the fact that premises are
not ready for occupancy, or due to a prior Tenant wrongfully holding over or any
other person wrongfully in possession or for any other reason; in such event the
rent shall not commence until possession is given or is available, but the term
herein shall not be extended.
<PAGE>
THE TENANT FURTHER COVENANTS:
IF A FIRST FLOOR
TWENTY-SECOND.--If the demised premises or any part thereof consist of a
store, or of a first floor, or of any part thereof, the Tenant will keep the
sidewalk and curb in front thereof clean at all times and free from snow and
ice, will keep insured in favor of the Landlord, all plate glass therein and
furnish the Landlord with policies of insurance covering the same.
INCREASED FIRE INSURANCE RATE
TWENTY-THIRD.--If by reason of the conduct upon the demised premises of a
business not herein permitted, or if by reason of the improper or careless
conduct of any business upon or use of the demised premises, the fire insurance
rate shall at any time be higher than it otherwise would be, then the Tenant
will reimburse the Landlord, as additional rent hereunder, for that part of all
fire insurance premiums hereafter paid out by the Landlord which shall have been
charged because of the conduct of such business not so permitted, or because of
the improper or careless conduct of any business upon or use of the demised
premises, and will make such reimbursement upon the first day of the month
following such outlay by the Landlord; but this covenant shall not apply to a
premium for any period beyond the expiration date of this lease, first above
specified. In any action or proceeding wherein the Landlord and Tenant are
parties, a schedule or "make up" of rate for the building on the demised
premises, purporting to have been issued by New York Fire Insurance Exchange, or
other body making fire insurance rates for the demised premises, shall be prima
facie evidence of the facts therein stated and of the several items and charges
included in the fire insurance rate then applicable to the demised premises.
WATER RENT
TWENTY-FOURTH.--If a separate water meter be installed for the demised
premises, or any part thereof, the Tenant will keep the same in repair and pay
the charges made by the municipality or water supply company for or in respect
to the consumption of water, as and when bills therefor are rendered. If the
demised premises, or any part thereof, be supplied with water through a meter
which supplies other premises, the Tenant will pay to the Landlord, as and when
bills are rendered therefor, the Tenant's proportionate part of all charges
which the municipality or water supply company shall make for all water consumed
through said meter, as indicated by said meter. Such proportionate part shall be
fixed by apportioning the respective charge according to floor area against all
of the rentable floor area in the building (exclusive of the basement) which
shall have been occupied during the period of the respective charges, taking
into account the period that each part of such area was occupied.
SEWER
Tenant agrees to pay as additional rent the Tenant's proportionate part,
determined as aforesaid, of the sewer rent or charge imposed or assessed upon
the building of which the premise are a part. Tenant responsible for all
services and utilities.
ELECTRIC CURRENT
TWENTY-FIFTH.--That the Tenant will purchase from the Landlord, if the
Landlord shall so desire, all electric current that the Tenant requires at the
demised premises, and will pay the Landlord for the same, as the amount of
consumption shall be indicated by the meter furnished therefor. The price for
said current shall be the same as that charged for consumption similar to that
of the Tenant by the company supplying electricity in the same community.
Payments shall be due as and when bills shall be rendered. The Tenant shall
comply with like rules, regulations and contract provisions as those prescribed
by said company for a consumption similar to that of the Tenant. Tenant
responsible for all services and utilities.
SPRINKLER SYSTEM
TWENTY-SIXTH.--If there now is or shall be installed in said building a
"sprinkler system" the Tenant agrees to keep the appliances thereto in the
demised premises in repair and good working condition, and if the New York Board
of Fire Underwriters or the New York Fire Insurance Exchange or any bureau,
department or official of the State or local government requires or recommends
that any changes, modifications, alterations or additional sprinkler heads or
other equipment be made or supplied by reason of the Tenant's business, or the
location of partitions, trade fixtures, or other contents of the demised
premises, or if such changes, modifications, alteration, additional sprinkler
heads or other equipment in the demised premises are necessary to prevent the
imposition of a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate as fixed by said Exchange or by any Fire
Insurance Company, the Tenant will at the Tenant's own expense, promptly make
and supply such changes, modifications, alterations, additional sprinkler heads
or other equipment. As additional rent hereunder the Tenant will pay to the
Landlord, annually in advance, throughout the term $________________________,
toward the contract price for sprinkler supervisory service.
SECURITY
TWENTY-SEVENTH.--The sum of______________________________________________
Dollars is deposited by the Tenant herein with the Landlord as security for the
faithful performance of all the covenants and conditions of the lease by the
said Tenant. If the Tenant faithfully performs all the covenants and conditions
on his part to be perfomed, then the sum deposited shall be returned to said
Tenant.
NUISANCE
TWENTY-EIGHT.--This lease is granted and accepted on the especially
understood and agreed condition that the Tenant will conduct his business in
such a manner, both as regards noise and kindred nuisances, as will in no wise
interfere with, annoy, or disturb any other tenants, in the conduct of their
several businesses, or the landlord in the management of the building; under
penalty of forfeiture of this lease and consequential damages.
BROKERS COMMISSIONS
TWENTY-NINTH.--The Landlord hereby recognizes _____________________________
as the broker who negotiated and consummated this lease with the Tenant herein,
and agrees that if, as, and when the Tenant exercises the option, if any,
contained herein to renew this lease, or fails to exercise the option, if any,
contained therein to cancel this lease, the Landlord will pay to said broker a
further commission in accordance with the rules and commission rates of the Real
Estate Board in the community. A sale, transfer, or other disposition of the
Landlord's interest in said lease shall not operate to defeat the Landlord's
obligation to pay the said commission to the said broker. The Tenant herein
hereby represents to the Landlord that the said broker is the sole and only
broker who negotiated and consummated this lese with the Tenant.
WINDOW CLEANING
THIRTIETH.--The Tenant agrees that it will not require, permit, suffer, nor
allow the cleaning of any window, or windows, in the demised premises from the
outside (within the meaning of Section 202 of the Labor Law) unless the
equipment and safety devices required by law, ordinance, regulation or rule,
including, without limitation, Section 202 of the New York Labor Law, are
provided and used, and unless the rules, or any supplemental rules of the
Industrial Board of the State of New York are fully complied with; and the
Tenant hereby agrees to indemnify the Landlord, Owner, Agent, Manager and/or
Superintendent as a result of the Tenant's requiring, permitting, suffering, or
allowing any window or windows in the demised premises to be cleaned from the
outside in violation of the requirements of the aforesaid laws, ordinances,
regulations and/or rules.
VALIDITY
THIRTY-FIRST.--The invalidity or unenforceability of any provision of this
lease shall in on way affect the validity or enforceability of any other
provision hereof.
EXECUTION & DELIVERY OF PREMISES
THIRTY-SECOND.--In order to avoid delay, this lease has been prepared and
submitted to the Tenant for signature with the understanding that it shall not
bind the Landlord unless and until it is executed and delivered by the Landlord.
EXTERIOR OF PREMISES
THIRTY-THIRD.--The Tenant will keep clean and polished all metal, trim,
marble and stonework which are a part of the exterior of the premises, using
such materials and methods as the Landlord may direct, and if the Tenant shall
fail to comply with the provisions of this paragraph, the Landlord may cause
such work to be done at the expense of the Tenant.
PLATE GLASS
THIRTY-FOURTH.--The Landlord shall replace at the expense of the Tenant any
and all broken glass in the skylights, doors and walls in and about the demised
premises. The Landlord may insure and keep insured all plate glass in the
skylights, doors and walls in the demised premises, for and in the name of the
Landlord and bills for the premiums therefor shall be rendered by the Landlord
to the Tenant at such times as the Landlord may elect, and shall be due from and
payable by the Tenant when rendered, and the amount thereof shall be deemed to
be, and shall be paid as, additional rent.
WAR EMERGENCY
THIRTY-FIFTH.--This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in nowise be affected, impaired or excused
because Landlord is unable to supply or is delayed in supplying any service
expressly or impliedly to be supplied or is unable to make, or is delayed in
making any repairs, additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if Landlord is prevented or
delayed from so doing so by reason of governmental preemption in connection with
a National Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency.
THE LANDLORD COVENANTS
QUIET POSSESSION
FIRST.--That if and so long as the Tenant pays the rent and "additional
rent" reserved hereby, and performs and observes the covenants and provisions
hereof, the Tenant shall quietly enjoy the demised premises, subject, however,
to the terms of this lease, and to the mortgages above mentioned, provided
however, that this covenant shall be conditioned upon the retention of title to
the premises by Landlord.
ELEVATOR
SECOND.--Subject to the provisions of Paragraph "Fourteenth" above the
Landlord will furnish the following respective services: (a) Elevator service,
if the building shall contain an elevator or elevators, on all days except
Sundays and holidays, from ___________ A.M. to __________ P.M. and on Saturdays
from _____________ A.M. to __________________ P.M.;
HEAT
(b) Heat, during the same hours on the same days in the cold season in each
year. Tenant is responsible for all services and utilities.
See back for additional covenants:
Maintenance: Notwithstanding anything to the contrary contained herein, all real
estate taxes, all insurance, all maintenance of buildings and grounds except for
Landlord who is responsible for structural defects only and other assessments
levied against the demised premises, or payment in lieu, as the case may be,
shall be paid for by the tenant as additional rent due Landlord hereunder. Said
payments shall be paid either on a monthly basis or as billed to the Tenant by
Landlord. This lease is intended to be NNN.
Mortgage: This lease is subject and subordinate to all present and future
mortgages.
And it is mutually understood and agreed that the covenants and agreements
contained in the within lease shall be binding upon the parties hereto and upon
their respective successors, heirs, executors and administrators.
In Witness Whereof, the Landlord and Tenant have respectively signed and
sealed these presents the day and year first above written.
/s/ [ILLEGIBLE] [L.S.]
-------------------------------
Lakeview Real Estate LLC Landlord
IN PRESENCE OF:
/s/ [ILLEGIBLE] [L.S.]
-------------------------------
American Tissue Mills of Tenant
Neenah LLC
<PAGE>
State of New York, County of _____________________ ss:
On the _________________ day of _________________ 19___, before me
personally came _________________________________________, to me known, who,
being by me duly sworn, did depose and say that he resides at
______________________________, that he is __________________ of the corporation
described in and which executed the within instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that the seal affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
State of New York, County of _____________________ ss:
On the _________________ day of _________________ 19___, before me
personally came _________________________________________, to me known, who,
being by me duly sworn, did depose and say that he resides at
______________________________, that he is ________________ of the corporation
described in and which executed the within instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that the seal affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
State of New York, County of _____________________ ss:
On the _________________ day of _________________ 19___, before me
personally came _________________________________________, to me known and known
to me to be the individual described in and who executed the foregoing
instrument, and duly acknowledged that he executed the same.
State of New York, County of _____________________ ss:
On the _________________ day of _________________ 19___, before me
personally came _________________________________________, subscribing witness
to the foregoing instrument, with whom I am personally acquainted, who, being by
me duly sworn, did depose and say, that he resided, at the time of the execution
of said instrument, and still resides, in______________________________________
that he is and then was acquainted with ____________________________________
__________________, and knew _______________________ to be
_________________________ the individual described in and who executed the
foregoing instrument; and that he, said subscribing witness, was present and
saw_______________________ execute the same; and that he, said witness,
thereupon at the same time subscribed his name as witness thereto.
BUILDING .......................................................................
Premises .......................................................................
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Landlord
to
Tenant
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L E A S E
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GUARANTY
In consideration of the letting of the premises within mentioned to the
Tenant within named, and of the sum of One Dollar, to the undersigned in hand
paid by the Landlord within named, the undersigned hereby guarantees to the
Landlord and to the heirs, successors and/or assigns of the Landlord, the
payment by the Tenant of the rent, within provided for, and the performance by
the Tenant of all of the provisions of the within lease. Notice of all defaults
is waived, and consent is hereby given to all extensions of time that any
Landlord may grant.
Dated, _________________ 19___
-----------------------------------
L.S.
STATE OF _____________________, COUNTY OF _____________________ ss:
On this ______ day of ______________, 19___, before me personally appeared
__________________________________________ to me known and known to me to be the
individual described in and who executed the foregoing instrument, and knowledge
to me that he executed the same.
THIS LEASE, dated the first day of June 1998 between Huntington LLC, a New York
company having an office 135 Engineers Road, Hauppauge, New York, hereinafter
referred to as the Landlord, and American Tissue Corporation, a New York company
having an Office at 135 Engineers Road, Hauppauge, New York, hereinafter
referred to as the Tenant,
WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the
Tenant hereby hires and takes from the Landlord for the term and upon the
rentals hereinafter specified, the premises described as follows, situated in
the town of Huntington, County of Suffolk and State of New York
Premises
Property located at 1 Arnold Drive, Huntington Station, Town of Huntington,
New York
Term
The term of this demise shall be for Twenty (20) years beginning June 1,
1998 and ending May 31, 2018
Rent
The rent for the demised term shall be ($_____________), which shall accrue
at the yearly rate of
See attached schedule
The said rent is to be payable monthly in advance on the first day of each
calendar month for the term hereof, in instalments as follows:
Payment of Rent
See attached schedule.
at the office of Landlord or as may be otherwise directed by the Landlord in
writing.
THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS:
Peaceful Possession
First.--The Landlord covenants that the Tenant, on paying the said rental
and performing the covenants and conditions in this Lease contained, shall and
may peaceably and quietly have, hold and enjoy the demised premises for the term
aforesaid.
Purpose
Second.--The Tenant covenants and agrees to use the demised premises for
any lawful purpose and agrees not to use or permit the premises to be used for
any other purpose without the prior written consent of the Landlord endorsed
herein.
Default in Payment of Rent
Abandonment of Premises
Re-entry and Reletting by Landlord
Tenant Liable for Deficiency
Lien of Landlord to Secure
Performance Attorney's Fees
Third.--The Tenant shall, without any previous demand therefor, pay to the
Landlord, or its agent, the said rent at the times and in the manner above
provided. In the event of the non-payment of said rent, or any instalment
thereof, at the times and in the manner above provided, and if the same shall
remain in default for ten days after becoming due, or if the Tenant shall be
dispossessed for non-payment of rent, or if the leased premises shall be
deserted or vacated, the Landlord or its agents shall have the right to and may
enter the said premises as the agent of the Tenant, either by force or
otherwise, without being liable for any prosecution or damages therefor, and may
relet the premises as the agent of the Tenant, and receive the rent therefor,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the premises under this lease shall be forfeited. Such
re-entry by the Landlord shall not operate to release the Tenant from any rent
to be paid or covenants to be performed hereunder during the full term of this
lease. For the purpose of reletting, the Landlord shall be authorized to make
such repairs or alterations in or to the leased premises as may be necessary to
place the same in good order and condition. The Tenant shall be liable to the
Landlord for the cost of such repairs or alterations, and all expenses of such
reletting. If the sum realized or to be realized from the reletting is
insufficient to satisfy the monthly or term rent provided in this lease, the
Landlord, at its option, may require the Tenant to pay such deficiency month by
month, or may hold the Tenant in advance for the entire deficiency to be
realized during the term of the reletting. The Tenant shall not be entitled to
any surplus accruing as a result of the reletting. The Landlord is hereby
granted a lien, in addition to any statutory lien or right to distrain that may
exist, on all personal property of the Tenant in or upon the demised premises,
to secure payment of the rent and performance of the covenants and conditions of
this lease. The Landlord shall have the right, as agent of the Tenant, to take
possession of any furniture, fixtures or other personal property of the Tenant
found in or about the premises, and sell the same at public or private sale and
to apply the proceeds thereof to the payment of any monies becoming due under
this lease, the Tenant hereby waiving the benefit of all laws exempting property
from execution, levy and sale on distress or judgment. The Tenant agrees to pay,
as additional rent, all attorney's fees and other expenses incurred by the
Landlord in enforcing any of the obligations under this lease.
Sub-letting and Assignment
Fourth.--The Tenant shall not sub-let the demised premises nor any portion
thereof, nor shall this lease be assigned by the Tenant without the prior
written consent of the Landlord endorsed hereon.
Condition of Premises, Repairs
Alterations and Improvements
Sanitation, Inflammable Materials
Sidewalks
Fifth.--The Tenant has examined the demised premises, and accepts them in
their present condition (except as otherwise expressly provided herein) and
without any representations on the part of the Landlord or its agents as to the
present or future condition of the said premises. The Tenant shall keep the
demised premises in good condition, and shall redecorate, paint and renovate the
said premises as may be necessary to keep them in repair and good appearance.
The Tenant shall quit and surrender the premises at the end of the demised term
in as good condition as the reasonable use thereof will permit. The Tenant shall
not make any alterations, additions, or improvements to said premises without
the
<PAGE>
prior written consent of the Landlord. All erections, alterations, additions and
improvements, whether temporary or permanent in character, which may be made
upon the premises either by the Landlord or the Tenant, except furniture or
movable trade fixtures installed at the expense of the Tenant, shall be the
property of the Landlord and shall remain and be surrendered with the premises
as a part thereof at the termination of this Lease, without compensation to the
Tenant. The Tenant further agrees to keep said premises and all parts thereof in
a clean and sanitary condition and free from trash, inflammable material and
other objectionable matter. If this lease covers premises, all or a part of
which are on the ground floor, the Tenant further agrees to keep the sidewalks
in front of such ground floor portion of the demised premises clean and free of
obstructions, snow and ice.
Mechanics' Liens
Sixth.--In the event that any mechanics' lien is filed against the premises
as a result of alternations, additions or improvements made by the Tenant, the
Landlord, at its option, after thirty days' notice to the Tenant, may terminate
this lease and may pay the said lien, without inquiring into the validity
thereof, and the Tenant shall forthwith reimburse the Landlord the total expense
incurred by the Landlord in discharging the said lien, as additional rent
hereunder.
Glass
Seventh.--The Tenant agrees to replace at the Tenant's expense any and all
glass which may become broken in and on the demised premises. Plate glass and
mirrors, if any, shall be insured by the Tenant at their full insurable value in
a company satisfactory to the Landlord. Said policy shall be of the full premium
type, and shall be deposited with the Landlord or its agent.
Liability of Landlord
Eighth.--The landlord shall not be responsible for the loss of or damage to
property, or injury to persons, occurring in or about the demised premises, by
reason of any existing or future condition, defect, matter or thing in said
demised premises or the property of which the premises are a part, or for the
acts, omissions or negligence of other persons or tenants in and about the said
property. The Tenant agrees to indemnify and save the Landlord harmless from all
claims and liability for losses of or damage to property, or injuries to persons
occurring in or about the demised premises.
Services and Utilities
Ninth.--Utilities and services furnished to the demised premises for the
benefit of the Tenant shall be provided and paid for by the Tenant.
The Landlord shall not be liable for any interruption or delay in any of the
above services for any reason.
Right to Inspect and Exhibit
Tenth.--The Landlord, or its agents, shall have the right to enter the
demised premises at reasonable hours in the day or night to examine the same, or
to run telephone or other wires, or to make such repairs, additions or
alterations as it shall deem necessary for the safety, preservation or
restoration of the improvements, or for the safety or convenience of the
occupants or users thereof (there being no obligation, however, on the part of
the Landlord to make any such repairs, additions or alterations), or to exhibit
the same to prospective purchasers and put upon the premises a suitable "For
Sale" sign. For three months prior to the expiration of the demised term, the
Landlord, or its agents, may similarly exhibit the premises to prospective
tenants, and may place the usual "To Let" signs thereon.
Damage by Fire, Explosion, The Elements or Otherwise
Eleventh.--In the event of the destruction of the demised premises or the
building containing the said premises by fire, explosion, the elements or
otherwise during the term hereby created, or previous thereto, or such partial
destruction thereof as to render the premises wholly untenantable or unfit for
occupancy, or should the demised premises be so badly injured that the same
cannot be repaired within ninety days from the happening of such injury, then
and in such case the term hereby created shall, at the option of the Landlord,
cease and become null and void from the date of such damage or destruction, and
the Tenant shall immediately surrender said premises and all the Tenant's
interest therein to the Landlord, and shall pay rent only to the time of such
surrender, in which event the Landlord may re-enter and repossess the premises
thus discharged from this lease and may remove all parties therefrom. Should the
demised premises be rendered untenantable and unfit for occupancy, but yet be
repairable within ninety days from the happening of said injury, the Landlord
may enter and repair the same with reasonable speed, and the rent shall not
accrue after said injury or while repairs are being made, but shall recommence
immediately after said repairs shall be completed. But if the premises shall be
so slightly injured as not to be rendered untenantable and unfit for occupancy,
then the Landlord agrees to repair the same with reasonable promptness and in
that case the rent accrued and accruing shall not cease or determine. The Tenant
shall immediately notify the Landlord in case of fire or other damage to the
premises.
Observation of Laws, Ordinances, Rules and Regulations
Twelfth.--The Tenant agrees to observe and comply with all laws,
ordinances, rules and regulations of the Federal, State, County and Municipal
authorities applicable to the business to be conducted by the Tenant in the
demised premises. The Tenant agrees not to do or permit anything to be done in
said premises, or keep anything therein, which will increase the rate of fire
insurance premiums on the improvements or any part thereof, or on property kept
therein, or which will obstruct or interfere with the rights of other tenants,
or conflict with the regulations of the Fire Department or with any insurance
policy upon said improvements or any part thereof. In the event of any increases
in insurance premiums, resulting from the Tenant's occupancy of the premises, or
from any act or omission on the part of the Tenant, the Tenant agrees to pay
said increase in insurance premiums on the improvements or contents thereof as
additional rent.
Signs
Thirteenth.--No sign, advertisement or notice shall be affixed to or placed
upon any part of the demised premises by the Tenant, except in such manner, and
of such size, design and color as shall be approved in advance in writing by the
Landlord.
Subordination to Mortgages and Deeds of Trust
Fourteenth.--This lease is subject and is hereby subordinated to all
present and future mortgages, deeds of trust and other encumbrances affecting
the demised premises or the property of which said premises are a part. The
Tenant agrees to execute, at no expense to the Landlord, any instrument which
may be deemed necessary or desirable by the Landlord to further effect the
subordination of this lease to any such mortgage, deed or trust or encumbrance.
Sales of Premises
Fifteenth.--In the event of the sale by the Landlord of the demised
premises, or the property of which said premises are a part, the Landlord or the
purchaser may terminate this lease on the thirtieth day of April in any year
upon giving the Tenant notice of such termination prior to the first day of
January in the same year.
Rules and Regulations of Landlord
Sixteenth.--The rules and regulations regarding the demised premises,
affixed to this lease, if any, as well us any other and further reasonable rules
and regulations which shall be made by the Landlord, shall be observed by the
Tenant and by the Tenant's employees, agents and customers. The Landlord
reserves the right to rescind any presently existing rules applicable to the
demised premises, and to make such other and further reasonable rules and
regulations as, in its judgment, may from time to time be desirable for the
safety, care and cleanliness of the premises, and for the preservation of good
order therein, which rules, when so made and notice thereof given to the Tenant,
shall have the same force and effect as if originally made a part of this lease.
Such other and further rules shall not, however, be inconsistent with the proper
and rightful enjoyment by the Tenant of the demised premises.
Violation of Covenants, Forfeiture of Lease, Re-entry by Landlord
Non-waiver of Breach
Seventeenth.--In case of violation by the Tenant of any of the covenants,
agreements and conditions of this lease, or of the rules and regulations now or
hereafter to be reasonably established by the Landlord, and upon failure to
discontinue such violation within ten days after notice thereof given to the
Tenant, this lease shall thenceforth, at the option of the Landlord, become null
and void, and the Landlord may re-enter without further notice or demand. The
rent in such case shall become due, be apportioned and paid on and up to the day
of such re-entry, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall constitute or be construed
as a waiver of any other violation or breach of condition, nor shall lapse of
time after breach of condition by the Tenant before the Landlord shall exercise
its option under this paragraph operate to defeat the right of the Landlord to
declare this lease null and void and to re-enter upon the demised premises after
the said breach or violation.
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Notices
Eighteenth.--All notices and demands, legal or otherwise, incidental to
this lease, or the occupation of the demised premises, shall be in writing. If
the Landlord or its agent desires to give or serve upon the Tenant any notice or
demand, it shall be sufficient to send a copy thereof by registered mail,
addressed to the Tenant at the demised premises, or to leave a copy thereof with
a person of suitable age found on the premises, or to post a copy thereof upon
the door to said premises. Notices from the Tenant to the Landlord shall be sent
by registered mail or delivered to the Landlord at the place hereinbefore
designated for the payment of rent, or to such party or place as the Landlord
may from time to time designate in writing.
Bankruptcy, Insolvency, Assignment for Benefit of Creditors
Nineteenth.--It is further agreed that if at any time during the term of
this lease the Tenant shall make any assignment for the benefit of creditors, or
be decreed insolvent or bankrupt according to law, or if a receiver shall be
appointed for the Tenant, then the Landlord may, at its option, terminate this
lease, exercise of such option to be evidenced by notice to that effect served
upon the assignee, receiver, trustee or other person in charge of the
liquidation of the property of the Tenant or the Tenant's estate, but such
termination shall not release or discharge any payment of rent payable hereunder
and then accrued, or any liability then accrued by reason of any agreement or
covenant herein contained on the part of the Tenant, or the Tenant's legal
representatives.
Holding Over by Tenant
Twentieth.--In the event that the Tenant shall remain in the demised
premises after the expiration of the term of this lease without having executed
a new written lease with the Landlord, such holding over shall not constitute a
renewal or extension of this lease. The Landlord may, at its option, elect to
treat the Tenant as one who has not removed at the end of his term, and
thereupon be entitled to all the remedies against the Tenant provided by law in
that situation, or the Landlord may elect, at its option, to construe such
holding over as a tenancy from month to month, subject to all the terms and
conditions of this lease, except as to duration thereof, and in that event the
Tenant shall pay monthly rent in advance at the rate provided herein as
effective during the last month of the demised term.
Eminent Domain, Condemnation
Twenty-first.--If the property or any part thereof wherein the demised
premises are located shall be taken by public or quasi-public authority under
any power of eminent domain or condemnation, this lease, at the option of the
Landlord, shall forthwith terminate and the Tenant shall have no claim or
interest in or to any award of damages for such taking.
Security
Arbitration
Twenty-third.--Any dispute arising under this lease shall be settled by
arbitration. Then Landlord and Tenant shall each choose an arbitrator, and the
two arbitrators thus chosen shall select a third arbitrator. The findings and
award of the three arbitrators thus chosen shall be final and binding on the
parties hereto.
Delivery of Lease
Twenty-fourth.--No rights are to be conferred upon the Tenant until this
lease has been signed by the Landlord, and an executed copy of the lease has
been delivered to the Tenant.
Lease Provisions Not Exclusive
Twenty-fifth.--The foregoing rights and remedies are not intended to be
exclusive but as additional to all rights and remedies the Landlord would
otherwise have by law.
Lease Binding on Heirs, Successors, Etc.
Twenty-sixth.--All of the terms, covenants and conditions of this lease
shall inure to the benefit of and be binding upon the respective heirs,
executors, administrators, successors and assigns of the parties hereto.
However, in the event of the death of the Tenant, if an individual, the Landlord
may, at its option, terminate this lease by notifying the executor or
administrator of the Tenant at the demised premises.
Twenty-seventh.--This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in nowise be affected, impaired or excused
because Landlord is unable to supply or is delayed in supplying any service
expressly or implicitly to be supplied or is delayed in supplying any equipment
or fixtures if Landlord is prevented or delayed from so doing by reason of
governmental preemption in connection with the National Emergency declared by
the President of the United States or in connection with any rule, order or
regulation of any department or subdivision thereof of any governmental agency
or by reason of the condition of supply and demand which have been or are
affected by the war.
Twenty-eighth.--This instrument may not be changed orally.
Twenty-ninth.--Notwithstanding anything to the contrary contained herein,
all real estate taxes, all insurance, all maintenance of building except for
Landlord who is responsible for structural defects only and other assessments
levied against the demised premises, or payments in lieu thereof, as the case
may be, shall be paid for by tenant as additional rent due Landlord hereunder.
Said payments shall be paid either on a monthly basis or as billed to tenant by
Landlord. Lease is NNN.
Thirty.--Lease is subject and subordinate to all present and future
mortgages.
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
Witness:
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Huntington LLC
ILLEGIBLE (Seal)
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Landlord
By /s/ Frank DiMaio, V.P.
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American Tissue Corp (Tenant)
AGREEMENT OF LEASE
AGREEMENT OF LEASE made as of the 18th day of January, 1996 between RECKSON
OPERATING PARTNERSHIP, L.P., a limited partnership having its principal office
at 225 Broadhollow Road, Suite 212 West, Melville, New York 11747 (hereinafter
referred to as Landlord"), and AMERICAN TISSUE CORPORATION, a corporation
organized under the laws of the State of New York, having its principal office
at 35 Engle Street, Hicksville, New York 11801 (hereinafter referred to as
"Tenant")
RECITAL
Landlord has agreed to demise and lease unto Tenant and Tenant has agreed
to hire and take from Landlord the real property and the building and other
improvements thereon known as and located at 85 Nicon Court, Hauppauge, New
York, as shown on Exhibit A annexed hereto (such real property, building and
improvements being hereinafter referred to as the "Premises" and such building
being hereinafter referred to as the "Building"). Now, therefore, in
consideration of the terms, conditions and covenants of this Lease, it is hereby
agreed as follows:
TERM
1. Landlord hereby leases the Premises to Tenant and Tenant hereby hires
the Premises from Landlord for a term of five (5) years which shall commence on
February 1, 1996 (the "Commencement Date") and shall end on January 31, 2001
(the "Expiration Date") unless such term shall sooner cease or expire as
hereinafter provided. If on the foregoing date specified for the Commencement
Date the Landlord's Work, as hereinafter described in Paragraph 6 hereof, is not
"Substantially Completed" (hereinafter defined), then the Term Commencement Date
shall be postponed until the sooner to occur of (a) Tenant's occupancy for the
conduct of its business, or (b) the date on which Landlord's Work shall be
Substantially Completed and the term of this Lease shall be extended so that the
expiration date shall be five (5) years after the last day of the month in which
the Commencement Date occurs. "Substantially Completed", as used herein, is
defined to mean when:
(a) The only items of Landlord's Work to be completed are those which
do not materially interfere with Tenant's use and occupancy of the Demised
Premises. If Landlord shall be delayed from achieving Substantial
Completion of Landlord's Work as a
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result of the performance or completion of any work, labor or services by
Tenant or a party employed by Tenant, then the commencement of the Term of
this lease and the payment of rent hereunder shall be accelerated by the
number of days of such delay. Tenant waives any right to rescind this Lease
under Section 223-a of the New York Real Property Law or any successor
statute of similar import then in force and further waives the right to
recover any damages which may result from Landlord's failure to deliver
possession of the Premises on the Commencement Date.
TITLE
2. The Premises are let subject to covenants, restrictions and easements of
record ("Permitted Encumbrances"), governmental laws, rules, regulations and
orders, and the reservation by Landlord of all air rights above, around and
about the Premises and all rights to increase the sizes of surrounding buildings
based on the air rights appurtenant to the Premises, as, if and when permitted
by any present or future zoning laws, ordinances, orders or regulations.
Landlord represents that the above-referenced covenants, restrictions and
easements of record shall not materially impair Tenant's permitted use of the
Premises. Tenant shall not be required to incur a financial obligation in
complying with the above Permitted Encumbrances except to the extent such
obligations are due to the acts of Tenant, it's employees, agents, invitees or
permitted licensees or permitted assigns.
RENT
3. (a) Tenant covenants to pay to Landlord at its principal office, or at
such place as Landlord shall from time to time direct in writing, the minimum
annual rent set forth below, and the additional rent required to be paid
pursuant to the terms of this Lease. Minimum annual rent and such other
additional rent and charges which Tenant shall be required to pay are
hereinafter sometimes referred to as "Rent". Minimum annual rent shall be as
follows:
During the period February 1, 1996 through January 31, 1997, the minimum
annual rent shall be $446,579.52, payable $in equal monthly installments of
$37,214.96.
During the period February 1, 1997 through January 31, 1998, the minimum
annual rent shall be $459,976.92, payable in equal monthly installments of
$38,331.41.
During the period February 1, 1998 through January 31, 1999, the minimum
annual rent shall be $473,776.20, payable in monthly installments of
$39,481.35.
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During the period February 1, 1999 through January 31, 2000, the minimum
annual rent shall be $487,989.48, payable in equal monthly installments of
$40,665.79.
During the period February 1, 2000 through January 31, 2001, the minimum
annual rent shall be $502,629.12, payable in monthly instaLlments of
$41,885.76.
(b) Tenant shall pay the minimum annual rent in equal monthly installments
in advance on the first day of each calendar month included in the term except
for the first month's rent which shall be paid on the signing of this Lease.
(c) All Rent shall be paid in lawful money of the United States which shall
be legal tender in payment of all debts and dues, public and private, at the
time of payment, at the address of Landlord set forth in this Lease or at such
other place as Landlord in writing may designate without any set-off or
deduction whatsoever except as may otherwise be specifically provided herein,
and without any prior demand therefor.
(d) Unless another time shall be herein expressly provided, any additional
rent shall be due and payable within ten (10) days of written demand or billing
therefor and Landlord shall have the same remedies for failure to pay the
additional rent as for a non-payment of minimum annual rent.
(e) For any portion of a calendar month included at the beginning or end of
the term, Tenant shall pay 1/30th of each monthly installment of Rent for each
day of such portion, payable in advance at the beginning of such portion. The
Rent for any partial month at the beginning of the term of this lease shall be
prorated on the basis of the monthly installments of Rent due for the second
calendar month of the term of this lease.
(f) In any case in which the minimum rent or additional rent is not paid
within ten (10) days of the day when same is due, Tenant shall pay a late charge
equal to 5 cents for each dollar so due; for the purpose of defraying expenses
incident to the handling of such delinquent payment. Tenant further agrees that
the late charge imposed herein is fair and reasonable, complies with all laws,
regulations and statutes, and constitutes an agreement between Landlord and
Tenant as to the estimated compensation for costs and administrative expenses
incurred by Landlord due to the late payment of rent to Landlord by Tenant.
Tenant further agrees that the late charge assessed pursuant to this Lease is
not interest, and the late charge assessed does not constitute a lender or
borrower/creditor relationship between Landlord and Tenant. Notwithstanding the
foregoing, Tenant shall not be required to pay the above late charge until and
including the second late payment in any twelve (12) month period during the
term of this Lease.
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(g) If Tenant shall be in default after the expiration of the applicable
notice period provided herein for the cure thereof in making any payment
required to be made by Tenant or in performing any obligation of Tenant under
this Lease which shall require the expenditure of money, Landlord may, but shall
not be obligated to, make such payment on behalf of Tenant or expend such sum as
may be necessary to perform or fulfill such obligation. Any sums so paid by
Landlord shall be deemed Rent and shall be due and payable to Landlord at the
time of payment of the next installment of minimum annual rent.
(h) Net Lease. The minimum annual rent hereinabove provided for shall be in
addition to all other payments to be made by Tenant as herein provided. It is
the purpose and intent of the parties hereto that the minimum annual rent shall
be absolutely net to Landlord so that, except as otherwise specifically provided
herein, this Lease shall yield, net to the Landlord, the minimum annual rent and
that all costs, expenses and obligations of every kind and nature whatsoever
relating to the Premises which may arise or become due during the term of this
Lease shall be paid by Tenant and that Landlord shall be indemnified and saved
harmless by Tenant from and against the same.
(i) Tenant will pay Landlord, as additional rent, without deduction or
offset, all amounts that this Lease requires Tenant to pay in addition to Rent
(the "additional rent"), at the place where the Rent is payable. Landlord will
have the same remedies for a default in the payment of additional rent as it has
for a default in the payment of Rent.
USE OF PREMISES
4. (a) Tenant shall use and occupy the Premises solely for warehousing,
distribution, manufacturing and offices associated therewith and related
purposes, and for no other purpose. Tenant shall not use or permit the use of
the Premises contrary to any applicable statute, ordinance or regulation or in
violation of the Certificate of Occupancy of the Building, or in a manner which
would cause structural injury to the Building.
(b) Tenant acknowledges that the value of the Premises and the reputation
of Landlord will be seriously injured if the Premises are used for any obscene
or pornographic purposes or if any obscene or pornographic material is permitted
on the Premises. Tenant further agrees that Tenant will not permit any of such
uses by Tenant or a sublessee of the Premises or an assignee of this Lease. This
Paragraph shall directly bind any successors in interest to Tenant. Tenant
agrees that if at any time Tenant violates any of the provisions of this
Paragraph, such violation shall be deemed a breach of a substantial obligation
of the terms
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of this Lease and objectionable conduct. Pornographic material is defined for
purposes of this Paragraph as any written or pictorial matter with prurient
appeal or any objects or instruments that are primarily concerned with lewd or
prurient sexual activity. Obscene material is defined here as it is in Penal Law
section 235.00.
TAXES
5. (a) The term "Real Estate Taxes" shall be deemed to mean all real estate
taxes, assessments, special or otherwise, fixed water charges or sewer rentals
(if any), or other taxes assessed upon or with respect to the ownership of or
all other taxable interests in the real property, Building and other
improvements which constitute the Premises, imposed by Federal, State or Local
governmental authority or any other taxing authority having jurisdiction over
the Premises, but shall not include income, intangible, franchise, capital
stock, estate or inheritance taxes, or taxes based upon the receipt of rentals
(unless the same shall be in lieu of "Real Estate Taxes" as herein defined by
whatever name the tax may be designated.) As to any assessment, for purposes
hereof, Landlord agrees to pay same in installments over the longest period
offered by the taxing authorities, and Real Estate Taxes for any given Lease
Year (hereafter defined) shall only include installments that are payable during
the term.
A "Lease Year" shall comprise a period of twelve (12) consecutive months.
Notwithstanding the foregoing, the first Lease Year shall commence upon the
Commencement Date and if the Commencement Date is not the first day of a month
shall include the additional period from the Commencement Date to the end of the
then current month. Each succeeding Lease Year shall end on the anniversary date
of the last day of the preceding Lease Year. For example, if the Commencement
Date is January 1, 1996, the first Lease Year would end on December 31, 1996 and
each succeeding Lease Year would end on December 31st. If, however, the
Commencement Date is January 2, 1996 the first Lease Year would end on January
31, 1997, the second Lease Year would commence on February 1, 1997 and each
succeeding Lease Year would end on January 31st.
(b) Commencing on the Commencement Date and continuing throughout the term
of this Lease, Tenant shall pay to Landlord any and all Real Estate Taxes levied
or assessed against the Premises to the extent applicable to the term of this
Lease, as additional rent hereunder. Any amount due to Landlord under the
provisions of this Paragraph shall be paid within ten (10) days after receipt by
Tenant from Landlord of an invoice therefor. A copy of the tax bill shall be
sufficient evidence of the amount of Real Estate Taxes imposed upon the
Premises. Tenant shall also pay when due any occupancy taxes arising under or in
connection with this Lease. Provided that Tenant pays Real Estate Taxes to
Landlord within the
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said ten (10) day period, Tenant shall not be liable for any penalties or
interest assessed as a result of any late payment of Real Estate Taxes.
(c) Landlord's failure during the term of this Lease to prepare and deliver
any of the foregoing tax statements or Landlord's failure to make a demand for
additional rent due hereunder shall not in any way waive or cause Landlord to
forfeit or surrender its rights to collect any of the foregoing items of
additional rent which may have become due during the term of this Lease.
(d) If, for any reason, any such Real Estate Taxes shall be paid by Tenant
directly to the taxing authority, Tenant agrees to deliver to Landlord, within
15 days after request by Landlord, a copy of Tenant's check and an official
receipt, if available, of the taxing authority evidencing such payment.
(e) Tenant shall pay to Landlord, within ten (10) days after demand, any
Real Estate Taxes relating to the term of this Lease which may have been prepaid
by Landlord. With respect to any period at the expiration of the term of this
Lease which shall constitute a partial tax year, Tenant shall be responsible for
the Real Estate Taxes allocable to such partial tax year and Landlord's tax
statement shall apportion the amount of the additional rental due hereunder. The
obligation of Tenant in respect of such additional rental applicable for the
last year of the term of this Lease or part thereof shall survive the expiration
of the term of this Lease.
(f) Tenant shall not, without Landlord's prior written consent, institute
or maintain any action, proceeding or application in any court or body or with
any governmental authority for the purpose of changing the Real Estate Taxes.
However, if Landlord fails to commence such a proceeding on or before the
thirtieth (30th) day prior to the final date to file challenges for the tax year
in question and Landlord has not provided a reasonable justification for not
doing so by such thirtieth (30th) day, then Tenant shall be permitted to
commence such a proceeding for the tax year in question at Tenant's sole cost
and expense and upon prior notice to Landlord. In the event Tenant commences
such a proceeding as permitted by this Article, Tenant shall furnish Landlord
with copies of all documents delivered and received by or on behalf of Tenant in
connection with said proceeding. In the event any such action initiated by
Landlord or Tenant is successful, then Landlord and Tenant shall share any tax
refund or credit obtained thereby (after reimbursement to the appropriate party
for reasonable legal fees and other customary out of pocket expenses) on the
basis of the Taxes actually paid by each such party.
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(g) Tenant shall not be responsible for increases in Real Estate Taxes
which result from improvements to the Building made by Landlord unless said
improvements are required by law or are performed by Landlord at the request of
Tenant or as required under this Lease.
LANDLORD'S WORK AND DELIVERY OF POSSESSION
6. (a) Subject to Landlord's representations in Subparagraph 8(a) being
true on the date of delivery of possession of the Premises, and further subject
to Landlord's obligation to perform the work provided below, Tenant agrees to
accept the Premises in its "as is" condition as of the date hereof and Landlord
shall have no obligation to perform any work on the Premises in order to prepare
same for occupancy by Tenant. Landlord, at its sole cost and expense shall
promptly commence and diligently complete the removal of the temporary small
non-structural platform and the racking system presently located at the Demised
Premises ("Landlord's Work"). In the event Landlord's Work is not Substantially
Completed within sixty (60) days of the date hereof, Tenant may terminate this
lease upon written notice to Landlord.
(b) Subject to the provisions of Article 35, Landlord shall deliver
possession of the Premises to Tenant on the date Landlord's Work is
Substantially Completed.
TENANT'S WORK
7. Upon the commencement of the Term as provided in Paragraph 1 hereof,
Tenant, at its sole cost and expense, may perform the following work at the
Demised Premises ("Tenant's Work"):
(a) Demolish the office area on the mezzanine.
(b) Raise loading docks.
(c) Replace existing florescent lighting with high pressure sodium
lighting fixtures.
(d) Install an exterior truck scale.
(e) Install a propane tank.
Notwithstanding the foregoing, Tenant may commence the raising of the loading
docks and the installation of exterior of the truck scale upon execution of this
lease.
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All alterations, additions, improvements, equipment and fixtures installed by
Tenant (as part of Tenant's Work or otherwise) which are appurtenant to the
Building (but not including Tenant's trade fixtures) shall be deemed the
property of Landlord (except for purposes of sales tax, if any, which shall
remain Tenant's obligation) and shall be and remain upon the Demised Premises at
the expiration of this Lease. All work performed by or on behalf of Tenant in
the Demised Premises including, without limitation, Tenant's Work, shall be
performed in accordance with Article "9" and Exhibit "B" annexed hereto and made
a part hereof. Tenant shall not be required to post a bond or pay a supervisory
fee with respect to Tenant's Work, as provided above. Landlord hereby approves
Tenant's plans for the installation of the truck scale and Bopst Machine, a copy
of which has been initialed by Landlord and Tenant.
Notwithstanding the foregoing, in the event that Tenant does not exercise its
option to renew the Term of this Lease for an additional five (5) year period,
or in the event that Tenant renews this Lease for an additional five (5) year
period and this Lease is terminated by reason of Tenant's acts or defaults or by
operation of law or otherwise, prior to the end of the extended term, at its
option, Tenant shall either (i) restore all of the offices which were demolished
as part of Tenant's Work to their condition existing on the date hereof
excepting wall coverings, floor coverings and paintings, or (ii) pay Landlord
$30,000.00 ("Restoration Fee") which Landlord and Tenant agree represents the
fair and reasonable amount Landlord may incur in restoring the offices which
were demolished as part of Tenant's Work. The Restoration Fee shall be paid on
the sooner to occur of: (i) an early termination of this Lease; or (ii) the
failure of Tenant to timely exercise its option to extend the term.
REPAIRS, MAINTENANCE, FLOOR LOADS AND PARKING RESTRICTION
8. (a) Tenant shall at all times keep and maintain the Premises in good
order, condition and repair, and shall make all nonstructural repairs to the
Premises, including, without limiting the generality of the foregoing, (i)
maintenance and repair of the electrical, plumbing, sprinkler, heating,
ventilating and air conditioning systems servicing the Premises; (ii) generally
keeping and maintaining the Premises, both interior and exterior, in good
condition and repair; (iii) maintenance and repair of all landscaping,
sidewalks, driveways and parking areas at the Premises; (iv) keeping the
Premises clean and free of debris, snow and ice; (v) the repair and maintenance
of all plate glass; and (vi) the roof. Tenant shall obtain and keep in full
force and effect for the benefit of Landlord and Tenant, with a responsible
company doing business in Nassau or Suffolk County, a service, repair and
maintenance contract with respect to the heating,
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ventilating and air-conditioning systems of the Premises. A copy of such
contract and all renewals thereof shall, upon issuance and thereafter not later
then ten (10) days prior to expiration, be furnished to Landlord together with
evidence of payment. If Tenant fails to make any repairs or replacements
required to be made by Tenant, Landlord may, after fifteen (15) days written
notice to Tenant, except in the case of emergency which shall not require
notice, without obligation, perform same for the account of Tenant at Tenant's
expense and the cost thereof shall be due and payable by Tenant to Landlord as
additional rent. In no event shall Tenant be obligated to make repairs to the
Premises necessitated by the affirmative acts or negligence of Landlord or
Landlord's agents, employees, licensees, contractors, invitees or
representatives. Landlord represents and warrants to Tenant that: (a) the
Premises are and shall be delivered to Tenant vacant, free of all rights of
occupancy, in broom clean condition, with all systems, including, without
limitation, HVAC, plumbing and electrical systems, equipment, facilities,
fixtures, installations and appurtenances in good working order, repair and
condition; (b) the roof and basement are in good condition, free of leaks; and
(c) all utility systems are operational and in good working order. Promptly upon
the execution hereof, weather permitting, Landlord and Tenant acknowledge that
Landlord will install a new roof membrane over the entire existing roof.
Landlord agrees that during the term of this Lease, Tenant shall receive the
benefit of the warranty given to Landlord covering the new roof membrane which
warranty shall be for minimum of three (3) years.
During the term hereof, Landlord shall promptly make all structural repairs to
the Building except for those structural repairs occasioned by the acts or
omissions of Tenant or Tenant's agents, employees, licensees, contractors,
invitees or representatives, which shall be made by Landlord at the sole cost
and expense of Tenant to be paid by Tenant as additional rent.
(b) When necessary by reason of accident or other casualty occurring in the
Building or at the Premises or in order to make any necessary repairs, or to
make alterations or improvements required by law, in or relating to the Building
or the Premises, Landlord reserves the right to interrupt, temporarily, and on
written notice to Tenant, the supply of utility services until said repairs or
improvements shall have been completed. Landlord shall pursue such work with
reasonable diligence and dispatch. Nothing contained in this paragraph shall
create any obligation of Landlord to maintain the Building or the Premises.
(c) Tenant shall not place a load upon any floor of the Premises which
exceeds the floor load per square foot area which such floor was designed to
carry. If Tenant shall desire a floor load in excess of that for which the floor
of any portion of the Premises is designed, upon submission to Landlord of plans
showing the location of and the desired floor live load for the area in
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question, Landlord may strengthen and reinforce the same, at Tenant's sole
expense, so as to carry the live load desired. Business machines and mechanical
equipment used by Tenant which cause vibration or noise that may be transmitted
to or through the Building shall be placed and maintained by Tenant, at its
expense, in settings of cork, rubber or spring-type vibration eliminators
sufficient to eliminate such vibration or noise.
(d) Tenant shall comply with the following restrictions with respect to the
Premises:
(i) Tenant shall store all trash and refuse in appropriate sealed and
covered containers either within the Premises or in a concealed location at
the rear of the Building and shall attend to the regular disposal and
removal thereof.
(ii) Tenant shall receive all deliveries, load and unload goods,
merchandise, supplies, fixtures, equipment, furniture and rubbish only
through proper service doors and loading docks serving the Building, but in
no event through the main front entrance thereof.
(iii) Tenant shall not change the exterior colors or architectural
treatment of the Premises or make any alterations or changes to the
exterior of the Building or to the grading, planting or landscaping of the
exterior of the Building without the consent of Landlord which shall not be
unreasonably withheld or delayed.
(iv) Tenant shall not place or install or suffer to be placed or
installed any sign upon the Building or the Premises unless such sign shall
be approved by Landlord which approval shall not be unreasonably withheld
or delayed and shall be harmonious with the signs of adjoining properties.
In any event, Tenant shall not place or cause to be placed upon the
Building any awning, canopy, banner, flag, pennant, aerial, antenna or the
like without the consent of Landlord, not to be unreasonably withheld or
delayed. All signs or lettering on or about the Premises or the Building
shall be neat and reasonable size. The following are strictly prohibited:
(x) Paper signs and stickers;
(y) Moving, flickering or flashing lights;
(z) Exposed neon or fluorescent tubes or other exposed light sources.
(v) Tenant shall not permit the parking of any vehicle on the streets
and roadways adjoining or surrounding the Building and Tenant shall require
its employees, customers, invitees, licensees and visitors to park only in
the parking areas serving the Premises.
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TENANT'S ALTERATION
9. Tenant shall make no alterations, improvements or changes to the
Building or the Premises without Landlord's prior written consent, which
consent, as to non-structural alterations which do not involve heating,
ventilating, air conditioning, plumbing, electrical, mechanical, fire safety or
life safety systems, shall not be unreasonably withheld or delayed. Tenant may,
without Landlord's consent but on prior notice to Landlord, (i) repaint,
recarpet, install wall coverings or replace ceiling tiles in the Premises, and
(ii) perform alterations which do not involve the Building structure, heating,
ventilating, air-conditioning, plumbing, electrical, mechanical, fire safety or
life safety systems, the cost of which do not exceed $25,000 in the aggregate
over the Term of this Lease ("Minor Alterations"). Tenant shall be deemed to
have met its obligations under Subparagraph (i) above if it endeavors to notify
Landlord. Tenant shall not be required to bond or pay a supervisory fee for
Minor Alterations. All improvements, alterations and replacements, and all
building service equipment made or installed by or on behalf of Tenant shall
immediately upon completion or installation thereof be and become the property
of Landlord. All trade fixtures, movable partitions, furniture and furnishings
installed at the expense of Tenant shall remain the property of Tenant and
Tenant may remove the same or any part thereof during the term of this Lease, or
if the term shall end prior to the date herein specifically fixed for such
termination, then within a reasonable time thereafter, but Tenant shall, at its
expense, repair any and all damage to the Premises resulting from or caused by
such removal. Title to any property which Tenant elects not to remove or which
is abandoned by Tenant shall, at the end of the term, vest in Landlord. Tenant
hereby acknowledges that Landlord does not possess current architectural or
mechanical plans for the Premises and that Landlord is not obligated to deliver
such plans to Tenant. Tenant shall not make any structural alterations or
improvements or any non-structural alterations or improvements other than Minor
Alterations until it shall have first submitted to Landlord plans and
specifications for such work and Landlord shall approve or respond to same
within two (2) business days of submission. Landlord shall not unreasonably
withhold such approval. All such work to be performed by Tenant shall be in
accordance with the approved plans and specifications and Landlord shall have
the right at any time during the pendency of such work to inspect the Premises
and the manner of construction. In the event of any such repairs, alterations or
improvements, Landlord shall have the option to require Tenant to deliver to
Landlord at Tenant's cost and expense a bond satisfactory to Landlord in the sum
equal to the cost of the work. Any mechanic's liens filed at any time against
the Premises, for work claimed to have been performed or for materials claimed
to have been furnished to Tenant or Tenant's contractors or subcontractors,
shall be discharged by Tenant within thirty (30)
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days from Tenant's receipt of notice of lien by bonding, payment or otherwise.
Except as otherwise specifically provided herein, all work done by Tenant other
than Minor Alterations shall be subject to a ten (10%) percent supervisory fee
of Landlord.
UTILITIES
10. (a) Tenant shall provide, at its own expense, fuel, heat, water,
electricity and all other utilities required in connection with its use of the
Premises. Landlord shall be obligated to deliver the utility lines and
facilities servicing the Premises in working order at the commencement of the
term of this Lease.
(b) Tenant shall be responsible for all deposits required by the respective
utilities for service. Tenant shall comply with all requirements of the
utilities supplying said service. Landlord shall have no responsibility for the
installation of telephone service.
REQUIREMENTS OF LAW, SPRINKLERS
11. (a) Tenant shall promptly execute and comply with all statutes,
ordinances, rules, orders, regulations and requirements (including those which
require structural alterations which alterations shall be made by Landlord at
Tenant's sole cost and expense and paid by Tenant as additional rent) of the
Federal, State, County and Local Government and of any and all their Departments
and Bureaus applicable to the Premises, for the correction, prevention or
abatement of nuisances or other grievances in, upon, or connected with the
Premises during the term; and shall also promptly comply with and execute all
rules, orders and regulations of the New York Board of Fire Underwriters for the
prevention of fires at the Tenant's own cost and expense. The foregoing
obligations of Tenant shall be limited to the extent such execution and
compliance is required due to Tenant's particular manner of use of the Premises.
In addition, Tenant may contest in good faith such laws. Landlord shall comply
at its sole cost and expense, with all applicable federal, state and local laws,
orders, rules and regulations to the extent actually required by governmental
authorities with respect to the real property and the Building, other than those
which are the responsibility of Tenant in accordance with the terms of this
Lease.
(b) Tenant shall keep and maintain any sprinkler system now or hereafter
installed in the Premises in good repair and working condition, and if the New
York Board of Fire Underwriters or the New York Fire Insurance Exchange or any
Bureau, Department
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or official of any Federal, State or Local governmental or quasi-governmental
authority shall require or recommend any changes, modifications or alterations,
including, without limitation, additional sprinkler heads or other equipment, to
be made or supplied by reason of Tenant's business or the location of
partitions, trade fixtures, or other contents of the Premises, or if such
changes, modifications, alterations, additional sprinkler heads or other
equipment in the Premises are necessary to prevent the imposition of a penalty
or charge against the full allowance for a sprinkler system in the fire
insurance rate as fixed by said Exchange, or by any Fire Insurance Company with
respect to the Building, the Premises or any adjoining or nearby buildings or
improvements, Tenant shall at Tenant's sole cost and expense, promptly make and
supply such changes, modifications, alterations, additional sprinkler heads or
other equipment. Tenant shall throughout the term maintain for the benefit of
Landlord and Tenant, with a responsible company doing business in Nassau or
Suffolk County, a contract for sprinkler supervisory service and furnish
Landlord with copies thereof and all renewals, together with evidence of
payment.
(c) If by reason of Tenant's use and occupancy or abandonment of the
Premises, or if by reason of the improper or careless conduct of any business
upon or use of the Premises, the fire insurance rates for any other tenants or
occupants of any adjoining or nearby buildings or improvements (including
contents and equipment coverage) shall at any time be higher than it otherwise
would be, Tenant shall reimburse Landlord, as additional rent hereunder, for
that part of all fire insurance premiums charged to such other owners, tenants
or occupants because of the improper or careless conduct of any business upon or
use of the Premises, and shall make such reimbursement upon the first day of the
month following billing thereof by Landlord; but this covenant shall not apply
to a premium for any period beyond the expiration date of this Lease first above
specified. In any action or proceeding based upon or arising out of this
provision, a schedule or "make up" of rate of the Building or any other affected
insurance coverage purporting to have been issued by the New York Fire Insurance
Exchange, or other body making fire insurance rates, shall be prima facie
evidence of the facts therein stated.
(d) Tenant shall keep or cause the Premises to be kept free of Hazardous
Materials (hereinafter defined). Without limiting the foregoing, Tenant shall
not cause or permit the Premises to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process Hazardous
Materials, except in compliance with all applicable federal, state and local
laws or regulations, nor shall Tenant cause or permit, as a result of any
intentional or unintentional act or omission on the part of Tenant or any
subtenant, a release of Hazardous Materials onto the Premises or onto any other
property. Tenant shall comply with and ensure compliance by all
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subtenants with all applicable federal, state and local laws, ordinances, rules
and regulations, whenever and by whomever triggered, and shall obtain and comply
with, and ensure that all subtenants obtain and comply with, any and all
approvals, registrations or permits required thereunder. Tenant shall (A)
conduct and complete all investigations, studies, samplings, and testing, and
all remedial removal, and other actions necessary to clean up and remove all
Hazardous Materials, on, from, or affecting the Premises (i) in accordance with
all applicable Federal, State and Local laws, ordinances, rules, regulations,
and policies, (ii) to the satisfaction of Landlord, and (iii) in accordance with
the orders and directives of all federal, state, and local governmental
authorities, and (B) defend, indemnify, and hold harmless Landlord, its
employees, agents, officers, and directors, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, or expenses
of whatever kind or nature, known or unknown, contingent or otherwise, arising
out of, or in any way related to, (i) the presence, disposal, release, or
threatened release of any Hazardous Materials which are on, from, or affecting
the soil, water, vegetation, buildings, personal property, persons, animals, or
otherwise to the extent same were; (ii) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Materials; (iii) any lawsuit brought or threatened, settlement
reached, or government order relating to such Hazardous Materials; and/or (iv)
any violation of laws, orders, regulations, requirements, or demands of
government authorities, or any policies or requirements of Landlord which are
based upon or in any way related to such Hazardous Materials, including, without
limitation, reasonable attorney and consultant fees, investigation and
laboratory fees, court costs, and litigation expenses. In the event this Lease
is terminated, or Tenant is dispossessed, Tenant shall deliver the Premises to
Landlord free of any and all Hazardous Materials so that the conditions of the
Premises shall conform with all applicable federal, state and local laws,
ordinances, rules or regulations affecting the Premises. For purposes of this
paragraph, "Hazardous Materials" includes, without limit, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or related materials defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801 et seq.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 9601, et seq.), and in the
regulations adopted and publications promulgated pursuant thereto, or any other
federal, state or local environmental law, ordinance, rule, or regulation.
(e) Nothing herein, or elsewhere in this Lease, shall place any liability
upon Tenant for and Landlord hereby agrees to indemnify and hold Tenant harmless
against damages, claims, expenses or costs arising out of the presence of any
Hazardous
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Materials resulting from the acts or omissions of Landlord, or prior tenants or
third parties unrelated to Tenant.
INSURANCE
12. (a) Landlord shall, during the term of this Lease, keep the Building,
together with all fixtures, building related equipment, building related
machinery and improvements therein or thereto, insured under its blanket policy
against loss by fire, with extended coverage, malicious mischief, storm and
sprinkler damage and boiler insurance (written on a broad form basis to a limit
of $300,000.00) if there is a boiler or pressure object in the Premises, all
with waiver of right in all such insurance policies to recover by way of
subrogation against Landlord or Tenant, with insurance companies of recognized
responsibility authorized and licensed to issue such policies in the State of
New York reasonably acceptable to Landlord and Landlord's first mortgagee, and
to maintain such insurance at all times during the term of this Lease in an
amount sufficient to prevent Landlord from becoming a co-insurer of any loss but
in no event in an amount less than the full replacement value (excluding
foundation costs) of the Building and improvements. Such policies shall be
obtained by Landlord and the policies shall be issued in the name of Landlord
and, at the direction of Landlord, loss to be payable to Landlord and its
mortgagee as their interests shall appear. All premiums paid by Landlord, shall
be deemed additional rent and shall be due and payable as provided in paragraph
3(d) hereof.
(b) Tenant shall, during the term of this Lease, at Tenant's sole cost and
expense, provide and keep in force for the benefit of Landlord and Tenant, as
their interests may appear, public liability insurance policy or policies in
standard form in the State of New York, with a combined single limit of
$1,000,000 and umbrella coverage of at least $3,000,000, such policy or policies
to cover the Premises, inclusive of sidewalks and parking facilities. The
policies shall be obtained by Tenant and certificates hereof delivered to
Landlord upon the commencement of the term hereof, with evidence of payment of
the premiums thereon and shall be taken in well rated insurance companies
authorized to do business in the State of New York.
(c) Landlord shall maintain during the term of this Lease rent insurance
covering minimum annual rent and additional rent for a twelve (12) month period
during the term of this Lease. Landlord agrees that such policy shall carry a
waiver of subrogation. Tenant shall, as additional rent, reimburse Landlord for
all such insurance premiums within ten (10) days after billing by Landlord.
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(d) Neither Landlord nor Tenant shall be liable to the other for any
business interruption or any loss or damage to property or injury to or death
of persons occurring at the Premises or for the condition thereof, whether or
not caused by the negligence or other fault of Landlord or Tenant or of their
respective agents, employees, subtenants, licensees, or assigns. This release
shall apply to the extent that such business interruption, loss, or damage to
property or injury to or death of persons is covered by insurance, regardless of
whether such insurance is payable to or protects Landlord or Tenant, or both.
Nothing herein shall be construed to impose any other or greater liability upon
either Landlord or Tenant than would have existed in the absence of this
provision. This release shall be in effect only so long as the applicable
insurance policies contain a clause to the effect that this release shall not
affect the right of the insured to recover under such policies. Such clauses
shall be obtained by the parties whenever possible. The release in favor of
Landlord contained herein is in addition to and not in substitution for, or in
diminution of, the hold harmless and indemnification provisions hereof.
DAMAGE OR DESTRUCTION
13. (a) If the Building or the Premises shall be damaged or destroyed
during the term by fire or other casualty covered by insurance then carried
pursuant to Article 12, to the extent permitted by the insurance proceeds
collected by Landlord (or collected by Tenant and paid over to Landlord),
Landlord shall, with due diligence, repair and/or rebuild the same to
substantially the condition it was in immediately prior to such damage or
destruction. Tenant shall receive and hold the insurance proceeds from the
insurance carried by Tenant covering any other property appurtenant to the
Premises (excepting Tenant's Trade Fixtures) in trust for the purposes of
preparing the Premises for occupancy by Tenant in the condition obtaining
immediately prior to the casualty.
(b) To the extent of payments received by Landlord with respect to Rent
insurance proceeds, Rent shall be abated proportionately during the period in
which, by reason of any such damage or destruction, there is a substantial
interference with the operation of the business of Tenant in the Premises,
having regard to the extent to which Tenant may be required to discontinue its
business in the Premises, and such abatement shall continue for the period
commencing with such destruction or damage and ending with the substantial
completion by Landlord of such work, repair or construction as Landlord is
obligated to perform.
(c) If the Building shall be damaged or destroyed to the extent of fifty
(50%) percent or more of the then replacement value
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thereof, exclusive of foundations, by any cause, or should the damage be
occasioned by a casualty for which there was no insurance, Landlord shall have
the right to terminate this Lease on written notice to Tenant served within
sixty (60) days after such damage or destruction. If, within ninety (90) days
after the occurrence of damage or destruction to the Building Landlord shall
fail to provide a certification by a licensed architect or engineer that the
Building can be restored within one (1) year, or if such certification is
obtained and Landlord fails to restore the Building within one (1) year from the
date of damage, either Landlord or Tenant may terminate this Lease.
(d) If this Lease shall not be terminated as in this Article 13 provided,
Landlord shall restore the Building and the Premises, provided adequate
insurance proceeds are available for this purpose, and subparagraphs (a) and (b)
of this Article 13 shall be applicable. Notwithstanding anything to the contrary
contained herein, if during the last year of the term, the Premises are rendered
substantially untenantable and Landlord shall fail to provide within thirty (30)
days of the casualty, a certification by a licensed architect or engineer that
the Premises can be restored within ninety (90) days, or if such certification
is obtained and Landlord fails to restore the Premises within ninety (90) days
from the date of damage, either Landlord or Tenant may terminate this Lease.
(e) Tenant hereby waives any and all rights granted by Section 227 of the
Real Property Law of the State of New York or any other law of like import now
or hereafter enacted.
SUBORDINATION
14. This Lease shall be subject and subordinate at all times to the lien of
any mortgages (i) now encumbering the Building or the Premises and to all
advances made or hereafter to be made upon the security thereof, and (ii)
hereafter made provided same are made to a lending institution. Tenant shall
execute and deliver such further reasonable instrument or instruments
subordinating this Lease to the lien of any such mortgage or mortgages as shall
be desired by any mortgagee or proposed mortgagee and Tenant hereby appoints
Landlord the attorney-in-fact of Tenant, irrevocably, to execute and deliver any
such instrument or instruments for the Tenant. As used in this Lease, the term
"lending institution" shall mean savings bank, savings and loan association,
bank or trust company, real estate investment trust, investment bank or an
affiliate thereof, insurance company, university, public or private, employee,
welfare, pension or retirement fund or system.
(b) Within thirty (30) days after demand, Tenant shall furnish to Landlord
certified balance sheets and operating
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statements for the past five (5) years and uncertified balance sheets and
operating statements for the current partial year as reasonably required by any
prospective mortgagee.
(c) Tenant shall, upon not less than ten (10) days' prior request by
Landlord, execute, acknowledge and deliver to Landlord a statement in writing
certifying (i) that this Lease is unmodified and in full force and effect (or if
there have been modifications that the same are in full force and effect as
modified and identifying the modifications), (ii) the dates to which the Rent
and other charges have been paid, and (iii) that so far as the person making the
certificate knows, Landlord is not in default under any provision of this Lease.
It is intended that any such statement may be relied upon by any person
proposing to acquire Landlord's interest in this Lease, any prospective
purchaser of the Premises, or any prospective mortgagee, or assignee of any
mortgage upon the Premises.
(d) So long as there is a first mortgage lien encumbering the Premises,
Landlord and Tenant shall not, without first obtaining the written consent of
such mortgagee, enter into any agreement, the effect of which would be to (i)
modify, cancel terminate or surrender this Lease; (ii) grant any concession in
respect thereof; (iii) reduce the Rent or require the prepayment of any rent in
advance of the due date thereof; (iv) create any offsets or claims against Rent;
(v) assign in whole or in part any of the rents therefrom or Tenant's interest
in this Lease or sublet the whole or any portion of the Premises, all of the
foregoing except as provided in this Lease.
(e) In the event of any act or omission by Landlord which would give Tenant
the right to terminate this Lease or to claim a partial or total eviction,
Tenant shall not exercise any such termination right until (i) it shall have
served written notice, by registered mail, of such act or omission, to Landlord
and to the holder of any mortgage whose name and address shall have been
furnished to Tenant in writing, at the last address so furnished, and (ii) a
reasonable period of time for remedying such act or omission shall have elapsed
following the serving of such notice; provided, however, that following the
serving of such notice, Landlord or said holder shall, with reasonable
diligence, have commenced and continued to remedy such act or omission or to
cause the same to be remedied.
(f) Notwithstanding the foregoing, Landlord agrees to provide a
Subordination, Attornment and Nondisturbance Agreement from its mortgagee, if
any, on such mortgagee's standard form.
(g) Any information delivered by Tenant to Landlord or its mortgagee
pursuant to Subparagraphs (b) and (e) above is to be made available internally
by Landlord or its mortgagee, as the case may be, only to such of Landlord's or
its mortgagee's employees and
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to the extent required for such employees to discharge their responsibilities on
a need-to-know basis only. In no event shall any such information, any copies
thereof or any information set forth thereon be disseminated to any person
outside Landlord's or its mortgagee's organizations unless such person is given
written notice of this confidentiality provision and agrees in writing to be
bound by same.
INDEMNIFICATION
15. Tenant shall indemnify, defend, save and hold Landlord harmless from
and against any and all liability and damages and any and all injury, loss,
claim, damage or suit of every kind and nature, including Landlord's reasonable
counsel fees, to any person, firm, association or corporation or to any
property, arising out of or based upon, related to, or in any way connected
with, the use or occupancy of the Premises or the conduct or operation of
Tenant's business unless such injury, loss, claim or damage is attributable
solely to the negligence of Landlord or its agents, servants or employees.
EMINENT DOMAIN
16. (a) If the whole of the Premises be taken under the power of eminent
domain for any public or quasi-public improvement or use, the term of this Lease
shall expire as of the date of vesting of title in the condemning authority.
(b) If 25% or more of the Building is taken under the power of eminent
domain or for any public or quasi-public purpose, Landlord shall have the option
of cancelling and terminating this Lease by written notice served within sixty
(60) days after the taking, and this Lease shall thereupon expire on the date of
vesting of title in said proceeding.
(c) If less than 25% of the Building is taken, this Lease shall remain in
full force and effect, however, the minimum annual rent shall be reduced in
proportion to the percentage of square feet of the Building so taken. If
Tenant's parking area only is taken, then (i) if 25% or less is taken, this
Lease shall not terminate but minimum annual rent only shall, unless Landlord
provides substitute parking, substantially equal in size to that which was
taken, within sixty (60) days after the taking, for Tenant within reasonable
walking distance of the Premises, be apportioned pro rata in accordance with the
size and usefulness of the portion taken; or (ii) if more than 25% is taken,
then, unless Landlord provides substitute parking, substantially equal in size
to that which was taken, and within reasonable walking distance of
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the Premises, within sixty (60) days after the taking, this Lease shall, at the
option of either Landlord or Tenant, by written notice served between the 61st
and 90th days after the taking, be canceled and terminated effective sixty (60)
days from the date of said taking and if such notice is not served, this Lease
shall not terminate but minimum annual rent only shall be apportioned pro rata
in accordance with the size and usefulness of the portion taken.
(d) If this Lease is not terminated or terminable under the provisions of
this Article 16, Landlord shall, with reasonable dispatch and at Landlord's sole
cost and expense, restore, reconstruct and rebuild the remaining portion of the
Premises and the Building and all the appurtenances, equipment, utilities,
facilities and installations to their condition prior to such taking, in such
manner that the resulting building and parking area and driveways shall be a
complete and integrated structural, architectural and functional unit similar to
and of equal material and workmanship to the Building and parking area and
driveways prior to such taking, with all the appurtenances, equipment,
utilities, facilities and installations throughout in good working order so as
to put both the parking area and driveways and the Premises in proper condition
to be used by Tenant for the same purposes as at the time of such taking, all in
accordance with plans and specifications to be prepared by Landlord, at the sole
cost and expense of Landlord.
(e) If the nature of the work to be performed as a result of the taking is
such as to prevent the operation of the business then being conducted thereon,
or to make it impractical so to do, then the Rent and other charges to be paid
by Tenant under this Lease shall abate until substantial completion of such work
by Landlord.
(f) In the event of any taking under the power of eminent domain, Landlord
shall be entitled to and shall receive the entire award provided that Tenant
shall be entitled to and shall receive any part of any award made for Tenant's
cost of moving Tenant's trade fixtures.
(g) In the event of any dispute under the provisions of this Article 16, it
shall be resolved by arbitration in Suffolk County, New York before three
disinterested and impartial arbitrators, in accordance with the rules of the
American Arbitration Association. Each arbitrator shall have a minimum of then
(10) years experience in dealing with, renting or appraising industrial real
estate. All fees and expenses of the arbitrators and the American Arbitration
Association shall be borne equally by the parties.
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RIGHT TO SUBLET OR ASSIGN
17. (a) The Tenant covenants that it shall not assign this Lease nor sublet
the Premises or any part thereof without the prior written consent of Landlord
in each instance, which consent shall not be unreasonably withheld or delayed.
The Tenant may assign this Lease or sublet the Premises with Landlord's written
consent, providing:
(i) That such assignment or sublease is for a use which is in
compliance with the then existing zoning regulations and the Certificate of
Occupancy;
(ii) That at the time of such assignment or subletting, there is no
default beyond such applicable notice and grace period provided herein for
the cure thereof under the terms of this Lease on the Tenant's part;
(iii) That in the event of an assignment, the assignee assumes in
writing the performance of all of the terms and obligations of the within
Lease;
(iv) That a duplicate original of said assignment or sublease be
delivered by registered mail to the Landlord at the address herein set
forth within ten (10) days from the said assignment or sublease and within
ninety (90) days of the date that Tenant first advises Landlord of the name
and address of the proposed subtenant or assignee as required, pursuant to
subparagraph (b) hereof;
(v) Such assignment or subletting shall not, however, release the
within Tenant from its liability for the full and faithful performance of
all of the terms and conditions of this Lease;
(vi) If this Lease be assigned, or if the Premises or any part thereof
be underlet or occupied by anybody other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, undertenant or occupant,
and apply the net amount collected to the Rent herein reserved;
(b) Notwithstanding anything contained in this Article 17 to the contrary,
no assignment or underletting shall be made by Tenant in any event until Tenant
has offered to terminate this Lease as of the last day of any calendar month
during the term hereof and to vacate and surrender the Premises to Landlord on
the date fixed in the notice served by Tenant upon Landlord (which date shall be
prior to the date of such proposed assignment or the commencement date of such
proposed sublease). Simultaneously with said offer to terminate this Lease,
Tenant shall advise the Landlord, in writing, of the name and address of the
proposed
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assignee or subtenant, and all the terms, covenants, and conditions of the
proposed sublease or assignment.
(c) Anything herein to the contrary notwithstanding, Tenant may, without
the consent of Landlord, assign this Lease or sublease or grant a license to use
the Premises or any portion thereof to (i) an affiliate of Tenant or any person,
corporation or other entity which controls, is controlled by or under common
control with Tenant and/or (ii) any person, corporation or other entity which is
acquiring a controlling interest in Tenant by purchase of stock, merger,
consolidation or otherwise, or is acquiring all or substantially all of Tenant's
business or assets, provided that with respect to such assignment such
purchasing, consolidated, merged, affiliated or subsidiary corporation, or other
entity or person shall, in writing, assume and agree to perform all of the
obligations of Tenant under this Lease and it shall deliver such assumption with
a copy of such assignment to Landlord within ten (10) days thereafter, and
provided further that Tenant shall not be released or discharged from any
liability under this Lease by reason of such assignment.
(d) Whenever Tenant shall claim under this Article or any other part of
this Lease that Landlord has unreasonably withheld or delayed its consent to
some request of Tenant, Tenant shall have no claim for damages by reason of such
alleged withholding or delay, and Tenant's sole remedy thereof shall be a right
to obtain specific performance or injunction but in no event with recovery of
damages.
(e) Without affecting any of its other obligations under this lease, except
with respect to any permitted assignment or subletting under Paragraph 17(c),
Tenant will pay Landlord as additional rent any sums or other economic
consideration, which (i) are actually received by Tenant as a result of an
assignment or subletting whether or not referred to as rentals under the
assignment or sublease (after deducting therefrom the bona fide costs and
expenses incurred by Tenant in connection with the assignment or subletting in
question; and (ii) exceed in total the sums which Tenant is obligated to pay
Landlord under this Lease (prorated to reflect obligations allocable to that
portion of the Premises subject to such assignment or sublease), it being the
express intention of the parties that Tenant shall not in any manner whatsoever
be entitled to any profit by reason of such sublease or assignment. The failure
or inability of the assignee or subtenant to pay rent pursuant to the assignment
or sublease will not relieve Tenant from its obligations to Landlord under this
Paragraph 17(e). Tenant will not amend the assignment or sublease in such a way
as to reduce or delay payment of amounts which are provided in the assignment or
sublease approved by Landlord.
(f) Landlord agrees that it shall not unreasonably withhold its consent to
a subletting or assignment in accordance
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with the terms of this Article 17. In determining reasonableness, there shall be
taken into account the character and reputation of the proposed subtenant or
assignee and the specific nature of the proposed subtenant's or assignee's
business, the financial standing of the proposed subtenant or assignee; and the
impact of all of the foregoing upon the Building. Landlord shall not be deemed
to have unreasonably withheld its consent if it refuses to consent to a
subletting or assignment to an existing tenant in any building in the Hauppauge
area which is owned by Landlord or its affiliate or to a proposed subtenant or
assignee with whom Landlord is negotiating a lease or if at the time of Tenant's
request, Tenant is in default, beyond applicable grace and notice periods
provided herein for the cure thereof, of any of the terms, covenants and
conditions of this lease to be performed by Tenant. At least thirty (30) days
prior to any proposed subletting or assignment, Tenant shall submit to Landlord
a written notice of the proposed subletting or assignment, which notice shall
contain or be accompanied by the following information:
(i) the name and address of the proposed subtenant or assignee;
(ii) the nature and character of the business of the proposed
subtenant or assignee and its proposed use of the premises to be demised;
(iii) the most recent three (3) years of balance sheets and profit and
loss statements of the proposed subtenant or assignee or other financial
information reasonably satisfactory to Landlord; and
(iv) such shall be accompanied by a copy of the proposed sublease or
assignment of lease.
RIGHT TO INSPECT; POSTING SIGNS
18. (a) Tenant shall permit Landlord or Landlord's agents to enter the
Premises at all reasonable hours upon reasonable notice, except in the case of
emergencies in which case no notice shall be required, for the purpose of (i)
inspecting the same; (ii) making repairs required by the terms of this Lease to
be made by Tenant and which Tenant neglects or refuses to make; (iii) exhibiting
the Premises to prospective purchasers and mortgagees; (iv) during the 12 months
preceding the expiration of this Lease, exhibiting the Premises to brokers and
prospective tenants; and (v) for the purpose of making any additions or
alterations to the Building; or to any surrounding building provided, in each
and every case, Landlord shall use its best efforts not to unreasonably
interfere with the conduct of Tenant's business at the Premises. If, at
reasonable hours, admission to the Premises for the aforesaid
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purposes cannot be obtained or, if at any time entry shall be deemed necessary
for the inspection or protection of the Premises or for making any repairs,
whether for the benefit of Tenant or not, Landlord or Landlord's agents may
enter the Premises with reasonable force without rendering Landlord or its
agents liable to Tenant for damages by reason thereof.
(b) During the nine (9) months preceding the end of the term, Landlord may
post and maintain, without hindrance or molestation, signs or notices indicating
that the Premises are for sale and/or for rent; however, no such sign shall be
affixed to a door or window of the Premises.
BANKRUPTCY
19. (a) If, at any time prior to the commencement of the term of this
Lease, or if at any time during the term, there shall be filed by or against
Tenant in any court, pursuant to any statute, either of the United States or of
any State, a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within ninety (90) days thereof Tenant fails to secure a discharge
thereof, or if Tenant makes an assignment for the benefit of creditors or
petition for or enters into an arrangement, this Lease, at the option of
Landlord, exercised within a reasonable time after notice of the happening of
any one or more of such events, may be canceled and terminated, in which event
neither Tenant nor any person claiming through or under Tenant by virtue of any
statute or of an order of any court, shall be entitled to possession or to
remain in possession of the Premises but shall forthwith quit and surrender the
Premises, and Landlord, in addition to any other rights, may retain any rent,
security deposit or monies received by it from Tenant or others in behalf of
Tenant as partial liquidated damages.
(b) In the event of the termination of this Lease pursuant to paragraph (a)
of this Article 19, Landlord shall forthwith, notwithstanding any other
provisions of this Lease to the contrary, be entitled to recover from Tenant as
and for liquidated damages an amount equal to the difference between the Rent
reserved hereunder for the unexpired portion of the term and the then fair and
reasonable rental value of the Premises for the same period. In the computation
of such damages, the difference between any installment of Rent becoming due
hereunder after the date of termination and the fair and reasonable rental value
of the Premises for the period for which such installment was payable shall be
discounted to the date of termination at the rate of 4% per annum. If the
Premises, or any part thereof, be relet by Landlord for the unexpired term of
this Lease, the amount of rent reserved upon such reletting shall prima facie be
the fair and
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reasonable rental value for the part or the whole of the Premises so relet
during the term of the reletting. Nothing herein contained shall limit or
prejudice the right of Landlord to prove for and obtain as liquidated damages by
reason of such termination an amount equal to the maximum allowed by any statute
or rule of law, in effect at the time when, and governing the proceeding in
which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
DEFAULT
20. (a) If Tenant shall fail to pay any installment of Rent or any
additional rent or other charges as and when the same are required to be paid
hereunder, and such default shall continue for a period of ten (10) days after
notice, or if Tenant defaults in fulfilling any of the other covenants of this
Lease and such default shall continue for a period of twenty (20) days after
notice, or if Tenant shall dissolve or liquidate or commence to dissolve or
liquidate, or if the Premises become vacant or deserted, or if the said default
or omission complained of shall be of such a nature that the same cannot be
completely cured or remedied within said twenty (20) day period, and if Tenant
shall not have diligently commenced during such default within such twenty (20)
day period, and shall not thereafter with reasonable diligence and in good faith
proceed to remedy or cure such default, then, in any one or more of such events,
Landlord may serve a written three (3) day notice of cancellation of this Lease
upon Tenant, and upon the expiration of said three (3) days, this Lease and the
term thereunder shall end and expire as fully and completely as if the date of
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this Lease, and the term thereof, and Tenant shall
then quit and surrender the Premises to Landlord but Tenant shall remain liable
as hereinafter provided. If Tenant shall default (i) in the timely payment of
any item of Rent, and such default shall continue or be repeated for four (4)
consecutive months or for a total of four months in any period of twelve months,
or (ii) in the performance of any particular term, condition or covenant of this
Lease more than six times in any period of twelve months, then, notwithstanding
that such defaults shall have each been cured within the period after notice, if
any, as provided in this Lease, any further similar default shall be deemed to
be deliberate and Landlord thereafter may serve a written ten (10) day notice of
termination of this Lease to Tenant without affording to Tenant an opportunity
to cure such further default.
(b) If (i) the notice provided for in paragraph (a) above shall have been
given and the term shall expire as aforesaid, or (ii) if any execution or
attachment shall be issued against
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Tenant or any of Tenant's property whereupon the Premises or any part thereof
shall be taken or occupied or attempted to be taken or occupied by someone other
than Tenant, or (iii) if Tenant shall make default with respect to any other
lease between Landlord and Tenant, or (iv) if Tenant shall fail to move into or
take possession of the Premises within thirty (30) days after commencement of
the term of this Lease, then, and in any of such event, Landlord may, dispossess
Tenant (or the legal representative of Tenant or other occupant of the Premises)
by summary proceedings or otherwise and remove their effects and hold the
Premises as if this Lease had not been made. If Tenant shall be in default
hereunder past the applicable notice and grace period provided herein for the
cure thereof, if any, prior to the date fixed as the commencement of any renewal
or extension of this Lease, Landlord may cancel and terminate such renewal or
extension agreement by written notice.
REMEDIES OF LANDLORD
21. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (i) Rent shall become due thereupon and be
paid up to the time of such re-entry, dispossess and/or expiration, together
with such expenses as Landlord may incur for legal expenses, attorneys' fees,
brokerage, and/or putting the Premises in good order or for preparing the same
for re-rental; (ii) Landlord may relet the Premises or any part or parts
thereof, either in the name of Landlord or otherwise, for a term or terms, which
may at Landlord's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this Lease and may grant concessions
or free rent; and/or (iii) Tenant or the legal representative of Tenant shall
also pay Landlord as liquidated damages for the failure of Tenant to observe and
perform said Tenant's covenants herein contained, any deficiency between the
Rent herein reserved and/or covenanted to be paid and the net amount, if any, of
the rents collected on account of the lease or leases of the Premises for each
month of the period which would otherwise have constituted the balance of the
term of this Lease. The failure or refusal of Landlord to relet the Premises or
any part or parts thereof shall not release or affect Tenant's liability for
damages. In computing such liquidated damages, there shall be added to the said
deficiency such expenses as Landlord may incur in connection with reletting such
as reasonable attorneys' fees, and brokerage, and for keeping the Premises in
good order or preparing the same for reletting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this Lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Landlord to collect the
deficiency for any subsequent month by a similar proceeding. Landlord, at
Landlord's option, may make such
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alterations, repairs, replacements and/or decorations in the Premises; and the
making of such alterations and/or decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Landlord shall in no
event be liable for the failure to relet the Premises, or in the event that the
Premises are relet, for failure to collect the rent under such reletting. In the
event of a breach or threatened breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
Lease of any particular remedy, shall not preclude Landlord from any other
remedy, in law or in equity. In all cases hereunder, and in any suit, action or
proceeding of any kind between the parties, it shall be presumptive evidence of
the fact of the existence of a charge being due, if Landlord shall produce a
bill, notice or certificate of any public official entitled to give such bill,
notice or certificate to the effect that such charge appears of record on the
books in his office and has not been paid.
ATTORNEY'S FEES
22. If Tenant shall at any time be in default hereunder beyond the
applicable notice and grace periods provided herein for the cure thereof, if
any, and if Landlord shall institute an action or summary proceeding against
Tenant based upon such default and Landlord shall be successful, then Tenant
shall reimburse Landlord for the reasonable expenses of attorney's fees and
disbursements incurred by Landlord. The amount of such expenses shall be deemed
to be "additional rent" hereunder and shall be due from Tenant to Landlord on
the first day of the month following the incurring of such expenses.
WAIVER OF REDEMPTION, COUNTERCLAIM, TRIAL BY JURY
23. Tenant hereby expressly (i) waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the Premises by reason of the violation by Tenant of any of the
covenants and conditions of this Lease or otherwise; (ii) agrees that it shall
not interpose any counterclaim in any summary proceeding or any action based on
non-payment of Rent or any other payments or charges required to be made by
Tenant to Landlord except compulsory counterclaims. Landlord and Tenant hereby
waive trial by jury in any action, proceeding or counterclaim brought by either
of them against the other with respect to any matters arising out of or
connected with this Lease, the relationship of Landlord and Tenant,
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Tenant's use or occupancy of the Premises, and/or any claim of injury or damage
and any emergency statutory or any other statutory remedy.
NO WAIVER
24. No act or thing done by Landlord or Landlord's agents during the term
hereby demised shall be deemed an acceptance of a surrender of the Premises, and
no agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys of the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises. The
failure of Landlord to seek redress for violation of, or to insist upon the
strict performance of, any covenant or condition of this Lease shall not prevent
a subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation. The receipt by
Landlord of Rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord unless such waiver be in writing signed
by Landlord. The words "re-enter" and "re-entry" as used herein are not
restricted to their technical legal meaning.
END OF TERM
25. (a) On the last day of the term hereof or on the earlier termination
thereof, Tenant shall peaceably and quietly leave, surrender and deliver the
Premises up to Landlord, broom clean, together with any and all alterations,
changes, additions, and improvements which may have been made upon the Premises
(except movable furniture or movable trade fixtures installed at the expense of
Tenant) in good repair and good order and safe condition, except for reasonable
wear and tear and damage by fire, other insured casualty or the elements
excepted, and Tenant shall remove all of its personal property from the Premises
and any property not so removed shall be deemed to have been abandoned and may
be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord
without notice to Tenant and without obligations to account therefor. Tenant's
obligation under this Article 25 shall survive the expiration or other
termination of this Lease.
(b) In the event of any holding over by Tenant after the expiration or
termination of this Lease without the consent of Landlord, Tenant shall;
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(i) pay as holdover rental for each month of the holdover tenancy an
amount equal to the greater of (a) the fair market rental value of the
Premises for such month (as reasonably determined by Landlord) or (b) one
hundred fifty (150%) percent of the Rent payable by Tenant for the month
prior no the Expiration Date of the term of this Lease, and otherwise
observe, fulfill and perform all of its obligations under this lease,
including but not limited to, those pertaining to additional rent, in
accordance with its terms;
(ii) be liable to Landlord for any payment or rent concession which
Landlord may be required to make to any tenant in order to induce such
tenant not to terminate an executed lease covering all or any portion of
the Premises by reason of the holdover over by Tenant; and
(iii) be liable to Landlord for any damages suffered by Landlord as
the result of Tenant's failure to surrender the Premises.
No holding over by Tenant after the Term shall operate to extend the Term.
The holdover, with respect to all or any part of the Premises, of a person
deriving an interest in the Premises from or through Tenant, including, but not
limited to, an assignee or subtenant, shall be deemed a holdover by Tenant.
Notwithstanding anything in this Article contained to the contrary, the
acceptance of any Rent paid by Tenant pursuant to this Paragraph 25 (b), shall
not preclude Landlord from commencing and prosecuting a holdover or eviction
action or proceeding or any action or proceeding in the nature thereof. The
preceding sentence shall be deemed to be an "agreement expressly providing
otherwise" within the meaning of Section 232-c of the Real Property Law of the
State of New York and any successor law of like import.
BROKER
26. Landlord and Tenant each represent to the other that this Lease was not
brought about by any broker and all negotiations with respect to this Lease were
conducted exclusively between Landlord and Tenant. Each party agrees that if any
claim is made for commissions by any broker, by, through or on account of any
acts of a party, that party will hold the other party free and harmless from any
and all liabilities and expenses in connection therewith, including reasonable
attorney's fees.
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QUIET ENJOYMENT
27. Landlord covenants that if and so long as Tenant pays the minimum
annual rent and additional rent and other charges reserved by this Lease, and
performs all the terms, covenants and conditions of this Lease on the part of
Tenant to be performed, Tenant shall quietly enjoy the premises subject,
however, to the terms of this Lease and of any mortgage or mortgages to which
this Lease by its terms is subject.
NONLIABILITY OF LANDLORD
28. (a) Landlord and Landlord's agents and employees shall not be liable
for, and Tenant waives all claims for, loss or damage to Tenant's business or
damage to person or property sustained by Tenant resulting from any accident or
occurrence (unless caused by or resulting from the negligence of Landlord, its
agents, servants or employees or Landlord's failure to comply with its specific
and affirmative obligations under this Lease in or upon the Premises or the
Building, including, but not limited to, claims for damage resulting from: (i)
any equipment or appurtenances becoming out of repair; (ii) injury done or
occasioned by wind; (iii) any defect in or failure of plumbing, heating or air
conditioning equipment, electric wiring or installation thereof, gas, water, or
steam pipes, stairs, porches, railings or walks; (iv) broken glass; (v) the
backing up of any sewer pipe or downspout; (vi) the bursting, leaking or running
of any tank, tub, washstand, water closet, waste pipe, drain or other pipe or
tank in, upon or about the Building or the Premises; (vii) the escape of steam
or hot water; (viii) water, snow or ice being upon or coming through the roof,
skylight, trapdoor, stairs, doorways, windows, walks or any other place upon or
near the Building or the Premises or otherwise; (ix) the falling of any fixture,
plaster, tile or stucco; and (x) any act, omission or negligence of occupants of
adjoining or contiguous buildings or of owners of adjacent or contiguous
property.
(b) If Landlord or a successor in interest is an individual (which term as
used herein includes aggregates of individuals such as joint ventures, general
or limited partnerships, or associations), such individual shall be under no
personal liability with respect to its obligations under this Lease, Tenant
shall look solely to the equity of such individual in the land and building
constituting the Premises for the satisfaction of Tenant's remedies, and in no
event shall Tenant attempt to secure any personal judgment against any such
individual or any principal, partner, employee or agent of Landlord by reason of
such default by Landlord.
(c) The word "Landlord" as used herein means only the owner in fee for the
time being of the Premises, and in the event
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of any sale of the Premises, Landlord shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder and it shall be
deemed and construed without further agreement between the parties or between
the parties and the purchaser of the Premises, that such purchaser has assumed
and agreed to carry out any and all covenants and obligations of Landlord
hereunder.
NO ABATEMENT
29. No diminution or abatement of Rent or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the Landlord's
making of repairs or the making of additions or improvements required by law, to
the Building or to its equipment and fixtures, except as specifically provided
in this Article or elsewhere in this Lease.
APPLICABLE LAW AND CONSTRUCTION
30. The laws of the State of New York shall govern the validity,
performance and enforcement of this Lease. The invalidity or unenforceability of
any provision of this Lease shall not affect or impair any other provision. The
submission of this document to Tenant for examination does not constitute an
offer to lease, or a reservation of or option to lease, and becomes effective
only upon execution and delivery thereof by Landlord and Tenant. All
negotiations, considerations, representations and understandings between the
parties are incorporated in this Lease. Landlord or Landlord's agents have made
no representations or promises with respect to the Building or the Premises
except as herein expressly set forth. The headings of the several articles and
sections contained herein are for convenience only and do not define, limit or
construe the contents of such articles or sections. Whenever herein the singular
number is used, the same shall include the plural, and the neuter gender shall
include the masculine and feminine genders. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
CONSTRUCTION ON ADJACENT PREMISES OR BUILDINGS
31. If any construction is in progress at, on or about the Building or any
excavation or other building operation shall be about to be made or shall be
made on any premises adjoining or
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above or below the Premises or on any portion of the Building, Tenant shall
permit Landlord or the adjoining owner or tenant and their respective agents,
employees, licensees and contractors, to enter the Premises and to shore the
foundations and/or walls thereof, and to erect scaffolding and/or protective
barricades around and about the Premises (but not so as to preclude entry
thereto) and to do any act or thing necessary for the safety or preservation of
the Premises. Tenant's obligations under this Lease shall not be affected by any
such construction or excavation work, shoring-up, scaffolding or barricading
except in cases where the Premises are rendered untenantable, in which event the
provisions of Article 29 shall apply. Landlord shall not be liable in any such
case for any inconvenience, disturbance, loss of business or any other annoyance
arising from such construction, excavation, shoring-up, scaffolding or
barricades, but Landlord shall use its best efforts so that such work will cause
as little inconvenience, annoyance or disturbance to Tenant as possible
consistent with accepted construction practice in the vicinity and so that such
work shall be expeditiously completed.
UTILITY EASEMENT
32. This Lease is subject and subordinate to any utility, gas, water,
electric, or telephone line easements, now or hereafter granted, affecting the
Premises, the Building or the land upon which they are located, provided that
the same do not materially interfere with the Building nor materially interfere
with the use or enjoyment of the Premises by Tenant.
NOTICES
33. All notices to be given hereunder shall be in writing and given by hand
delivery or by certified or registered mail or by recognized overnight courier
addressed to either of the parties at the address hereinabove given or at any
other subsequent mailing address they may indicate by written notice. Any notice
given hereunder by mail shall be deemed delivered two (2) business days after
the date when deposited in a United States general or branch post office,
addressed as above provided, the date when delivered, if delivered by hand, and
one (1) day after delivery to such overnight courier. Tenant hereby authorizes
and designates the receptionist at 35 Engle Street, Hicksville, New York 11801
as a person authorized to accept and receive service of process.
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BINDING EFFECT OF LEASE
34. The covenants, agreements and obligations contained in this Lease
shall, except as herein otherwise provided, extend to, bind and inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and permitted assigns. Each covenant, agreement, obligation or
other provision herein contained shall be deemed and construed as a separate and
independent covenant of the party bound by, undertaking or making the same, not
dependent on any other provision of this Lease unless otherwise expressly
provided.
UNAVOIDABLE DELAYS
35. Whenever Landlord shall be required by the terms of this Lease or
otherwise to make any improvements or repairs, to furnish any service, to
perform any construction or reconstruction, or to fulfill any other obligation
hereunder, and Landlord shall be delayed in, or prevented from, so doing,
Landlord shall not be deemed to be in default and this Lease and the obligation
of Tenant to pay Rent hereunder and to perform all of the other covenants and
agreements hereunder on the part of Tenant to be performed shall not be
affected, impaired or excused, and any time limit herein fixed for Landlord's
performance thereof shall be extended if and so long as Landlord's
non-performance, delay or default shall be caused by reason of strike or labor
troubles, accidents, any rule, order or regulation of any governmental agency,
or any department or subdivision thereof, governmental pre-emption in connection
with any national emergency or war, the conditions of supply and demand which
have been or are affected by war or other emergency, or any other cause beyond
Landlord's reasonable control.
SEWER
36. Tenant shall only permit sanitary discharge into the sewer servicing
the Premises. Tenant shall comply with all requirements of the County of
Suffolk, Department of Public Works, as they relate to use of the sewer,
including the payment of any excess volume charges as determined by the County
of Suffolk.
TERMINATION OPTION
37. (a) Tenant shall have the right to terminate this Lease effective as of
December 31, 1998 upon the following conditions:
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(i) Tenant shall give Landlord notice, not later than December 31,
1997, of its election to terminate this Lease effective December 31, 1998.
(ii) Tenant shall pay to Landlord on December 31, 1997, together with
the notice required in (a) (i) above, a termination fee equal to
$41,736.40.
(iii) In the event Tenant fails to provide notice to Landlord as
required under (a) (i) above or fails to pay the termination fee as
required under (a) (ii) above, Tenant shall be deemed to have waived this
termination option.
(b) In the event Tenant does not exercise the termination option set forth
in (a) above, Tenant shall have the right to terminate this Lease on December
31, 1999 upon the following conditions:
(i) Tenant shall give Landlord notice, not later than December 31,
1998, of its election to terminate this Lease effective December 31, 1999.
(ii) Tenant shall pay to Landlord on December 31, 1998, together with
the notice required in (b) (i) above, a termination fee equal to
$20,868.20.
(iii) In the event Tenant fails to provide notice to Landlord or fails
to pay the termination fee, Tenant shall be deemed to have waived this
termination option.
(c) In the event Tenant exercises this termination option, the minimum
annual rent payable during the last month of the term of this Lease shall be
reduced by $37,214.96 to account for the advance rent paid by Tenant hereunder.
RENEWAL OPTION
38. The Tenant shall have the right to be exercised as hereinafter
provided, to extend the term of this Lease for one period of five (5) years (the
"Renewal Term") upon the following terms and conditions:
(A) That at the time of the exercise of such right and at the
commencement of the Renewal Term, Tenant shall not be in default beyond
applicable notice and cure periods provided herein for the cure thereof in
the performance of any of the terms, covenants or conditions which Tenant
is required to perform under this Lease.
(B) That Tenant shall notify Landlord in writing that Tenant intends
to exercise this option at least nine (9) months prior to
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the termination of the initial term set forth in Article 1 of this Lease.
(C) That the Renewal Term shall be upon the same terms, covenants and
conditions as in this Lease provided, except that (a) there shall be no
further option to extend this Lease beyond the one (1) Renewal Term
referred to above; (b) the Premises shall be delivered in its then "as is"
condition; and (c) the Rent to be paid by Tenant during the Renewal Term
shall be as follows:
During the first Lease Year of the Renewal Term, the Rent shall be $552,892.08,
payable in monthly installments of $46,074.34.
During the second Lease Year of the Renewal Term, the Rent shall be $569,478.84,
payable in monthly installments of $47,456.57.
During the third Lease Year of the Renewal Term, the Rent shall be $586,563.24,
payable in monthly installments of $48,880.27.
During the fourth Lease Year of the Renewal Term, the Rent shall be $604,160.04,
payable in monthly installments of $50,346.67.
During the fifth Lease Year of the Renewal Term, the Rent shall be $622,284.84,
payable in monthly installments of $51,857.07.
This Renewal Option is personal to American Tissue Corporation and is
non-transferable by operation of law or otherwise, except to a permitted
transferee under paragraph 17(c) hereof.
SECURITY DEPOSIT
39. On the date hereof, Tenant shall deliver to Landlord an unconditional,
irrevocable, documentary letter of credit in the amount of Thirty-Seven Thousand
Seven Hundred Fourteen and 96/100 ($37,714.96) Dollars issued to Landlord for a
one-year term renewable annually during the Term of the Lease to secure the
performance by Tenant of all of the terms, conditions, covenants and agreements
of this Lease, as more particularly set forth herein. If Tenant defaults, after
the expiration of applicable notice and grace periods provided herein for the
cure thereof, in its payment of Rent or performance of its other obligations
under this Lease, Landlord may draw upon the letter of credit. The letter of
credit shall provide that Landlord will receive no less than thirty (30) days
prior written notice from the issuing bank of said bank's intention not to renew
the letter of credit. Upon receipt of said notice, Landlord will notify Tenant
that it must replace said letter of credit with a new letter of credit on the
terms set forth herein at least five (5) business days prior to the termination
of the original letter of credit. Failure by Tenant to
35
<PAGE>
replace the original letter of credit as required herein shall entitle Landlord
to immediately draw upon the original letter of credit up to the full amount
thereon. In the event Landlord draws upon the letter of credit as permitted by
the preceding sentence, the amount of said withdrawal shall be held by Landlord
as security for the faithful performance and observance by Tenant of the terms,
conditions, covenants and agreements of this Lease. In the event Tenant
defaults, after the expiration of applicable notice and grace periods provided
herein for the cure thereof, in respect of any of the terms, conditions,
covenants and agreements of this Lease, including, but not limited to the
payment of Rent and additional Rent, Landlord may use, apply or retain the whole
or any part of the security to the extent required for the payment of any Rent
and additional Rent or any other sum as to which Tenant is in default or for any
sum which Landlord may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms, conditions, covenants and agreements of
this Lease. In the event that Tenant shall fully and faithfully comply with all
of the terms, conditions, covenants and agreements of this Lease, the security
shall be returned to Tenant within fifteen (15) business days of Tenant's
request, given after the date fixed as the end of this Lease and after delivery
of entire possession of the Premises to Landlord. In the event of a sale of the
land and Building or Lease of the Building of which the Premises form a part,
Landlord shall have the right to transfer the security to the vendee or lessee
and Landlord shall thereupon be released by Tenant from all liability for the
return of such security; and Tenant agrees to look solely to the new landlord
for the return of said security, and the provisions hereof shall apply to every
transfer or assignment made of the security to a new landlord. Tenant further
covenants that it will not assign or encumber or attempt to assign or encumber
the security and that neither Landlord nor its successors or assigns shall be
bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. The letter of credit shall be issued by LaSalle National Bank,
Chicago, Illinois or, at the option of Tenant, any "Money Center Bank"
authorized to do business in New York and with respect to such Money Center Bank
shall indicate an address in New York City or Long Island where it can be drawn
and the hours of operation of that location and any other relevant limitations
on its use. The letter of credit must be payable "on sight" and must not contain
as a condition to a draw the requirement of Landlord's certification of the
existence of Tenant's default or other justification for the draw. Landlord will
not be responsible for bank error. The letter of credit shall not be a
limitation on Landlord's damages or other rights under this Lease, or a payment
of liquidated damages or an advance payment of Rent.
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IN WITNESS WHEREOF, the parties have executed this agreement as of the day
and year first above written.
RECKSON OPERATING PARTNERSHIP, L.P.,
By: RECKSON ASSOCIATES REALTY CORP.
By: /s/ ILLEGIBLE
----------------------------------
AMERICAN TISSUE CORPORATION
By: /s/ ILLEGIBLE
----------------------------------
37
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this 18th day of January, 1996 before me personally came [ILLEGIBLE] to
me known, who being by me duly sworn, did depose and say that he resides at
[ILLEGIBLE] that he is the Vice President of American Tissue Corporation, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of the said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of the said corporation; and that he signed thereto by like order.
/s/ MURIEL KLOPSIS
------------------------------
Notary Public
MURIEL KLOPSIS
NOTARY PUBLIC, State of New York
No - 4860544
Qualified In Suffolk County
Commission Expires June 30, 1997
38
AGREEMENT OF LEASE made as of the _________ day of February, 1990, between
VANDERBILT ASSOCIATES, a partnership, with offices at 310 East Shore Road, Great
Neck, NY 11023 (hereinafter referred to as "Landlord") and AMERICAN TISSUE
CORP., a corporation, with officers at 50 Cabot Court, Hauppauge, NY 11788
(hereinafter referred to as "Tenant").
W I T N E S S E T H :
Landlord hereby leases to Tenant and Tenant hereby hires form Landlord the
premises located at 110 Plant Avenue, Hauppauge, NY (the "Premises") for the
term of ten (10) years and six (6) months (or until such term shall sooner cease
and expire as hereinafter provided) to commence on the "Commencement Date" as
defined in paragraph "16" hereof, and to terminate ten (10) years and six (6)
months after the Commencement Date (the "Expiration Date").
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
RENT
1. Six (6) months after the Commencement Date shall be the "Rent
Commencement Date."
During the first and second years after the Rent Commencement Date the basic
annual rental shall be $499,212.00, payable $41,601.00 in equal monthly
installments.
During the third and fourth years after the Rent Commencement Date the basic
annual rental shall be $467,496.00, payable $38,958.00 in equal monthly
installments.
During the fifth and sixth years after the Rent Commencement Date the basic
annual rental shall be $491,256.00, payable $40,938.00 in equal monthly
installments.
During the seventh and eight years after the Rent Commencement Date the basic
annual rental shall be $515,004.00, payable $42,917.00 in equal monthly
installments.
During the ninth and tenth years after the Rent Commencement Date the basic
annual rental shall be $540,000.00, payable $45,000.00 in equal monthly
installments.
Tenant agrees to pay the basic annual rental rate in lawful money of the
United States in equal monthly installments in advance on the first day of each
month during said term after the Term Commencement Date, at the office of
Landlord, or such other place as Landlord may designate, without any set off or
deduction whatsoever, except that Tenant shall pay the first monthly installment
on the execution hereof.
OCCUPANCY
2. Tenant shall use and occupy demised premises for its present business,
warehousing, light manufacturing and distribution, with offices appurtenant
thereto, and for no other purpose. Tenant shall not use or permit the use of the
demised premises contrary to any applicable statute, ordinance or regulation or
in violation of the Certificate of Occupancy, or in a manner which would cause
structural injury to the building.
<PAGE>
ADDITIONAL RENT
3. All costs and expenses which Tenant assumes or agrees to pay pursuant to
this lease shall at Landlord's election be treated as additional rent and, in
the event of non-payment, Landlord shall have all the rights and remedies herein
provided for in the case of non-payment of rent or of a breach of condition. If
Tenant shall default in making any payment required to be made by Tenant (other
than the payment of rent required by paragraph "1" of this lease) or shall
default in performing any term, covenant or condition of this lease on the part
of Tenant to be performed which shall involve the expenditure of money by
Tenant, Landlord, at Landlord's option may, but shall not be obligated to, make
such payment on behalf of Tenant, or expend such sum as may be necessary to
perform and fulfill such term covenant or condition on fifteen (15) days' prior
written notice to Tenant, except in an emergency, and any and all sums so
expended by Landlord with interest thereon at the rate of one and one-half
(1-1/2%) per cent per month from the date of such expenditure, shall be deemed
to be additional rent, in addition to the basic rent, and shall be repaid by
Tenant to Landlord, on demand, but no such payment or expenditure by Landlord
shall be deemed a waiver of Tenant's default nor shall it affect any other
remedy of Landlord by reason of such default.
"AS IS" CONDITION
4. Tenant presents that Tenant has inspected the Premises and agrees to
occupy the same in its present "as is" condition. Landlord shall not be required
to perform any work in the Premises. Landlord represents that the mechanical
systems, consisting of plumbing, heating, electrical and air conditioning, will
be in working order in on the Commencement Date and the Premises broom clean.
TAXES
5. If, in any year, during the term of this lease or any renewal, extension
or modification thereof, real estate taxes (as hereinafter defined) shall be
increased over and above Landlord's basic tax liability (as hereinafter defined)
Tenant covenants and agrees to pay that proportion of increase as determined by
the formula (as hereinafter defined) as additional rental, on the rent
installment date immediately following receipt of "Landlord's Statement" (as
hereinafter defined). Any increases in taxes due to Tenant's improvements
performed by Tenant are to be paid in full solely by Tenant.
(A) The term "real estate taxes" shall be deemed to mean all taxes and
assessments, special or otherwise, assessed upon or with respect to the
ownership of and/or all other taxable interests in the land and improvements
thereon of which the demised premises are part, imposed by Federal, State or
local governmental authority or any other taxing authority having jurisdiction
over Landlord's tax lot or lots, but shall not include income, intangible,
franchise, capital stocks, estate or inheritance taxes, or taxes based upon the
receipt of rentals (unless the same shall be in lien of "real estate taxes" as
herein defined by whatever name the tax may be designated).
(B) "Landlord's basic tax liability" shall be a sum equal to the
lesser of the amount of taxes as assessed or the said taxes as reduced by
appropriate proceedings, against the land, buildings and improvements in which
the premises are located in the tax year 1989/1990, excluding, however, taxes
for special assessments for local improvements not located on property owned by
Landlord.
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<PAGE>
(C) "Formula"
Tenant's total
Square footage x increase = Tenant's share
-------------- of increase
Total square footage (100%)
of the building
(D) "Landlord's Statement" shall be that written statement which
Landlord may at any time deliver to Tenant containing a computation of the
increase above Landlord's basic tax liability and the amount of Tenant's
proportionate share thereof.
The failure of Landlord to deliver a Landlord's Statement as provided
above, shall not prejudice nor waive the right of Landlord to deliver such
statement for any subsequent tax year nor from including in said statement, as
additional rental, Tenant's proportionate share of any increase for any year in
which no Landlord's Statement was delivered to Tenant, but for which Tenant was
otherwise obligated to pay such additional rental. In the event that Landlord's
basic tax liability is reduced as a result of any appropriate proceeding,
Landlord shall have the right to adjust the amount of additional rent due from
Tenant for any year in which Tenant is or was obligated to pay additional rental
hereunder and Tenant agrees to pay the amount of said adjustment on the next
rent installment day immediately following receipt of a written statement from
Landlord setting forth the amount of said adjustment.
With respect to any period at the expiration of the term of this lease,
which shall constitute a partial tax year, Landlord's Statement shall apportion
the amount of the additional rental due hereunder. The obligation of Tenant in
respect of such additional rental applicable for the last year of the term of
this lease or part thereof shall survive the expiration of the term of this
lease.
(E) The Tenant shall have the right to contest any such real estate
tax, special assessments or other governmental charges levied against the
demised premises by writ of certiorari, or otherwise, in the same manner as
provided by law for the owner of the property to contest the same upon condition
that the Tenant shall secure the payment of such real estate taxes, special
assessments or other governmental charge with surety bond, cash deposit or other
means satisfactory to the Landlord, that the cost of such proceeding shall be
borne solely by the Tenant, and the Tenant shall hold Landlord free and harmless
from any cost, penalties, or otherwise, incurred as a result thereof. Landlord
shall at Tenant's request execute such documents as are necessary to carry out
the foregoing.
(F) Landlord represents that the Premises are fully assessed and not
subject to any tax abatements at the present time.
(G) [ILLEGIBLE]
REPAIRS
6. The Landlord shall make all structural repairs to the demised premises
during the term of this lease with the exception of any structural repairs
required as a result of the acts of negligence of the Tenant, its agents,
officers, employees, patrons or licensees. Landlord shall cause the guarantees
provided by its contractors and materialmen to be issued to and for the benefit
of the Tenant and Landlord. "Structural Repairs" are hereby defined as meaning
repairs to the foundation, roof supports, perimeter walls and structural steel.
The Tenant shall make all repairs other than those set forth in this paragraph
"6" and structural repairs when the result of the negligence or acts of itself,
its agents, officers, employees, patrons or licensees. The Tenant shall, in
addition thereto, maintain and repair
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<PAGE>
sidewalks abutting the premises, driveways and repair electrical, heating,
plumbing, sprinkler and air-conditioning facilities (if any), parking areas and
buildings appurtenances. The Tenant shall keep the premises properly painted and
decorated; it shall paint all exterior trim and all exposed metal beams and
girders as reasonably required, and generally keep the premises, interior and
exterior, in good repair, excluding only those repairs for which the Landlord
shall be responsible. The Tenant shall keep the premises clean and free of
debris, snow and ice, replace all broken glass, and maintain all landscaping on
the premises.
ALTERATIONS
7. (A) Tenant shall make no structural alterations in or to the demised
premises without Landlord's prior written consent. The Landlord will not
unreasonably withhold such consent.
(B) Landlord consents to Tenant making the following repairs to the
Premises, at Tenant's sole cost and expenses:
1. increase height of exterior overhead doors;
2. modify sheetrock wall separating building running from east
to west; and
3. install additional docks and/or drive in.
HEAT, WATER AND UTILITIES
8. Anything to the contrary in this agreement or the specifications
notwithstanding, the Tenant shall be obligated to furnish at its own expense,
heat, water, electricity and other utilities necessary for the operation of the
building and grounds. The utility lines and facilities shall be in good
operating order, as of the Commencement Date.
COMPLIANCE WITH REQUIREMENTS OF LAW
9. The Tenant shall promptly execute and comply with all statutes,
ordinances, rules, orders, regulations and requirements (including those which
require structural repairs resulting from Tenant's modification of the demised
premises) of the Federal, State, County and Local Government and of any and all
of their Departments and Bureaus applicable to said premises, for the
correction, prevention and abatement of nuisances or other grievances, in, upon
or connected with said premises during said term; and shall also promptly comply
with and execute all rules, orders and regulations of the New York Board of Fire
Underwriters for the prevention of fires at the Tenant's own cost and expense.
Tenant shall keep or cause the Premises to be kept free of Hazardous
Materials. Without limiting the foregoing, Tenant shall not cause or permit the
Premises to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance with all applicable Federal, state and local laws or regulations, nor
shall Tenant cause or permit, as a result of any intentional or unintentional
act or omission on the part of Tenant or any subtenant, a release of Hazardous
Materials onto the Premises or onto any other property. Tenant shall comply with
and ensure compliance by all subtenants with all applicable Federal, state and
local laws, ordinances, rules and regulations, whenever and by whomever
triggered, and shall obtain and comply with, and ensure that all subtenants
obtain and comply with, any and all approvals, registrations or permits required
thereunder. Tenant shall (a) conduct and complete all investigations, studies,
samplings, and testing, and all remedial removal, and other actions necessary to
clean up and remove all Hazardous Materials, on, from, or affecting the Premises
(i) in accordance with all applicable Federal, state and local laws, ordinances,
rules, regulations, and policies, (ii) to the satisfaction of Landlord, and
(iii) in accordance with the orders and directives of all
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<PAGE>
Federal, state and local governmental authorities, and (b) defend, indemnify,
and hold harmless Landlord, its employees, agents, officers, and directors, from
and against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs, or expenses of whatever kind or nature, known or unknown,
contingent or otherwise, arising, after Tenant's possession of the Premises, out
of, or in any way related to, (i) the presence, disposal, release, or threatened
release of any Hazardous Material which are on, from, or affecting the soil,
water, vegetation, buildings, personal property, person, animals, or otherwise;
(ii) any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Materials; (iii) any
lawsuit brought or threatened, settlement reached, or government order relating
to such Hazardous Materials, and/or (iv) any violation of laws, orders,
regulations, requirements, or demands of government authorities, or any policies
or requirements of Landlord which are based upon in any way related to such
Hazardous Materials, including, without limitation, attorney and consultant
fees, investigation and laboratory fees, court costs, and litigation expenses.
In the event this Lease is terminated, or Tenant is dispossessed, Tenant shall
deliver the Premises to Landlord free of any and all Hazardous Materials so that
the conditions of the Premises shall conform with all applicable Federal, state
and local laws, ordinances, rules or regulations affecting the Premises. For
purposes of this paragraph, "Hazardous Materials" includes, without limit, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Tansportation Act, as amended (49 U.S.C. Sections 1801 et seq.), the Resource
Conservations and Recovery Act, as amended (42 U.S.C. Sections 9601, et seq.)
and in the regulations adopted and publications promulgated pursuant thereto, or
any other Federal, state or local environmental law, ordinance, rule or
regulation.
FIRE INSURANCE
10. The Tenant covenants that it will, during the term of this lease, keep
the building and improvements which will hereafter be erected upon the demised
premises, together with equipment and machinery therein (excluding machinery,
equipment and personal property belonging to Tenant) insured against loss by
fire with extended coverage, rent insurance, and boiler insurance with waiver of
right in all such insurance to recover by way of subrogation against Landlord or
Tenant, and such other hazards as Landlord's first mortgagee may require
in solvent insurance companies authorized and licensed to issue such policies in
the State of New York acceptable to Landlord and to Landlord's first mortgagee,
and to maintain such insurance at all times during the term of this lease in an
amount sufficient to prevent Landlord from becoming a co-insurer of any loss but
in no event in an amount less than ninety (90%) per cent of the full insurable
value thereof (excluding foundation costs) or the reconstruction cost of the
building and improvements, whichever is greater. Such policies shall be taken
out by the Tenant shall be issued in the name of the Landlord, and, at the
direction of the Landlord, loss to be payable to Landlord and mortgagee as their
interests shall appear. The policies shall remain at all times in the possession
of the landlord or the Landlord's mortgagees. The Tenant agrees to pay the
premiums as they accrue, and if not so paid, the Landlord may, at its option,
pay such premiums. Such accrued premiums, whether or not paid by the Landlord
shall be deemed additional rent and due and payable on the next rent day or any
subsequent rent day. Payments of such premiums by the Landlord shall not be
deemed a waiver of the default in payment by the Tenant, and the Landlord,
whether or not it shall have been paid such premiums, shall have recourse to all
remedies heretofore provided in the event of default by the Tenant in the
performance
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<PAGE>
of the terms and conditions of this lease. At the commencement of the term of
this lease the Tenant will take over by transferring Landlord's existing fire
insurance policy and adjusting with the Landlord the prepaid portion of the
premium.
DESTRUCTION
11. (A) If the demised premises should be damaged or destroyed during the
demised term by fire or other casualty covered by insurance, Landlord shall,
with due diligence, repair and/or rebuild the same to substantially the
condition it was in immediately prior to such damage or destruction, except as
in this paragraph "11" provided.
(B) Rent shall be abated proportionately during the period in which,
by reason of any such damage or destruction, there is a substantial interference
with the operation of the business of Tenant in the demised premises, having
regard to the extent to which Tenant may be required to discontinue its business
in the demised premises, and such abatement shall continue for the period
commencing with such destruction or damage and ending with the completion by the
Landlord of such work or repair and/or construction as Landlord is obligated to
do.
(C) If the building on the demised premises should be damaged or
destroyed to the extent of fifty (50%) per cent or more of the then monetary
value thereof, exclusive of foundations, by any cause, and should such damage or
destruction occur at any time when the term of this lease has less than five (5)
years to run, either party shall have the right to terminate this lease on
written notice to the other given within sixty (60) days after such damage or
destruction.
(D) If this lease shall not be terminated as in this paragraph "11"
provided, Landlord shall restore the building or buildings and subparagraphs "A"
and "B" of this paragraph "11" shall be applicable.
(E) In the event at the time of the fire loss or destruction, the
Landlord is unable to rebuild because (i) any governmental bureau, department or
subdivision thereof shall impose restrictions on the manufacture, sale,
distribution and/or use of materials necessary in the construction of the
building, or (ii) the Landlord is unable to obtain materials from any normal
sources due to strikes, lockouts, war, military operations and requirements,
national emergencies, etc., and such disability shall continue for six (6)
months, the Landlord may cancel this lease upon giving notice to the Tenant.
LIABILITY INSURANCE
12. During the term hereof, Tenant shall, at Tenant's own cost and expense,
provide and keep in force for the benefit of Landlord and Tenant as their
interests may appear, public liability insurance policy or policies of standard
form in the State of New York, with limits of One Million ($1,000,000.00)
Dollars bodily injury, including death, and One Hundred Thousand ($100,000.00)
Dollars limits for property damage, such policy or policies to cover the demised
premises, inclusive of sidewalks and parking facilities. The policies shall be
obtained by Tenant and certificates thereof delivered to Landlord upon the
commencement of the term hereof, with evidence of stamping or otherwise of the
payment of the premiums thereon and shall be taken in well rated insurance
companies authorized to do business in the State of New York.
SUBORDINATION
13. This lease is subject and subordinate to all first mortgages which may
now or hereafter affect the demised premises
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<PAGE>
and to all renewals, modifications, consolidations, replacements and extensions
thereof. This clause shall be self-operative and no further instrument of
subordination shall be required by any mortgagee. In confirmation of such
subordination, Tenant shall execute promptly any certificate that Landlord may
request. Tenant hereby constitutes and appoints Landlord the Tenant's
attorney-in-fact to execute any such certificate or certificates for and on
behalf of Tenant. Landlord agrees to notify Tenant of Notice of Default received
from any mortgagee.
MORTGAGEE'S REQUIREMENTS
14. (A) The Tenant will promptly furnish to the Landlord all financial
information and other information concerning the Tenant reasonably required by
any mortgagee to whom the Landlord applies for the mortgage commitment
hereinabove described and the Tenant will execute any documents reasonably
required by such mortgagee.
(B) The Tenant agrees that upon the commencement of the term of this
lease and at any time thereafter, and from time to time upon less than five (5)
days prior request by the Landlord, the Tenant will execute, acknowledge and
deliver to the Landlord a statement in writing certifying (a) that this lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and identifying the
modifications), (b) the dates to which the basic rent and other charges have
been paid, and (c) that, so far as the person making the certificate knows, the
Landlord is not in default under any provisions of this lease. It is intended
that any such statement may be relied upon by any person proposing to acquire
the Landlord's interests in this lease or any prospective mortgagee of, or
assignee of any mortgage upon such interest.
(C) So long as there is a first mortgage lien against the demised
premises, Landlord and Tenant, without first obtaining the written consent of
such mortgagee, will not enter into any agreement, the effect of which would be
to (a) modify, cancel, terminate or surrender the lease; (b) grant any
concession in respect of; (c) reduce the rent or require the prepayment of any
rent in advance of the due date thereof; (d) create any offsets or claims
against rents, (e) assign in whole or in part any of the rents therefrom or
Tenant's interest in the lease or sublet the whole or any portion of the demised
premises, except as provided in this lease.
(D) The Tenant will furnish to the Landlord and the first mortgagee,
within one hundred fifty (150) days after the end of each fiscal year of the
Tenant, copies of (consolidated) balance sheets of the Tenant (and subsidiaries)
for such fiscal year, delivered by the Tenant's accountants.
(E) In the event of any act or omission by the Landlord which would
give the Tenant the rights same as the holder of any mortgage whose name and
address shall have been furnished to the Tenant in writing, at the last address
so furnished, and (b) until a reasonable period of time for remedying such act
or omission shall have elapsed following the giving of such notice, provided
that following the giving of such notice, the Landlord or said holder shall,
with reasonable diligence, have commenced and continued to remedy such act or
omission or to cause the same to be remedied in a speedy and expeditious manner.
(F) In the event a Receiver is a foreclosure action or a purchaser at
a sale in an action to foreclose a mortgage to which this lease is subordinate,
or their successor or assigns,
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<PAGE>
shall become the Landlord of the demised premises, then such Landlord shall not
be obligated to repair, rebuild or restore the demised premises after fire or
other casualty, or after a partial "taking", anything to the contrary in
paragraphs "11" and "18" hereof notwithstanding, provided that such Landlord
gives notice to the Tenant within thirty (30) days.
(G) If an institution furnishing a mortgage on the demised premises
shall require a change or changes in this lease as a condition of such financing
and if Tenant refuses to agree hereto, the Landlord may terminate this lease at
any time, provided such changes shall not substantially alter the obligations of
the parties each to the other or to impose on the Tenant any conditions more
burdensome than as otherwise exists hereunder.
INDEMNITY AGAINST LIABILITY
15. Landlord shall not in any event whatsoever be liable for any injury or
damage to any person happening on or about the demised premises, or for any
injury or damage to the demised premises, or to any property of Tenant, or to
any property of any other person, firm, association or corporation on or about
the demised premises other than resulting from Landlord's negligence. If the
Tenant shall fail to keep in force and effect the insurance hereinabove set
forth, then the Tenant shall indemnify and save harmless Landlord from and
against any and all suits, claims, and demands of every kind and nature,
including reasonable counsel fees by or on behalf of any person, firm,
association or corporation arising out of or based upon any accident, injury or
damage, however occurring, which shall or may happen on or about the demised
premises, or in or about the vaults, streets, sidewalks or curbs in front of or
adjacent thereto, and from and against any matter or thing growing out of the
condition, maintenance, repair, alterations, use, occupation or operation of the
demised premises or of the vaults, streets, sidewalks or curbs in front of or
adjacent thereto.
COMMENCEMENT OF TERM
16. The Tenant shall then take physical possession of the Premises on the
date Landlord delivers possession of the Premises to the Tenant. Should the date
upon which the said rent is payable be a date other than the first day of the
month, the Tenant shall pay a pro rata portion of the rent from such date to the
first day of the following month.
"Substantially completed" as used elsewhere in this Lease, is defined
to mean when the only items to be completed are those which do not interfere
with the Tenant's occupancy and full enjoyment of the demised premises. The
issuance of a temporary Certificate of Occupancy shall be treated for all
purposes as if the permanent Certificates of Occupancy has been issued. Wherever
the words "Certificate of Occupancy" appear herein they shall be deemed to
include within their meaning "or temporary Certificate of Occupancy".
If Landlord shall be unable to give possession of the demised premises
by reason of the fact that the present Tenant has not vacated the Premises or
for any other reason, Landlord shall not be subject to any liability for the
failure to give possession on said date.
When the Commencement Date and Expiration Date are finally determined,
Landlord and Tenant shall execute an agreement memorializing said dates.
TENANT'S INSTALLATION PRIOR TO TERM
17. The Tenant shall, prior to the commencement of the term, and after the
present Tenant vacates the Premises, have the
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right to come upon the premises at its own risk to build, construct and install
its equipment, signs and fixtures for the operation of its business. Tenant,
however, shall hold the Landlord fee and harmless from any claims for any such
installation, etc. Tenant will employ only such labor as will not cause any
conflict or controversy with any labor organization representing trades
performing work for Landlord, its contractors, or subcontractors in and about
the demised premises. Tenant shall conduct its operations in a manner in which
will not interfere with Landlord's construction of the building. The Tenant
shall supply the Landlord with Workers' Compensation Certificates for all
persons and/or contractors doing work for the Tenant on premises during the
course of construction. In addition thereto, the Tenant shall furnish the
Landlord with a Public Liability Policy or an endorsement on its own policy in
the sum of Five Hundred Thousand ($500,000.00) Dollars/One Million
($1,000,000.00) Dollars for personal injuries and death claims and One Hundred
Thousand ($100,000.00) Dollars for property damage. The Tenant shall, in the
event of any mechanics liens filed against the premises by any subcontractors
and/or materialmen, bond the mechanics liens or pay same within ten (10) days'
of written notice to the Landlord. On its failure to do so the Landlord may, at
its own option, either remove the lien by payment or bonding same and charging
the Tenant with the cost thereof together with reasonable counsel fees. The
Landlord shall have the option of paying out the monies for said liens from any
funds of Tenant in Landlord's possession. Nothing in this lease contained shall
be construed in any way as constituting the consent or request of the Landlord,
expressed or implied, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
improvement, alteration or repair of the demised premises, nor as giving any
right or authority to contract for the rendering of any services or the
furnishing of any materials that would give rise to the filing of any mechanic's
liens against the demised premises.
EMINENT DOMAIN
18. If the whole of the demised premises be taken under the power of
eminent domain for any public or quasi public improvement or use, the term of
this lease shall expire as of the date when the possession of the demised
premises shall be required for such use or purpose.
If more than fifteen (15%) per cent of the parking area is taken
and/or fifteen (15%) per or more of the building is taken but less than the
whole of the demised premised be so taken and the nature and extent thereof are
such that the Tenant cannot reasonably conduct and operate its business and/or
that of its subtenants or licensees at the demised premises as to the remaining
portion thereof, or if less than such percentage be taken but the premises
remaining are divided or split up or direct access to the premises is taken away
by such taking, then and in any of such events, Tenant may elect to terminate
this lease, and the term thereof by written notice given to the Landlord within
sixty (60) days after surrendering possession to the condemning authority
pursuant to such taking. If, however, Tenant shall elect to continue the term of
this lease as to the remaining portion of the demised premises and shall give
written notice to Landlord within sixty (60) days after surrendering possession
to the condemning authority of the part so taken of such election or if this
lease is not terminated or terminable under the provisions therefor, Landlord
hereby agrees that it will with all reasonable dispatch and at Landlord's sole
cost and expense restore, reconstruct and rebuild the remaining parking area and
driveways, and/or the remaining portion of the building and all the
appurtenances to their condition prior to such taking in such manner that the
resulting building and parking area and driveways shall be complete and
integrated structural architectural and functional unit similar to and of equal
material and workmanship
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to the building and parking area and driveways on the demised premises prior to
such taking, with all the appurtenances throughout in good working order, so as
to put both the parking area and driveways and the building in proper condition
to be used by Tenant for the same purposes as at the time of such taking, all in
accordance with plans and specifications to be prepared by Landlord, at the sole
cost and expense of Landlord, and submitted for approval by Tenant before the
commencement of work.
(A) If the nature of the work to be done as a result of the taking is
such as to prevent the operation of the business then being conducted thereon,
or to make it impractical so to do, then the rent, taxes and other charges to be
paid by the Tenant under this lease shall abate until such completion of such
work by the Landlord. Otherwise on the date of the surrender of that portion of
the premises taken in condemnation or the resumption of occupancy by the Tenant
and for the balance of the term of this lease, the rent payable shall be reduced
in accordance with the following formula;
(i) if any portion of the parking field shall be taken during the
term, the Tenant shall be entitled to a reduction in the annual rental of $40.00
for each parking space lost as a result of the taking.
(ii) If any portion of the demised premises shall be taken during the
term, the Tenant shall be entitled to an abatement of rent which shall be that
fraction of the basic annual rental rate payable at the date of which numerator
shall be the number of square feet of the demised premises "taken" and the
denominator shall be the total number of square feet previously in the demised
premises, less the amount (if any) of any rent reduction pursuant to subdivision
"(i)" above.
(B) If, during the term of this lease or any renewal period, less than
the aforesaid percentages be so taken, then and from the date of the surrender
of the portion so taken by the condemning authority, the rent payable hereunder
shall be reduced in the amounts as is provided in subdivisions "(i)" and "(ii)"
of subparagraph "(A)" of this paragraph "18" aforesaid. However, if the rental
rate during any renewal period is decreased (or increased) then the amount of
the foregoing rent reduction shall be proportionately decreased (or increased).
(C) In the event of any taking under the power of eminent domain,
Landlord shall be entitled to and shall receive the entire award provided that
tenant shall be entitled to and receive any part of any award made for many
buildings or improvements erected or made by Tenant.
RIGHT TO SUBLET OR ASSIGN
19. A. The Tenant covenants that it shall not assign this Lease nor sublet
the Demised Premises or any part thereof without the prior written consent of
Landlord in each instance, except on the conditions hereinafter stated. The
Tenant may assign this Lease or sublet the Demised Premises with Landlord's
written consent, which shall not be unreasonably withheld or delayed, providing;
(i) That such assignment or sublease is for a use which is in
compliance with the then existing zoning regulations and the Certificate of
Occupancy;
(ii) That at the time of such assignment or subletting, there is no
default under the terms of this Lease on the Tenant's part;
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(iii) That is the event of an assignment, the assignee assume in
writing the performance of all of the terms and obligations of the within Lease;
(iv) That a duplicate original of said assignment or sublease be
delivered by registered mail to the Landlord at the address herein set forth
within ten (10) days from the said assignment or sublease and within ninety (90)
days of the date that Tenant first advises Landlord of the name and address of
the proposed subtenant or assignee as required, pursuant to subparagraph (B)
hereof;
(v) Such assignment or subletting shall not, however, release the
within Tenant from its liability for the full and faithful performance of all of
the terms and conditions of this Lease;
(vi) If this Lease be assigned, or if the Demised Premises or any part
thereof be under let or occupied by anybody other than Tenant, Landlord may
after default by Tenant collect rent from the assignee, undertenant or occupant;
and apply the net amount collected to the rent herein reserved;
B. Notwithstanding anything contained in this Article 19 to the
contrary, no assignment or underletting shall be made by Tenant in any event
until Tenant has offered to terminate this Lease as of the last day of any
calendar month during the term hereof and to vacate and surrender the Demised
Premises to Landlord on the date fixed in the notices served by Tenant upon
Landlord (which date shall be prior to the date of such proposed assignment or
the commencement date of such proposed lease). Simultaneously with said offer to
terminate this Lease, Tenant shall advise the Landlord, in writing, of the name
and address of the proposed assignee or subtenant, and all the terms, covenants,
and conditions of the proposed sublease or assignment.
C. Tenant may, without the consent of Landlord, assign this Lease to
an affiliated (i.e. a corporation 20% or more of whose capital stock is owned by
the same stockholders owning 20% of Tenant's capital stock or more), parent or
subsidiary corporation of Tenant or to a corporation to which it sells or
assigns all of substantially all of its assets, or which shall purchase the
business at the premises, or with which it may be consolidated or merged,
provided such purchasing consolidated, merged or affiliated or subsidiary
corporation shall, in writing assume and agree to perform all of the obligations
of Tenant under this Lease and it shall deliver such assumption with a copy of
such assignment to Landlord within ten (10) days thereafter, and provided
further that Tenant shall not be released or discharged from any liability under
this Lease by reason of such assignment.
D. Whenever Tenant shall claim under this Article or any other part of
this Lease that Landlord has unreasonably withheld or delayed its consent to
some request of Tenant, Tenant shall have no claim for damages by reason of such
alleged withholding or delay, and Tenant's sole remedy thereof shall be a right
to obtain specific performance or injunction but in no event with recovery of
damages.
E. Tenant shall have the right to sublease the existing office area,
anything to the contrary herein notwithstanding.
RIGHT TO INSPECT
20. Tenant shall permit Landlord or Landlord's agents to enter the demised
premises (subject to any governmental security regulations) at all reasonable
hours for the purpose of inspecting the same, or of making repairs that Tenant
may neglect or refuse to make in accordance with the terms, covenants and
conditions of this lease and also for the purpose of showing the demised
premises to persons wishing to purchase the same, and during the year next
preceding the expiration of this lease, shall permit inspection thereof by or on
behalf of prospective tenants. If, at
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reasonable hours, admission to the premises for the purpose aforesaid cannot be
obtained, or if at any time an entry shall be deemed necessary for the
inspection or protection of the property or for making any repairs, whether for
the benefit of Tenant or not, Landlord or Landlord's agents or representatives
may enter the demised premises by force or otherwise, without rendering Landlord
or Landlord's agent or representative liable to any claim or cause of action for
damages by reason thereof, and accomplish such purpose. The provision contained
in this paragraph "20" are not to be construed as an increase of Landlord's
obligations under this lease; it being expressly agreed that the right and
authority hereby reserved does not impose nor does Landlord assume by reason
thereof, any responsibility or liability whatsoever for the repair, care or
supervision of the demised premises, or any building, equipment or appurntenance
on the demised premises.
POSTING OF SIGNS FOR RELETTING
21. During the nine (9) last months of the term or any extended term hereby
granted, Landlord may post and maintain, without hindrance or molestation, signs
or notices indicating that the premises are for sale and/or for rent. No such
sign shall be affixed to a door or window of the premises. The sign shall be of
reasonable size and the location of the sign shall not unreasonably interfere
with Tenant's use of the Premises.
BANKRUPTCY
22. (A) If, at any time prior to the commencement of the term of this
lease, or if at any time during the term hereby demised there shall be filed by
or against Tenant in any court pursuant to any statute, either of the United
States or of any State, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver, or trustee of all or a
portion of Tenant's property, and within ninety (90) days thereof Tenant fails
to secure a discharge thereof, or if Tenant makes an assignment for the benefit
of creditors or petition for or enter into an arrangement, this lease, at the
option of Landlord, exercised within a reasonable time after notice of the
happening of any one or more of such events, may be cancelled and terminated and
in which event neither Tenant nor any person claiming through or under Tenant
by virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the premises demised but shall
forthwith quit and surrender the premises, and Landlord, in addition to the
other rights and remedies Landlord has by virtue of any other provision herein
or elsewhere in this lease contained or by virtue of any statute or rule of law,
may retain as liquidated damages any rent, security deposit or monies received
by him from Tenant or others in behalf of Tenant.
(B) It is stipulated and agreed that in the event of the termination
of this lease pursuant to "(A)" hereof, Landlord shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the then fair and reasonable rental value of the demised
premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination at the rate of four (4%) per cent per annum. If such premises or any
part thereof be relet by the Landlord for the unexpired term of said lease, or
any part thereof, before the unexpired term of said lease, or any part thereof,
before presentation of proof of such liquidated damages to any court, commission
or tribunal, the amount of rent reserved upon such reletting shall be prima
facie to be the fair and reasonable rental value for the part or the whole of
the premises so relet
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during the term of reletting. Nothing herein contained shall limit or prejudice
the right of the Landlord to prove for and obtain as liquidated damages by
reason of such termination, an amount equal to the maximum allowed by any
statute or rule of law, in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
DEFAULT
23. (A) If Tenant shall fail to pay any installment of basic rent, or any
additional rent or other charges as and when the same are required to be paid
hereunder, and such default shall continue for a period of ten (10) days after
notice, or if Tenant defaults in fulfilling any of the other covenants of this
lease and such default shall continue for a period of twenty (20) days after
notice, or if the demised premises become vacant or deserted, then, in any one
or more such events, upon Landlord serving a written five (5) days' notice upon
Tenant specifying the nature of said default and upon the expiration of said
five (5) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of such a
nature that the same cannot be completely cured or remedied within said five (5)
day period, and shall not thereafter with reasonable diligence and in good faith
proceed to remedy or cure such default, then Landlord may serve a written three
(3) days' notice of cancellation of this lease upon Tenant, and upon the
expiration of said three (3) days, this lease and the term thereunder shall end
and expire as fully and completely as if the date of expiration of such three
(3) day period were the day herein definitely fixed for the end and expiration
of this lease, and the term thereof, and Tenant shall then quit and surrender
the demised premises to Landlord, but Tenant shall remain liable as hereinafter
provided.
(B) If the notice provided for in "(A)" above shall have been given,
and the term shall expire as aforesaid; or (a) if Tenant shall make default in
the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein provided,
and such default shall continue for ten (10) days after notice, or (b) if any
execution or attachment shall be issued against Tenant or any of Tenant's
property whereupon the demised premises shall be taken or occupied by someone
other than Tenant, or (c) if Tenant shall fail to move into or take possession
of the premises within fifteen (15) days after commencement of the term of this
lease, then, and in any such events, Landlord may without notice, re-enter the
demised premises and dispossess Tenant by summary proceedings or otherwise,
and the legal representative of Tenant or other occupant of demised premises
and remove their effects and hold the premises as if this lease had not been
made, and Tenant hereby waives the service of notice of intention to re-enter or
to institute legal proceedings to that end. If Tenant shall make default
hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Landlord may cancel and terminate such renewal or
extension agreement by written notice
REMEDIES OF LANDLORD
24. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (i) Rent shall become due thereupon and be
paid up to the time of such re-entry, dispossess and/or expiration, together
with such reasonable expenses as Landlord may incur for legal expenses,
attorneys' fees, brokerage, and/or putting the Premises in good order or for
preparing the same for re-rental; (ii) Landlord may relet the Premises or any
part or parts thereof, either in the name of the Landlord or otherwise, for a
term or terms, which may at Landlord's option be less than or exceed the period
which would otherwise have constituted the balance of the term of this Lease and
may grant concessions or free rent; and/or (iii) Tenant or the legal
representatives of Tenant shall also pay Landlord as liquidated damages for the
failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the Rent herein reserved and/or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
lease or leases of the Premises for each month of the period which would
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otherwise have constituted the balance of the term of this Lease. The failure or
refusal of Landlord to relet the Premises or any part or parts thereof shall not
release or affect Tenant's liability for damages. In computing such liquidated
damages there shall be added to the said deficiency such reasonable expenses as
Landlord may incur in connection with reletting such as legal expenses,
attorneys' fees, brokerage and for keeping the Premises in good order or
preparing the same for reletting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in this Lease and any
suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Landlord to collect the deficiency for any
subsequent month by a similar proceeding. Landlord, at Landlord's option may
make such alterations, repairs, replacements and/or decorations in the Premises
as Landlord, in Landlord's sole judgment, considers advisable and necessary for
the purpose of reletting the Premises; and the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable for the failure to
relet the Premises, or in the event that the Premises are relet, for failure to
collect the rent under such reletting. In the event of a breach or threatened
breach by Tenant of any of the covenants or provisions hereof, Landlord shall
have the right of injunction and the right to invoke any remedy allowed at law
or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this Lease of any particular remedy, shall not
preclude Landlord from any other remedy, in law or in equity. In all cases
hereunder, and in any suit, action or proceeding of any kind between the
parties, it shall be presumptive evidence of the fact of the existence of a
charge being due, if Landlord shall produce a bill, notice or certificate of any
public official entitled to give such bill, notice or certificate to the effect
that such charge appears of record on the books in his office and has not been
paid.
WAIVER OF REDEMPTION
25. Tenant hereby expressly waives any and all rights of redemption granted
by or under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Landlord obtaining possession of
demised premises, by reason of the violation by Tenant of any of the covenants
and conditions of this lease or otherwise.
SECURITY
26. Tenants to deposit with Landlord the sum of Fifty Thousand ($50,000.00)
Dollars as retainage for the faithful performance and observance by Tenant of
the terms, provisions and conditions of this Lease; it is agreed that in the
event Tenant defaults in respect of any of the terms, provisions and conditions
of this Lease, including, but not limited to, the payment of rent and additional
rent, Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sum as to which Tenant is in default or for any sum which Landlord
may expend or may be required to expend by reason of Tenant's default in respect
of any of the terms, covenants and conditions of this Lease, including but not
limited to, any damages or deficiency in the reletting of the premises, whether
such damages or deficiency
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accrued before or after summary proceedings or other re-entry by Landlord. In
the event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this Lease, the security shall be
returned to Tenant after the date fixed as the end of the Lease and after
delivery of entire possession of the Demised Premises to the Landlord. In the
event of a sale of the land and building or leasing of the building, of which
the Demised Premises form a part, Landlord shall have the right to transfer the
security to the vendee or lessee and Landlord shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new Landlord solely for the return of said security; and it is
agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new Landlord. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber the monies deposited
herein as security and that neither Landlord nor its successors or assigns shall
be bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
Tenant shall have the right to deliver to Landlord, in lieu of the cash
deposit, a clean, unconditional irrevocable letter of credit, drawn on a bank
which is a member of the New York Clearing House, in the amount of the security
deposit. The form and content of the letter of credit shall be subject to the
reasonable approval of Landlord.
BROKER
27. Tenant represents that this Lease was brought about by Sutton &
Edwards, as broker and all negotiations with respect to this Lease were
conducted exclusively through said broker. Tenant agrees that if any claim is
made for commissions by any broker other than said broker, by, through or on
account of any acts of Tenant, Tenant will hold Landlord free and harmless from
any and all liabilities and expenses in connection therewith, including
Landlord's reasonable attorney's fees. The Landlord will pay said broker its
brokerage commission per separate agreement.
REPOSSESSION
28. On the last day of the term hereof or on the earlier termination
hereof, Tenant shall peaceably and quietly leave, surrender and deliver up to
Landlord the demised premises broom clean, together with the buildings or any
new building and all alterations, changes, additional and improvements which may
have been made upon the premises (except movable furniture or movable trade
fixtures put in at the expense of Tenant) in good repair and good order and safe
condition, except for reasonable wear and tear and damage by fire, other
casualty or the elements excepted. Tenant, on or before said date shall remove
all of Tenant's personal property from the demised premises and all property not
so removed shall be deemed to have been abandoned and may be appropriated, sold,
stored, destroyed or otherwise disposed of by Landlord without notice to Tenant
and without obligation to account therefor. Tenant's obligation under this
paragraph "28" shall be deemed to survive the expiration or other termination of
this lease.
RESTRICTION
29. Tenant shall comply with the following restrictions with respect to the
premises:
A. Tenant shall store all trash and refuse in appropriately sealed and
covered containers either within the building or in a concealed location at the
rear of the building and shall attend to the regular disposal and removal
thereof.
B. Tenant shall receive all deliveries, load and unload goods,
merchandise, supplies, fixtures, equipment, furniture and
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rubbish only through proper service doors and loading docks serving the
building, but in no event through the main front entrance thereof.
C. Tenant shall not change the exterior colors or architectural
treatment of the premises or make any alterations or changes to the exterior of
the building, the grading, planting or landscaping of the exterior of the
premises which shall not be harmonious with adjoining properties.
D. Tenant shall not place or install or suffer to be placed or
installed any sign upon the premises unless such sign shall be approved by
Landlord and shall be harmonious with the signs of adjoining properties. In any
event, Tenant shall not place or cause to be placed upon the building any
awning, canopy, banner, flag, pennant, aerial, antenna or the like. All signs or
lettering on or about the premises or the building shall be neat and of
reasonable size. The following are strictly prohibited:
1. Paper signs and stickers;
2. Moving, flickering or flashing lights;
3. Exposed neon or fluorescent tubes or other exposed light
sources.
E. Tenant shall not permit the parking of any vehicles on the streets
and roadways adjoining or surrounding the premises and Tenant shall require its
employees, customers, invites, licensees and visitors to park only in the
parking areas serving the Premises.
NO WAIVER
30. No act or thing done by Landlord or Landlord's agents during the term
hereby demised shall be deemed an acceptance of a surrender of the demised
premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the lease or a surrender
of the premises. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this lease
shall not prevent a subsequent act, which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of a covenant of this
lease shall not be deemed a waiver of such breach. No provision of this lease
shall be deemed to have been waived by Landlord unless such waiver be in writing
signed by Landlord.
DEFINITION
31. The words "re-enter" and "re-entry" as used herein are not restricted
to their technical legal meaning. The word "Landlord" as used herein means only
the owner in fee for the time being of the demised premises, so that in the
event of any sale of the demised premises, Landlord shall be and hereby is
entirely freed and relieved of all covenants and obligations of Landlord
hereunder and it shall be deemed and construed without further agreement between
the parties or between the parties and the purchaser of the demised premises,
that such purchaser has assumed and agreed to carry out any and all covenants
and obligations of Landlord hereunder. If any Landlord named herein be acting in
a fiduciary or representative capacity, the termination in whole or in part of
such capacity shall be deemed a transfer within the meaning of this article.
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QUIET ENJOYMENT
32. Landlord covenants that if and so long as Tenant pays the Rent, and
additional rent, and other charges reserved by this Lease, and performs all the
terms, covenants and conditions of this Lease on the part of Tenant to be
performed, Tenant shall quietly enjoy the premises subject, however, to the
terms of this Lease and of any mortgage or mortgages to which this Lease by its
terms is subject.
MARGINAL NOTES
33. The marginal notes are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope or intent of this
lease.
WAIVER OF JURY AND COUNTERCLAIM
34. It is mutually agreed by and between Landlord and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either the parties hereto against
the other on any matters whatsoever arising out of or in any way connected with
this lease, the relationship of Landlord and Tenant, Tenant's use or occupancy
of said premises, and/or any claim of injury or damage and any emergency
statutory or any other statutory remedy. It is further mutually agreed that in
the event the Landlord commences any summary proceedings for non-payment of
rent, the Tenant will not interpose any counterclaim of whatsoever nature or
description in such proceeding.
NONLIABILITY OF LANDLORD
35. (a) Landlord and Landlord's agents and employees shall not be
liable for, and Tenant waives all claims for, loss or damage to Tenant's
business or damage to persons or property sustained by Tenant resulting from
any accident or occurrence sustained by Tenant resulting from any accident or
occurrence (unless caused by or resulting from the negligence of Landlord, its
agents, servants or employees other than accidents or occurrences against which
Tenant is insured) in or upon the Premises or the Building, including, but not
limited to, claims for damage resulting from: (i) any equipment or appurtenances
becoming out of repair; (ii) injury done or occasioned by wind, (iii) any defect
in or failure of plumbing, heating or air conditioning equipment, electric
wiring or installation thereof, gas, water, and steam pipes, stairs, porches,
railings or walks; (iv) broken glass; (v) the backing up of any sewer pipe or
downspout; (vi) the bursting, leaking or running of any tank, tub, washstand,
water closet, waste pipe, drain or other pipe or tank in, upon or about the
Building or the Premises; (vii) the escape of steam or hot water; (viii) water,
snow or ice being upon or coming through the roof, skylight, trapdoor, stairs,
doorways, show windows, walks or any other place upon or near the Building or
the Premises or otherwise; (ix) the falling of any fixture, plaster, tile or
stucco; and (x) any act, omission or negligence of other tenants, licensees or
of any other persons or occupants of the Building or of adjoining or contiguous
buildings or of owners of adjacent or contiguous property.
(b) If Landlord or a successor in interest an individual (which term
as used herein includes aggregates of individuals such as joint ventures,
general or limited partnerships or associates) such individuals shall be under
no personal liability with respect to any of the provisions of this Lease, and
if such individual hereto is in breach or default with respect to its
obligations under this Lease, Tenant shall look solely to the equity of such
individual in the land and building of which the Premises form a part for the
satisfaction of Tenant's remedies and in no event shall Tenant attempt to secure
any
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<PAGE>
personal judgment against any partner, employee or agent of Landlord by reason
of such default by Landlord.
(c) The word "Landlord" as used herein means only the owner in fee for
the time being of the Premises, and in the event of any sale of the Premises,
Landlord shall be and hereby is entirely freed and relieved of all covenants and
obligations of Landlord hereunder and it shall be deemed and construed without
further agreement between the parties or between the parties and the purchase
of the Premises, that such purchaser has assumed and agreed to carry out any and
all covenants and obligations of Landlord hereunder.
NO ABATEMENT OF RENT
36. No diminution or abatement of Rent or other compensation shall be
claimed or allowed for inconvenience or discomfort arising from the making of
additions, repairs or improvements to the Building or to its appliances, nor for
any space taken to comply with any law, ordinance or order of a governmental
authority, except as provided in paragraphs "11" and "18" hereof. In respect to
the "services", if any herein expressly or impliedly agreed to be furnished by
the Landlord to the Tenant, it is agreed that there shall be no diminution or
abatement of the rent, or any other compensation, for interruption or
curtailment of such "service" when such interruption or curtailment shall be due
to accident, alterations or repairs, desirable to or necessary to be made or to
inability or difficulty in securing supplies or labor for the maintenance of
such "service" or to some other cause, not gross negligence on the part of the
Landlord. No such interruption or curtailment of such "service" shall be deemed
a constructive eviction. The Landlord shall not be required to furnish, and the
Tenant shall not be entitled to receive any of such "service" during any period
wherein the Tenant shall be in default in respect to the payment of rent.
Neither shall there be any abatement or diminution of rent because of making of
repairs, improvements, or decorations to the demised premises after the date
above fixed for the commencement of the term, it being understood and agreed
that rent shall, in any event, commence to run at such date so above fixed.
NEW YORK LAW APPLICABLE
37. This agreement shall be governed by and construed in accordance with
the law of or applicable to the State of New York.
ENTIRE AGREEMENT
38. This lease contains the entire agreement between the parties and shall
not be modified in any manner except by an instrument in writing executed by the
parties or their respective successor in interest.
ADJACENT EXCAVATION-SHORING
39. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation license to enter upon the demised
premises for the purpose of doing such work as said person shall deem necessary
to preserve the wall or the building of demised premises from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Landlord, or diminution or abatement of rent.
OPTION TO PAY MORTGAGE ARREARS
40. In the event the Landlord defaults in the payment of any interest or
amortization due on any first mortgage to which the
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<PAGE>
within lease is subordinate, then after twenty (20) days notice in writing by
the Tenant to the Landlord, the Tenant may pay to such first mortgagee the
amount of such principal and/or interest in arrears and credit the same against
rent thereafter to become due from Tenant to the Landlord under this lease.
UTILITY EASEMENT
41. This Lease is subject and subordinate to any utility, gas, water and
electric light or telephone line easements now or hereafter granted, affecting
the Premises, the Building or the land upon which they are located, provided
that the same do not unreasonably interfere with the Building nor unreasonably
interfere with the use of the Premises by Tenant.
NOTICES
42. All notices to be given hereunder shall be in writing by certified or
registered mail addressed to either of the parties at the address hereinabove
given or at any other subsequent mailing address they may indicate by notice.
Any notice given hereunder by mail shall be deemed delivered when deposited in a
United States general or branch post office, addressed as above provided. Tenant
hereby authorizes and designates the manager of the Premises as an officer
authorized to accept and receive service of process.
LATE CHARGES
43. In the event that the Tenant shall not have paid the rent on or before
the 10th day of the month during which same is due, there shall be a late charge
of one hundred ($100.00) Dollars a day, computed from the first day of the month
in which said rent shall be due computed to the date on which payment shall be
made. This late charge shall only be applicable after the first late payment.
This late charge shall be deemed additional rent and shall, at Landlord's
election, be added to the rent for the month in which the rent shall be due, and
the Landlord shall have all rights with respect to additional rent as for
nonpayment of any and all other rents due under the terms of this lease. The
demand for and collection of the aforesaid late charges shall in no wise be
deemed a waiver of any and all remedies that the Landlord may have under the
terms of this lease by summary proceedings or otherwise in the event of a
default in payment of rent.
LANDLORD'S REPRESENTATION
44. Landlord or Landlord's agents have made no representations or promises
with respect to the land constituting the demised premises, nor with respect to
the building to be constructed thereon, nor otherwise with respect to the
demised premises, except as herein expressly set forth.
BINDING ON SUCCESSORS
45. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, successors and, except as otherwise
provided in this lease, their assigns.
EARLIER TERMINATION
46. Tenant shall have the right to terminate this lease at the end of the
sixth (6th) year of the term of the lease on the following terms and conditions:
1. Tenant shall not then be in default of any of the terms and
conditions of this lease on the part of Tenant to be performed;
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<PAGE>
2. That Tenant notify Landlord by certified mail, return receipt
requested, of Tenant's election to terminate this lease not later than the
end of the fifth (5th) year of the term, time being of the essence; and
3. That Tenant pay to the Landlord at the time of notification, the
sum of Two Hundred Fifty-Seven Thousand Five Hundred ($257,500.00) Dollars,
as lease termination consideration.
POSSESSION OF PREMISES
47. Landlord agrees that he will deliver possession of the demised premises
to the Tenant and the Tenant agrees to accept such possession between the date
of this lease and June 1, 1990 upon sixty (60) days' prior written notification
to the Tenant. Should Landlord be unable to give possession of the demised
premises to the Tenant, within such period, Tenant shall have the option to
terminate this agreement by written notice of such intention to terminate, to
the Landlord, served not later than June 15,1990. In the event of termination,
pursuant to this Article, neither party shall have any further liability to the
other.
INSPECTION OF PREMISES
48. After the execution and delivery of this lease, Tenant shall have the
right to inspect the demised premises at reasonable times on reasonable notice
with Tenant's personnel and/or his architect, engineer or other adviser.
MAINTENANCE OF THE ROOF
49. Anything herein contained to the contrary notwithstanding, Landlord
shall be responsible for the maintenance of the roof of the premises during the
entire term of this lease. Tenant shall pay to Landlord the sum of Five Hundred
($500.00) Dollars per month which Landlord shall retain as a separate fund for
the repair of said roof. It is understood that this fund shall not be used for a
complete reroofing of the premises should Landlord elect this improvement. Upon
payment of any repair charged to the said fund, Landlord will send Tenant a copy
of the invoice therefor. At the end of the term of this lease, Landlord shall
return to Tenant any unexpended portion of the accumulated monies in said fund.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed
this Lease as of the day and year first above written.
VANDERBILT ASSOCIATES
By:
-----------------------------
Partner
AMERICAN TISSUE CORP.
By:
-----------------------------
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On this day of ,1989, before
me personally came to me known, who thereupon made solemn
oath and acknowledged before me that he is a member of VANDERBILT ASSOCIATES,
the partnership in whose behalf he acts and whose name he executed the foregoing
instrument.
-------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On this 6th day of February,1989, before me personally came to me
known, who being by me duly sworn, did depose and say that he resides at
279 East 44th Street, New York, New York 10017 that he is President of
AMERICAN TISSUE CORP., the corporation described in and which executed the
foregoing instrument; that he knows the seal of the said corporation; that
the seal affixed to the said instrument is such corporate seal; that it was
so affixed by order of the Board of Directors of the said corporation; and
that he signed his name thereto by like order.
-------------------------------
Notary Public
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EXHIBIT 10.13
NOVATION AGREEMENT dated as of July 9, 1999 among Super American Tissue Inc., a
Delaware Corporation ("SATI"), Nourollah Elghanayan ("Nourollah"), Mehdi
Gabayzadeh ("Mehdi"), Lakeview Real Estate LLC, a New York limited liability
company ("Lakeview"), and Huntington LLC, a New York limited liability
company ("Huntington").
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. SATI hereby agrees to pay and perform certain debt obligations
originally owing by certain subsidiaries of American Tissue Inc., a Delaware
corporation, to Nourollah, Mehdi, Lakeview and Huntington (collectively, the
"Creditors") in accordance with the terms of the following promissory notes that
are concurrently being executed and delivered by SATI to the respective
Creditors (collectively, the "Notes"):
a. The obligation to pay the sum of $775,000 in accordance with the
terms of a certain non-negotiable promissory note dated July 9, 1999 made
by SATI and payable to Mehdi;
b. The obligation to pay the sum of $5,000,000 in accordance with the
terms of a certain non-negotiable promissory note dated July 9, 1999 made
by SATI and payable to Nourollah;
c. The obligation to pay the sum of $24,736,627 in accordance with the
terms of a certain non-negotiable promissory note dated July 1, 1999 made
by SATI and payable to Nourollah;
d. The obligation to pay the sum of $3,881,086 in accordance with the
terms of a certain non-negotiable promissory note dated July 9, 1999 made
by SATI and payable to Lakeview Real Estate LLC;
e. The obligation to pay the sum of $136,832.88 in accordance with a
certain non-negotiable promissory note dated July 9, 1999 made by SATI and
payable to Lakeview; and
f. The obligation to pay the sum of $1,293,354.70 in accordance with a
certain non-negotiable promissory note dated July 9, 1999 made by SATI and
payable to Huntington.
2. The assumption by SATI of the obligations of certain subsidiaries of
American Tissue Inc. ("ATI") set forth in Section 1 of this Agreement
(collectively, the "Obligations") shall not be construed to defeat, impair or
limit in any way any rights of
<PAGE>
SATI to dispute with the obligee thereof the validity or amount thereof, but in
the event SATI chooses to contest or dispute the validity or amount of any such
liability, SATI agrees to indemnify and hold ATI harmless from any liability
arising from such contest or dispute.
3. SATI agrees that, from time to time after the delivery of this
Agreement, it will, at the request of ATI and without further consideration,
promptly take such further action and execute and deliver such additional
documents as ATI may reasonably deem necessary in order to more fully effectuate
the assumption of the Obligations.
4. In consideration of the assumption by SATI of the Obligations pursuant
hereto and SATI's execution and delivery of the Notes to the Creditors, the
Creditors hereby absolutely and irrevocably release American Tissue Inc. and
each of its subsidiaries, as the same are constituted on the date hereof, from
any and all liability to the Creditors, or any of them, for principal, interest
or any other amount at time any owing under or on account of Obligations.
5. The provisions of this Agreement are intended to be binding upon SATI,
its successors and assigns, and are for the benefit of American Tissue Inc., its
subsidiaries and their respective successors and assigns.
6. This Agreement may not be orally canceled, changed, modified or amended,
and no cancellation, change, modification or amendment shall be effective or
binding unless in writing and signed by all of the parties hereto.
7. This Agreement shall be governed by and construed in accordance with the
internal substantive laws of the State of New York. SATI hereby expressly
consents to the exclusive jurisdiction of the Supreme Court of the State of New
York, County of Suffolk, with respect to any action or proceeding between SATI
and American Tissue Inc. and/or any of the subsidiaries of American Tissue Inc.
with respect to this Agreement and any rights or obligation of such person
pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be on the
date first above written
Super American Tissue Inc.
By:
------------------------------
Mehdi Gabayzadeh, President
-----------------------------------
Nourollah Elghanayan
2
<PAGE>
-----------------------------------
Mehdi Gabayzadeh
Huntington LLC
By:
---------------------------------
Mehdi Gabayzadeh, Manager
Lakeview Real Estate LLC
By:
---------------------------------
Mehdi Gabayzadeh, Manager
3
SWIMLINE CORP., with offices at 191 Rodeo Drive, Edgewood, New York 11717
as Landlord
and
AMERICAN TISSUE CORPORATION with offices at 135 Engineers Road, Hauppauge, New
York 11788
as Tenant
WITNESSETH: The Landlord hereby leases to the Tenant the following premises:
building known as and by 56 Vanderbilt Motor Parkway, Commack, New York
comprised of approximately 55,000 square feet situated on a plot of
approximately three (3) acres including all the parking spaces contained therein
for the term of five (5) years
to commence from the 15th day of August 1996 and to end on the
14th day of August 2001 to be used and occupied only for the manufacturing,
warehousing and distribution of all paper products including tissue products
made from paper including facial tissue toilet paper and paper towels as well as
office work machine [ILLEGIBLE] in connection therewith
Upon the conditions and covenants following: 1st. That the Tenant shall pay
the annual rent of $220,000.00 for the first year payable in monthly
installments of $18,333.33; $226,600.00 for the second year payable in monthly
installments of, $18,883.33; $233,200.00 for the third year payable in monthly
installments of $19,433.33; $239,800.00 for the fourth year payable in monthly
installments of $19,983.33 and $246,400.00 for the fifth year payable in month
installments of $20,533.33 said rent to be paid in equal monthly payments in
advance on the 15th day of each and every month during the term of the lease.
2nd. That the Tenant shall take good care of the premises and shall, at the
Tenant's own cost and expense make all repairs except structural repairs or roof
leaks not caused by the misuse of the tenant or its agents, servants, employees
or visitors
and at the end or other expiration of the term, shall deliver up the demised
premises in good order or condition, damages by the elements excepted.
3rd. That the Tenant shall promptly execute and comply with all statutes,
ordinances, rules, orders, regulations and requirements of the Federal, State
and Local Governments and of any and all their Departments and Bureaus
applicable to said premises, for the correction, prevention, and abatement of
nuisances or other grievances, in, upon, or connected with said premises during
said term; and shall also promptly comply with and execute all rules, orders and
regulations of the New York Board of Fire Underwriters, or any other similar
body, at the Tenant's own cost and expense.
4th. That the Tenant, successors, heirs, executors or administrators shall not
assign this agreement, or underlet or underlease the premises, or any part
thereof, or make any alterations on the premises, without the Landlord's consent
in writing; or occupy, or permit or suffer the same to be occupied for any
business or purpose deemed disreputable or extra-hazardous on account of fire,
under the penalty of damages and forfeiture, and in the event of a breach
thereof, the term herein shall immediately cease and determine at the option of
the Landlord as if it were the expiration of the original term.
5th. Tenant must give Landlord prompt notice of fire, accident, damage or
dangerous or defective condition. If the Premises can not be used because of
fire or other casualty, Tenant is not required to pay rent for the time the
Premises are unusable. If part of the Premises can not be used, Tenant must pay
rent for the usable part. Landlord shall have the right to decide which part of
the Premises is usable. Landlord need only repair the damaged structural parts
of the Premises. Landlord is not required to repair or replace any equipment,
fixtures, furnishings or decorations unless originally installed by Landlord.
Landlord is not responsible for delays due to settling insurance claims,
obtaining estimates, labor and supply problems or any other cause not fully
under Landlord's control.
Landlord has the right to demolish or rebuild the Building if there is
substantial damage by fire or other casualty.
<PAGE>
hire or purchase the same; and the Tenant further agrees that on and after the
the term hereby granted, the Landlord or the Landlord's agents shall have the
right to place notices on the front of said premises, or any part thereof,
offering the premises "To Let" or "For Sale", and the Tenant hereby agrees to
permit the same to remain thereon without hindrance or molestation.
8th. That if the said premises, or any part thereof shall be deserted or become
vacant during said term, or if any default be made in the payment of the said
rent or any part thereof, or if any default be made in the performance of any of
the covenants herein contained, the Landlord or representatives may re-enter the
said premises by force, summary proceedings or otherwise, and remove all persons
therefrom, without being liable to prosecution therefor, and the Tenant hereby
expressly waives the service of any notice in writing of intention to re-enter,
and the Tenant shall pay at the same time as the rent becomes payable under the
terms hereof a sum equivalent to the rent reserved herein, and the Landlord may
rent the premises on behalf of the Tenant, reserving the right to rent the
premises for a longer period of time than fixed in the original lease without
releasing the original Tenant from any liability, applying any moneys collected,
first to the expense of resuming or obtaining possession, second to restoring
the premises to a rentable condition, and then to the payment of the rent and
all other charges due and to grow due to the Landlord, any surplus to be paid to
the Tenant, who shall remain liable for any deficiency.
9th. Landlord may replace, at the expense of Tenant, any and all broken glass in
and about the demised premises. Landlord may insure, and keep insured, all plate
glass in the demised premises for and in the name of Landlord. Bills, for the
premiums therefor shall be rendered by Landlord to Tenant at such times as
Landlord may elect, and shall be due from, and payable by Tenant when rendered,
and the amount thereof shall he deemed to be, and be paid as, additional rental.
Damage and injury to the said premises, caused by the carelessness, negligence
or improper conduct on the part of the said Tenant or the Tenant's agents or
employees shall be repaired as speedily as possible by the Tenant at the
Tenant's own cost and expense.
10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front
of, entrance to, or halls and stairs of said premises, nor allow the same to be
obstructed or encumbered in any manner.
11th. The Tenant shall neither place, or cause or allow to be placed, any sign
or signs of any kind whatsoever at, in or about the entrance to said premises or
any other part of same, except in or at such place or places as may be indicated
by the Landlord and consented to by the Landlord in writing. And in case the
Landlord or the Landlord's representatives shall deem it necessary to remove any
such sign or signs in order to paint the said premises or the building wherein
same is situated or make any other repairs, alterations or improvements in or
upon said premises or building or any part thereof, the Landlord shall have the
right to do so, providing the same be removed and replaced at the Landlord's
expense, whenever the said repairs, alterations or improvements shall be
completed.
12th. That the Landlord is exempt from any and all liability for any damage or
injury to person or property caused by or resulting from steam, electricity,
gas, water, rain, ice or snow, or any leak or flow from or into any part of said
building or from any damage or injury resulting or arising from any other cause
or happening whatsoever unless said damage or injury be caused by or be due to
the negligence of the Landlord.
13th. That if default he made in any of the covenants herein contained, then it
shall be lawful for the said Landlord to reenter the said premises, and the same
to have again, re-possess and enjoy. The said Tenant hereby expressly waives the
service of any notice in writing of intention to re-enter.
14th. That this instrument shall not be a lien against said premises in respect
to any mortgages that are now on or that hereafter may be placed against said
premises, and that the recording of such mortgage or mortgages shall have
preference and precedence and be superior and prior in lien of this lease,
irrespective of the date of recording and the Tenant agrees to execute without
cost, any such instrument which may be deemed necessary or desirable to further
effect the subordination of this lease to any such mortgage or mortgages, and a
refusal to execute such instrument shall entitle the Landlord, or the Landlord's
assigns and legal representatives to the option of cancelling this lease without
incurring any expense or damage and the term hereby granted is expressly limited
accordingly.
15th. The Tenant has this day deposited with the Landlord the sum of $36,666.66
as security for the full and faithful performance by the Tenant of all the
terms, covenants and condition of this lease upon the Tenant's part to be
performed, which said sum shall be returned to the Tenant after the time fixed
as the expiration of the term herein, provided the Tenant has fully and
faithfully carried out all of said terms, covenants and conditions on Tenant's
part to be performed. In the event of a bona fide sale, subject to this lease,
the Landlord shall have the right to transfer the security to the vendee for the
benefit of the Tenant and the Landlord shall be considered released by the
Tenant from all liability for the return of such security; and the Tenant agrees
to look to the new Landlord solely for the return of the said security, and it
is agreed that this shall apply to every transfer or assignment made of the
security to a new Landlord.
16th. That the security deposited under this lease shall not be mortgaged,
assigned or encumbered by the Tenant without the written consent of the
Landlord.
17th. It is expressly understood and agreed that in case the demised premises
shall be deserted or vacated, or if default be made in the payment of the rent
or any part thereof as herein specified, or if, without the consent of the
Landlord, the Tenant shall sell, assign, or mortgage this lease or if default be
made in the performance of any of the covenants and agreements in this lease
contained on the part of the Tenant to be kept and performed, or if the Tenant
shall fail to comply with any of the statutes, ordinances, rules, orders,
regulations and requirements of the Federal, State and Local Governments or of
any and all their Departments and Bureaus, applicable to said premises, or if
the Tenant shall file or there be filed against Tenant a petition in bankruptcy
or arrangement, or Tenant be adjudicated a bankrupt or make an assignment for
the benefit of creditors or take advantage of any insolvency act, the Landlord
may, if the Landlord so elects, at any time thereafter terminate this lease and
the term hereof, on giving to the Tenant five days' notice in writing of the
Landlord's intention so to do, and this lease and the term hereof shall expire
and come to an end on the date fixed in such notice as if the said date were the
date originally fixed in this lease for the expiration hereof. Such notice may
be given by mail to the Tenant addressed to the demised premises.
18th. Tenant shall pay to Landlord the rent or charge, which may, during the
demised term, be assessed or imposed for the water used or consumed in or on the
said premises, whether determined by meter or otherwise, as soon as and when the
same may be assessed or imposed, and will also pay the expenses for the setting
of a water meter in the said premises should the latter be required. Tenant
shall pay Tenant's proportionate part of the sewer rent or charge imposed upon
the building. All such rents or charges or expenses shall be paid as additional
rent and shall be added to the next month's rent thereafter to become due.
19th. That the Tenant will not nor will the Tenant permit undertenants or other
persons to do anything in said premises, or bring anything into said premises,
or permit anything to be brought into said premises or to be kept therein, which
will in any way increase the rate of fire insurance on said demised premises,
nor use the demised premises or any part thereof, nor suffer or permit their use
for any business or purpose which would cause an increase in the rate of fire
insurance on said building, and the Tenant agrees to pay on demand any such
increase.
20th. The failure of the Landlord to insist upon a strict performance of any of
the terms, conditions and covenants herein, shall not be deemed a waiver of any
rights or remedies that the Landlord may have, and shall not be deemed a waiver
of any
<PAGE>
28th. Upon the execution of this lease together with the deposit of security and
the production of the insurance herein required, the Tenant shall have the right
of the use and occupancy of the premises, rent free, but subject to all of the
other terms and conditions of the least until September 14, 1996.
Contemporaneously with the signing of this lease, the Tenant has paid to the
Landlord, the sum of $18,333.33 for the first month's rent, to wit: from
September 15, 1996 to October 14, 1996.
29th. Tenant shall pay, as additional rent, any and all increases in the real
estate taxes assessed against the demised premises in excess of the current
1995/96 taxes in the sum of $76,344.32. The amounts of any assessments levied
against the demised premises during the term hereof shall be deemed additional
rent and shall be payable by the Tenant in same manner as rent provided,
however, if any such assessment is payable in installments, the Tenant shall be
required to pay tenant's share as such installments fall due within the term
hereof. Tenant shall pay such additional rent within thirty (30) days after
receipt by Tenant of a bill from Landlord for such additional rent accompanied
by copies of the tax bills or assessment. If the method of taxation now in force
in the County of Suffolk shall be changed so that taxes are no longer levied, in
whole or in part against the demised premises, but are transferred in effect to
income of the Landlord or to some other means assessable against the Landlord,
then the Tenant agrees to pay such substitute taxes as additional rent in the
same manner and the same proportions as real estate taxes above mentioned. In
the event the Landlord is successful in obtaining a real estate tax reduction,
via certiorari proceeding, or otherwise, that portion of the reduction
attributable to taxes actually paid, either included in rent at $1.39 per square
foot or by the increase as set forth herein, by Tenant shall either be credited
or refunded to Tenant less the percentage of legal fees that bears to the
reduction on behalf of Tenant. Commencing with the real estate taxes for 1997/98
and throughout the term of the lease, the Landlord shall seek a reduction in the
then current real estate taxes, including without limitation, the commencement
and prosecution of a tax certiorari proceeding or upon its failure to do so, the
Tenant may either in its own name or on behalf of the Landlord, seek a reduction
in the then current real estate taxes, including without limitation, the
commencement of a tax certiorari proceeding and to be responsible to pay that
percentage of the legal fees attributable to the reduction that pertains to the
Tenant. It is distinctly understood and agreed that in no event shall the Tenant
seek a reduction in the then current real estate taxes in the event the Landlord
has elected to do so. Landlord will use tax certiorari attorney who does not
charge in excess of 17 1/2% as a fee after the 1996/97 filing. Landlord will
settle tax certiorari only on a reasonable basis.
30th. The premises shall be delivered with the plumbing, heating and electrical
systems and air conditioning in the office area in working condition and the
roof free of any leaks. The premises shall be delivered vacant and broom clean
at the commencement date of the lease. Other than the foregoing representation
by the Landlord, it is understood and agreed that the Tenant has inspected the
premises and takes same in its present "AS IS" condition.
31st. The Tenant shall have the right, at its sole cost and expense, to erect
and maintain a sign on the facade of the
<PAGE>
[ILLEGIBLE] The Tenant agrees remove any sign that it erects on the facade of
the building and to repair any damage to the facade that may have been caused by
the erection of said sign.
32nd. Tenant shall, during the entire term hereof, keep in full force and effect
a policy of public liability insurance with respect to the leased premises,
including the sidewalk in front of or adjacent to the leased premises, and the
business operated by Tenant with minimum limits of at least $2,000,000 for
bodily injury and $500,000 for property damage. The policy shall name Landlord
as a named insured and shall contain a clause that the insurer will not cancel
or change the insurance without first giving the Landlord ten (10) days prior
written notice. The insurance shall be placed with any insurance company
licensed to transact such business in the State of New York and a copy of the
policy or a certificate of insurance shall building provided same conforms to
all rules and regulations of all government agencies having jurisdiction
thereof. The Tenant be delivered to the Landlord. Upon the failure of tenant to
obtain the insurance policy described hereinabove, Landlord is hereby authorized
to obtain a policy of insurance in the limits set forth hereinabove on behalf of
tenant and the premium for such policy shall be due and payable with the
installment of rent next due.
33rd. Tenant shall pay, as additional rent, the cost, at competitive rates, of
the fire insurance policy maintained by the Landlord for the demised premises.
Upon presentment by the Landlord to the tenant of the bill for said fire policy,
the Tenant shall pay to the landlord, as additional rent, an amount equal to the
unexpired term of said policy on a monthly basis. Thereafter, insurance shall be
paid by Tenant in installments on a monthly basis.
34th. In any case where Landlord brings any action or summary proceedings for
any default of the Tenant hereunder and is successful to any extent, whether for
the non-payment of rent or additional rent or any other default, Landlord shall
be entitled to reasonable attorney's fees as additional rent, if successful by
suit or settlement.
35th. The Tenant expressly represents that no broker except All Industrial Real
Estate Corp. and Schacker Realty brought about the within lease and agrees to
indemnify and hold Landlord harmless from the claim of any other broker based
upon acts of the Tenant. The Landlord shall pay the commission to All Industrial
Real Estate Corp. and Schacker Realty per separate agreement.
36th. Tenant will keep the sidewalks, if any, and the area immediately adjacent
to the demised premises free from rubbish, snow and ice.
37th. Notwithstanding any other provisions contained in this lease and in
addition to any and all rights and remedies of the Landlord, Tenant shall pay as
additional rent a late charge equivalent to 5% of any rent or other payment that
is not paid within five (5) days of its due date.
39th. Tenant shall pay for all electricity, gas, water, for heating and lighting
and any other utilities which Tenant may require in the demised premises. The
Landlord has this date given to Tenant a statement from Lewisy Fuel Oil Co. Inc.
that as of this date there are 2,102 gallons of fuel in the tank, at a total
value of $1,832.85, including taxes, which sum the Tenant shall pay to the
Landlord within thirty (30) days of date.
-2-
<PAGE>
[ILLEGIBLE]
demised premises, including the parking lot and entrances thereto, in a clean
and orderly condition, and shall be responsible for and to pay for the repair
and cleaning of any septic tank or cesspool serving the demised premises. The
Tenant shall maintain and keep the lawn and vegetation in front of the building
in reasonably good condition by having same watered, fertilized and mowed on a
regular basis.
41st. Tenant shall not make or cause to be made any alterations, additions or
improvements without first obtaining the Landlord's written approval and
consent, which consent will not be unreasonably withheld. Tenant shall present
to the Landlord plans and specifications for any such work at the time approval
is sought. Any work done on the subject premises shall be performed by
contractors duly licensed by the local governing authorities and shall maintain
liability and worker's compensation insurance. If any mechanic's lien shall be
filed against the demised premises on account of work done or materials
furnished to Tenant, the latter shall, within fifteen (15) days thereafter and
at its own cost and expenses, cause such lien or liens to be discharged by
filing the bonds required therefor by law.
42nd. Supplementing paragraph "2" of the lease, the Tenant covenants and agrees,
during the term of the lease and the extension thereof, at its sole cost and
expense, to retain the services of heating, ventilating, air conditioning,
indoor fire sprinkler and lawn sprinkler companies to maintain and repair the
equipment on a regular basis.
43rd. Tenant agrees to indemnify Landlord against any and all damages, including
but not limited to, court costs, attorneys' fees, clean up and repairs, which
might be caused by the disposal or spillage of any hazardous waste on or about
the demises premises and improvements and against any and all liability of the
Landlord under the Environmental Response Compensation and Liability Act, a
federal statute, and any applicable New York Environmental conservation laws
arising from acts by parties other than the Landlord. Tenant shall undertake any
and all clean up and repairs necessitated by such spillage promptly upon
notification by Landlord or any governmental agency having jurisdiction thereof.
Failure to comply with any of the provisions of this paragraphs shall be deemed
to be a material breach of this lease. It is understood and agreed that the
Tenant shall not be responsible for any condition with respect to the premises
that arose prior to the commencement date of the lease. Notwithstanding the
foregoing, the Tenant shall only be liable under this article to Landlord if
such spillage, release or disposal of any such hazardous waste or substance were
caused by the Tenant or Tenant's employees, agents, officers, director, invitees
or vendors.
44th. So long as Tenant is in possession of the premises and is not in an
uncured default of any of the terms and conditions of this lease, it shall have
the option to extend the lease for an additional period of five (5) years as
follows: from August 15, 2001 to August 14, 2006. This option must be exercised
by the tenant by certified mail, return receipt requested, addressed to the
Landlord at its within address and posted not later than six (6) months prior to
the termination date of the initial term of this lease. Such extension shall be
upon all of the terms and conditions of the lease except as to the amount of
rent and
-3-
<PAGE>
rent for the first year of the renewal period shall be $253,000.00 payable in
monthly payments of $21,083.33; the second year of the renewal period shall be
$259,600.00 payable in monthly payments of $21,633.33; the third year of the
renewal period shall be $266,200.00 payable in monthly payments of $22,733.33
and the fourth year of the renewal period shall be $272,800.00 payable in
monthly payments of $22,733.33 and the fifth year of the renewal period shall be
$279,400.00 payable in monthly payments of $23,283.33.
46th. This lease and rider set forth the entire agreement between the parties
and supersedes all prior oral or written statements.
47th. Whenever the Landlord's consent is required for the Tenant to do or
perform an act, such consent will not be unreasonably withheld or delayed,
including an assignment or subletting. In either case, the Tenant shall not
relieved of liability under the lease.
48th. With respect to any mortgage that may now be a lien against the premises
or in the event the Landlord obtains a mortgage, the Landlord shall use its best
efforts to obtain from the mortgagee a nondisturbance clause with respect to the
Tenant's rights under this lease.
49th. The terms and conditions of this rider are to be construed to be in
addition to or supplementing the terms and conditions contained in the printed
portion of the lease. However, if any provision contained in the rider is
inconsistent with the printed provision of this lease, the provisions contained
in said rider shall prevail and be binding upon the parties.
50th. It is understood and agreed that the terms, conditions and covenants
contained in the within lease and rider shall be binding upon the parties hereto
and upon the respective successors, heirs, executors, administrators and
assigns.
51st. The Landlord has delivered to Tenant this date two certificates of
occupancy from the Town of Smithtown as follows: one for 45,000 square feet and
the other for 10,055 square feet for a total of 55,055, which measurements are
for the outside dimensions of the building. The Tenant shall have the right to
have the building measured within fifteen (15) days of date and the report of
said measurement is to be forwarded to Landlord's attorney within twenty (20)
days of date. If the measurement is less than 55,000 square feet, then the rent
shall be reduced by the multiple of the actual square footage multiplied by
$4.00 gross per square foot for the first year; $4.12 gross per square foot for
the second year; $4.24 gross per square foot for the third year; $4.36 gross per
square foot for the fourth year; $4.48 gross per square foot for the fifth year;
$4.60 gross per square foot for the sixth year; $4.72 gross per square foot for
the seventh year; $4.84 gross per square foot for the eighth year; $4.96 gross
per square foot for the ninth year and $5.08 gross per square foot for the tenth
year.
In the event the measurement submitted by the Tenant is done by one other than
an architect, engineer or surveyor, the Landlord shall have the right to have
the building measured by one of the foregoing professionals, which measurement
and certification thereto shall prevail, a copy of said certification shall be
forwarded to Tenant's attorney.
-4-
<PAGE>
[ILLEGIBLE] the measurement of the building within the twenty (20) day period,
any claim for a reduction in the rent based upon the square footage being less
than 55,000 square feet shall have been waived.
In the event the building measures in excess of 55,000 square feet, the Tenant
shall not pay for such increased square footage.
SWIMLINE CORP.
/s/ Herman Schwimmer
---------------------------------
BY: HERMAN SCHWIMMER, President
AMERICAN TISSUE CORPORATION
/s/ Nourallah Elghanayan
---------------------------------
BY: NOURALLAH ELGHANAYAN,
President
<PAGE>
Landlord.
23rd. In the event that the relation of the Landlord and Tenant may cease or
terminate by reason of the re-entry of the Landlord under the terms and
covenants contained in this lease or by the ejectment of the Tenant by summary
proceedings or otherwise, or after the abandonment of the premises by the
Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in
monthly payments the rent which accrues subsequent to the re-entry by the
Landlord, and the Tenant expressly agrees to pay as damages for the breach of
the covenants herein contained, the difference between the rent reserved and the
rent collected and received, if any, by the Landlord during the remainder of the
unexpired term, such difference or deficiency between the rent herein reserved
and the rent collected if any, shall become due and payable in monthly payments
during the remainder of the unexpired term, as the amounts of such difference or
deficiency shall from time to time be ascertained; and it is mutually agreed
between Landlord and Tenant that the respective parties hereto shall and hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other on any matters whatsoever arising out of
or in any way connected with this lease, the Tenant's use or occupancy of said
premises, and/or any claim of injury or damage.
24th. The Tenant waives all rights to redeem under any law of the State of New
York.
25th. This lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in nowise be affected, impaired or excused because Landlord is
unable to supply or is delayed in supplying any service expressly or impliedly
to be supplied or is unable to make, or is delayed in making any repairs,
additions, alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is prevented or delayed from so
doing by reason of governmental preemption in connection with a National
Emergency or in connection with any rule, order or regulation of any department
or subdivision thereof of any governmental agency or by reason of the condition
of supply and demand which have been or are affected by war or other emergency.
26th. No diminution or abatement of rent, or other compensation, shall be
claimed or allowed for inconvenience or discomfort arising from the making of
repairs or improvements to the building or to its appliances, nor for any space
taken taken to comply with any law, ordinance or order of a governmental
authority. In respect to the various "services," if any, herein expressly or
impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed
that there shall be no diminution or abatement of the rent, or any other
compensation, for interruption or curtailment of such "service" when such
interruption or curtailment shall be due to accident, alterations or repairs
desirable or necessary to be made or to inability or difficulty in securing
supplies or labor for the maintenance of such "services," or to some other
cause, not gross negligence on the part of the Landlord. No such interruption or
curtailment of any such "service" shall be deemed a constructive eviction. The
Landlord shall not be required to furnish, and the Tenant shall not be entitled.
to receive, any of such "services" during any period wherein the Tenant shall be
in default in respect to the payment of rent. Neither shall there be any
abatement or diminution of rent because of making of repairs, improvements or
decorations to the demised premises after the date above fixed for the
commencement of the term, it being understood that rent shall, in any event,
commence to run at such date so above fixed.
27th. Landlord shall not be liable for failure to give possession of the
premises upon commencement date by reason of the fact that premises are not
ready for occupancy or because a prior Tenant or any other person is wrongfully
holding over or is in wrongful possession, or for any other reason. The rent
shall not commence until possession is given or is available, but the term
herein shall not be extended.
SEE ANNEXED RIDER
And the said Landlord doth covenant that the said Tenant on paying the said
yearly rent, and performing the cover aforesaid, shall and may peacefully and
quietly have, hold and enjoy the said demised premises for the term aforesaid,
provided however, that this covenant shall be conditioned upon the retention of
title to the premises by the Landlord.
And it is mutually understood and agreed that the covenants and agreements
contained in the within shall be binding upon the parties hereto and upon their
respective successors, heirs, executors and administrators.
In Witness Whereof, the parties have interchangeably set their hands and
seals (or caused these presents signed by their proper corporate officers and
caused their proper corporate seal to be hereto affixed) this 15th day of August
1996
Signed, sealed and delivered SWIMLINE CORP
in the presence of
/s/ Herman Schwimmer
--------------------------L.S.
BY: HERMAN SCHWIMMER, President
AMERICAN TISSUE CORPORATION
--------------------------L.S.
<PAGE>
On the day of
to me known and known to me to be the individual described in, and who executed,
the foregoing instrument, and acknowledged to me that he executed the same.
State of New York
County of
On the day of 19 , before me personally came
to me known, who, being by me duly sworn, did depose and say that he resides at
No.
that he is the of
the corporation mentioned in, and which executed, the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of said
corporation: and that he signed h name thereto by like order.
================================================================================
LEASE
================================================================================
Dated, _____________________________________________19
In Consideration of the letting of the premises within mentioned to the
within named Tenant and the sum of $1.00 paid to the undersigned by the within
named Landlord, the undersigned do hereby covenant and agree, to and with the
Landlord and the Landlord's legal representatives, that if default shall at any
time be made by the said Tenant in the payment of the rent and the performance
of the covenants contained in the within lease, on the Tenant's part to be paid
and performed, that the undersigned will well and truly pay the said rent, or
any arrears thereof, that may remain due unto the said Landlord, and also pay
all damages that may arise in consequence of the non-performance of said
covenants, or either of them, without requiring notice of any such default from
the said Landlord. The undersigned hereby waives all right to trial by jury in
any action or proceeding hereinafter instituted by the Landlord, to which the
undersigned may be a party.
In Witness Whereof, the undersigned ha set hand and seal this
day of ,19
WITNESS
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease Agreement"), dated as of March 20, 1998,
by and between WATERFORD INDUSTRIAL DEVELOPMENT AGENCY (the "Agency"), a public
benefit corporation of the State of New York having its office at 65 Broad
Street, Town Hall, Waterford, New York 12188 and the Grand LLC (the "Company"),
a limited liability company duly organized and existing under the laws of the
State of New York with an office at 135 Engineers Road, Hauppauge, New York
11788.
W I T N E S S E T H:
WHEREAS, Title 1 of Article 18-A of the General Municipal Law of the State
of New York (the "Enabling Act") was duly enacted into law as Chapter 1030 of
the Laws of 1969 of the State of New York, as amended from time to time; and
WHEREAS, the Enabling Act authorizes and provides for the creation of
industrial development agencies for the benefit of the several counties, cities,
villages and towns in the State of New York (the "State") and empowers such
agencies, among other things, to acquire, construct, reconstruct, lease,
improve, maintain, equip and sell land and any building or other improvement,
and all real and personal properties, including, but not limited to, machinery
and equipment deemed necessary in connection therewith, whether or not now in
existence or under construction, which shall be suitable for manufacturing,
warehousing, research, commercial or industrial facilities, including industrial
pollution control facilities, in order to advance the job opportunities, health,
general prosperity and economic welfare of the people of the State and to
improve their prosperity and standard of living; and
WHEREAS, the Enabling Act further authorizes each such agency to lease and
sell any or all of its facilities on such terms and conditions as it deems
advisable, to issue its bonds for the purpose of carrying out any of its
corporate purposes and, as security for the payment of the principal and
redemption price of, and interest on, any such bonds so issued and any
agreements made in connection therewith to pledge the revenues and receipts from
its facilities or from the sale thereof to secure the payment of such bonds and
interest thereon; and
WHEREAS, the Agency was created, pursuant to and in accordance with the
provisions of the Enabling Act, by Chapter 528 of the Laws of 1981 of the State
of New York, as amended by Chapter 184 of the Laws of 1989 of the State of New
York (collectively with the Enabling Act, the "Act") and is empowered under the
Act to
<PAGE>
undertake the providing of the "Facility" (as that quoted term is hereinafter
defined) in order to so promote job opportunities, health, general prosperity
and economic welfare of the people of the State and improve their standard of
living; and
WHEREAS, pursuant to and in accordance with a certain resolution of the
Agency (the "Agency Inducement Resolution") and the inducement agreement (the
"Inducement Agreement") dated as of September 3, 1996, the Agency agreed to
provide certain financial assistance for the purpose of financing the
improvement of a certain existing 608,000 square foot warehouse and
manufacturing facility (the "Project Facility") on a parcel of land located in
the Town of Waterford, Saratoga County, New York (the "Land") (the Land and the
Project Facility being collectively referred to herein as the "Facility")
consisting of:
(A) Taking possession of the Facility and leasing the Facility back
to the Company as a straight-lease transaction as defined in
Section 854(15) of the New York State General Municipal Law;
(B) An exemption from state and local sales and use taxes with
respect to the qualifying personal property portion of the
Facility;
(C) An exemption from mortgage recording tax;
(D) An exemption from general real property taxation with respect to
the Facility, which exemption shall be offset, in whole or in
part, by contractual payments in lieu of taxes by the Company for
the benefit of affected tax jurisdictions (such contemplated
financial assistance as set forth in A, B, C and D herein being
collectively hereinafter referred to as the "Financial
Assistance").
WHEREAS, the Agency has agreed to undertake the improvement of the Facility
in accordance with the terms hereof and to lease the Facility to the Company
upon the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto hereby formally covenant,
agree and bind themselves as follows (but, in the case of the Agency, as limited
by Section 12.9 hereof), to wit:
2
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following words and terms as used in this
Lease Agreement shall have the following meanings unless the context or use
indicates another or different meaning or intent;
"Act" means Title 1 of Article 18-A of the General Municipal Law of the
State, as amended from time to time, together with Chapter 528 of the Laws of
1981 of the State, as amended by Chapter 184 of the Laws of 1989 of the State of
New York.
"Agency" means (i) the Waterford Industrial Development Agency and its
successors and assigns and (ii) any public benefit corporation or political
subdivision resulting from or surviving any consolidation or merger to which the
Waterford Industrial Development Agency or its successors or assigns may be a
party.
"Agency Deed" means the deed evidencing the proposed transfer of the
Facility subject to the Mortgage and any other security agreements of the Bank
from the Agency to the Company.
"Agency Documents" means collectively, this Lease Agreement, the Agency
Deed, the PILOT Agreement and all other documents and instruments executed in
connection therewith.
"Agency Final Resolution" means the resolution dated November 17, 1997
approving the Agency Documents and authorizing the execution and delivery of the
Agency Documents.
"Agency Inducement Resolution" means the resolution of the Agency dated
September 3, 1996 authorizing the Agency's provision of Financial Assistance and
the Inducement Agreement.
"Authorized Representative" means, in the case of the Agency, its Chairman,
Vice Chairman or Secretary; in the case of the Company, its manager; and in the
case of both, such additional persons as, at the time, are designated to act on
behalf of the Agency or the Company, as the case may be, by written certificate
furnished to the Bank and the Agency or the Company, as the case may be,
containing the specimen signature of each such person and signed on behalf of
(i) the Agency by its Chairman, Vice Chairman or Secretary and (ii) the Company
by its manager.
3
<PAGE>
"Bank" means Bank United having an office at 3200 Southwest Freeway,
Houston, Texas 77027.
"Closing Date" means the date of execution and delivery of this Lease
Agreement by the Agency and the Company, being March 20, 1998.
"Company" means the Grand LLC, a limited liability company duly organized
and existing under the laws of the State of New York with an office at 135
Engineers Road, Hauppauge, New York 11788.
"Company Deed" means the deed, dated as of March 16, 1998 evidencing the
transfer of the Facility subject to the Mortgage and any other security
agreements of the Bank, from the Company to the Agency.
"Company Documents" means collectively, this Lease Agreement, the Note, the
Mortgage, the Company Deed, the PILOT Agreement and all other documents and
instruments executed in connection therewith.
"Condemnation" means the taking of title to, or the use of, Property under
the exercise of the power of eminent domain by any governmental authority.
"Enabling Act" means Title 1 of Article 18-A of the General Municipal Law
of the State.
"Event of Default" means any of those events defined as Events of Default
by Section 10.1(a) hereof. An Event of Default shall "exist" if an Event of
Default shall have occurred and be continuing.
"Facility" means the Land and the Project Facility.
"GAAP" means generally accepted accounting principles in the United States
of America applied on a consistent basis.
"Improvements" means certain equipment, machinery and other items of
tangible and personal property installed or to be installed in and around the
Project Facility.
"Independent Counsel" means an attorney or attorneys or firm or firms of
attorneys duly admitted to practice law before the highest court of the State.
"Inducement Agreement" means the agreement dated as of September 3, 1996
between the Agency and the Company.
4
<PAGE>
"Land" means the real property described in Exhibit "A" attached hereto,
which real property is the site of the Facility.
"Lease Agreement" means this Lease Agreement by and between the Agency and
the Company, as the same may be amended from time to time.
"Lease Documents" means collectively the Agency Documents and the Company
Documents.
"Lease Term" means the duration of the leasehold estate created by this
Lease Agreement, as specified in Section 5.2 hereof.
"Lien" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes, other than liens arising in connection with
sales of goods or provision of services in the ordinary course of business to
the Facility, provided such liens are discharged within a reasonable period of
time, but in any event as soon as practicable, by payment or other release of
the underlying obligation, or the Company is otherwise contesting the obligation
in good faith through appropriate procedures while maintaining adequate reserves
to the extent required by GAAP. The term "lien" includes reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar encumbrances, including but not limited
to mechanics', materialmen's, warehousemen's and carriers' liens and other
similar encumbrances affecting real property. For the purposes of this Lease
Agreement, a Person shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement or other arrangement
pursuant to which title to the Property has been retained by or vested in some
other Person for security purposes.
"Mortgage" means that mortgage and security agreement dated as of October
17, 1997 between the Company and the Bank.
"Net Proceeds" means so much of the gross proceeds with respect to which
that term is used as remain after payment of all expenses, costs and taxes
(including reasonable attorneys' fees) incurred in obtaining such gross
proceeds.
5
<PAGE>
"Note" means the mortgage note in the amount of $6,500,000 dated as of
October 17, 1997 from the Company to the Bank which is secured by the Mortgage.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"PILOT Agreement" means the Agreement for Payment in Lieu of Taxes dated as
of March 20, 1998, by and between the Agency and the Company.
"Protect Facility" has the same meaning as that defined in the Recital
clauses.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"State" means the State of New York.
Section 1.2. Rules of Construction. Unless the context clearly indicates to
the contrary, the following rules shall apply to the construction of this Lease
Agreement.
(a) Words importing the singular number shall include the plural number and
vice versa.
(b) All references herein to particular articles or sections are references
to articles or sections of this Lease Agreement.
(c) The use of the neuter gender shall include the masculine and feminine
genders as well.
(d) The table of contents and headings of the Sections herein are solely
for convenience of reference and shall not control, affect the meaning of, or be
taken as an interpretation of any provision of this Lease Agreement.
(e) All terms "herein", "hereof" and "hereunder" and other words of similar
import refer to this Lease Agreement as a whole and not to any particular
Article, Section or other subdivision.
(f) All accounting terms not otherwise defined herein shall have the
meanings assigned to them by, and all computations herein provided for shall be
made in accordance with, generally accepted accounting principles. All
references to "generally accepted accounting principles" refer to such
principles as they exist at the date of application thereof.
6
<PAGE>
ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.1. Representations and Covenants of the Agency. The Agency makes
the following representations and covenants as the basis for the undertakings on
its part herein contained:
(a) The Agency is duly established under the provisions of the Act and has
the power to enter into this Lease Agreement and to carry out its obligations
hereunder. Based upon representations of the Company as to the utilization of
the Facility, the Facility will constitute a "project", as such quoted term is
defined in the Enabling Act. By proper official action, the Agency has been duly
authorized to execute, deliver and perform this Lease Agreement.
(b) Neither the execution and delivery of this Lease Agreement, the
consummation of the transactions contemplated hereby nor the fulfillment of or
compliance with the provisions of this Lease Agreement will conflict with or
result in a breach by the Agency of any of the terms, conditions or provisions
of the Act, the by-laws of the Agency or any restriction, agreement, instrument,
order or judgment to which the Agency is a party or by which it is bound, or
will constitute a default by the Agency under any of the foregoing.
(c) The Agency will cause the Facility to be acquired and will lease the
Facility to the Company pursuant to this Lease Agreement, all for the purpose of
promoting the industry, health, welfare, convenience and prosperity of the
inhabitants of the State and improving their standard of living. The Agency will
cooperate with the Company in good faith in the improvement of the Facility.
Section 2.2. Representations and Covenants of the Company. The Company
makes the following representations and covenants as the basis for the
undertakings on its part herein contained:
(a) The Company is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of New York and duly
authorized to do business under the Laws of the State of New York, has the power
to enter into this Lease Agreement and to carry out its obligations hereunder
and by proper action of its members has been duly authorized to execute, deliver
and perform this Lease Agreement.
(b) Neither the execution and delivery of this Lease Agreement or the other
Company Documents to which the Company is a
7
<PAGE>
party, the consummation of the transactions contemplated hereby or thereby nor
the fulfillment of or compliance with the provisions hereof or thereof will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Articles of Organization and Operating Agreement of the
Company or any agreement, instrument, order or judgment to which the Company is
a party or by which it is bound, or will constitute a default under any of the
foregoing, or result in the creation or imposition of any Lien of any nature
upon any of the Property of the Company under the terms of any such instrument,
agreement, order or judgment.
(c) The acquisition and improvement of the Facility by the Agency and the
lease thereof by the Agency to the Company will not result in the removal of a
plant or facility of the Company, any Facility occupant or any proposed Facility
occupant from one area of the State to another area of the State or in the
abandonment of one or more plants or facilities of the Company, any Facility
occupant or proposed Facility occupant located in the State.
(d) The Facility is and will be located entirely within the boundaries of
the Town of Waterford and no portion of the Facility is or will be located
outside the boundaries of the Town of Waterford. The Facility will constitute a
"project" within the definition of the Act and the Company will not take any
action, or fail to take any action, which would cause the Facility not to
constitute a "project" as such quoted term is defined in the Act.
(e) The Company has the ability to improve the Facility and shall proceed
with due diligence to complete the acquisition of the Facility in accordance
with the terms hereof.
(f) The Facility is not now, and when improved shall not then be, in
violation of any applicable zoning, planning or building law or regulation of
any governmental authority having jurisdiction over the Facility. (For purposes
of the preceding sentence, the applicability of such laws and regulations is to
be determined as if the Company and not the Agency were the owner of the
Facility.)
(g) The Facility and the operation thereof will comply with all presently
applicable building, zoning, environmental, planning and subdivision laws, rules
and regulations of all governmental bodies, boards and agencies having
jurisdiction over the Facility during the Lease Term (the applicability of such
laws, rules and regulations being determined both as if the Agency were the
owner of the Facility and as if the Company and not the Agency were the owner of
the Facility).
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(h) The Facility does not constitute a project where facilities or property
that are primarily used in making retail sales of goods and/or services to
customers who personally visit such facilities or property constitute more than
one-third of the cost of the Facility.
(i) The Company, in accordance with Section 874(g) of the Act, will file
annually with the New York State Department of Taxation and Finance, a statement
in such form and in such a manner as may be prescribed by the Commissioner of
Taxation of Finance, of the value of all sales tax exemptions claimed by the
Company under the authority granted by the Agency.
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ARTICLE III
CONVEYANCE AND USE OF FACILITY
Section 3.1. Agreement to Convey to Agency. The Company will convey to the
Agency title to the Facility.
Section 3.2. Use of Facility. Subsequent to the Closing Date, the Company
shall use the Facility for any purpose so long as the proposed use does not
cause the Facility to fail to qualify as a "project" under the Act.
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ARTICLE IV
ACQUISITION OF THE FACILITY
Section 4.1. Improvement of the Facility.
(a) The Company shall, on behalf of the Agency, proceed with due diligence
to improve the Facility.
(b) The Company may revise, amend or modify the plans and specifications
for the Facility without the prior written consent of the Agency provided that
such revisions, amendments or modifications do not cause the Facility to fail to
qualify as a "project" under the Act.
(c) Title to all materials, equipment, machinery and other items of
Property intended to be incorporated or installed in and to become part of the
Facility shall vest in the Agency immediately upon payment therefor. The Company
shall execute, deliver and record or file all instruments necessary or
appropriate to so vest title in the Agency and shall take all action necessary
or appropriate to protect such title against claims of any third Persons, except
as otherwise set forth herein.
(d) The Agency shall enter into, and accept the assignment of, such
contracts as the Company may request in order to effectuate the purposes of this
Section 4.1; provided, however, that no such contract shall result in the
assumption by the Agency of any obligation to pay any cost or expense.
(e) The Agency hereby appoints the Company its true and lawful agent, and
the Company hereby accepts such agency, (i) to improve the Facility (ii) subject
to Section 4.1(d) hereof, to make, execute, acknowledge and deliver any
contracts, orders, receipts, writings and instructions with any other Persons,
and in general to do all things which may be requisite or proper, all for the
improvement of the Facility with the same powers and with the same validity as
the Agency could do if acting in its own behalf, (iii) to pay all fees, costs
and expenses incurred in the improvement of the Facility from funds made
available therefor in accordance with this Lease Agreement and (iv) to ask,
demand, sue for, levy, recover and receive all such sums of money, debts, dues
and other demands whatsoever which may be due, owing and payable to the Agency
under the terms of any contract, order, receipt, or writing in connection with
the improvement of the Facility, and to enforce the provisions of any contract,
agreement, obligation, bond or other performance security in connection with
same. The Company
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at its option may cause a parent, subsidiary or affiliate of the Company or any
partnership or corporation or limited liability company in which the Company has
an interest to perform its duties hereunder.
(f) The Company shall give, or cause to be given, all notices required by,
and comply or cause compliance with, all laws, ordinances, municipal rules and
regulations and requirements of all governmental agencies and public authorities
applying to or affecting the conduct of the operation of the Facility, and the
Company will defend and save the Agency and its officers, members, agents,
servants and employees harmless from all fines and penalties due to failure to
comply therewith. All permits and licenses necessary for the operation of the
Facility shall be procured promptly by the Company.
(g) The Company will, as agent for the Agency, (i) comply with the
requirements of Article 8 of the Labor Law of the State to the extent, if any,
applicable to the Facility and (ii) cause all persons involved in the
acquisition of the Facility to comply with Article 8 of the Labor Law of the
State to the extent, if any, applicable to the Facility.
Section 4.2. Company to Pay Facility Costs. The Company agrees, for the
benefit of the Agency, to pay all costs of improving the Facility.
Section 4.3. Certificates of Completion. The Company shall proceed to
complete the improvement of the Facility by no later than March 1, 1998.
Completion of the improvement of the Facility shall be evidenced by a
certificate signed by an Authorized Representative of the Company stating that
(A) the improvement of the Facility has been completed and (B) the payment of
all labor, services, materials and supplies used in such improvement has been
made or provided for.
Section 4.4. Remedies to be Pursued Against Contractors, Subcontractors,
Materialmen and their Sureties. In the event of a default by any contractor,
subcontractor or materialman under any contract made by it in connection with
the Facility or in the event of a breach of warranty with respect to any
materials, workmanship, or performance guaranty, the Company may proceed, either
separately or in conjunction with others, to exhaust the remedies of the Company
and the Agency against the contractor, subcontractor or materialman so in
default and against each surety for the performance of such contract. The
Company may, in its own name or, in the name of and as agent for the Agency,
prosecute or defend any such action or proceeding or take any other action
involving any
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such contractor, subcontractor, materialman or surety which the Company deems
reasonably necessary, and in such event the Agency hereby agrees, at the
Company's sole expense, to cooperate fully with the Company and to take all
action necessary to effect the substitution of the Company for the Agency in any
such action or proceeding. The Company shall notify the Agency of any actions or
proceedings taken hereunder. The Net Proceeds of any amounts recovered pursuant
to this Section 4.4 shall be payable to the Company for its own account.
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ARTICLE V
DEMISING CLAUSES AND RENTAL PROVISIONS
Section 5.1. Demise of Facility. The Agency hereby demises and leases the
Facility to the Company and the Company hereby leases and takes the Facility
from the Agency upon the terms and conditions of this Lease Agreement.
Section 5.2. Duration of Lease Term; Quiet Enjoyment.
(a) The Agency shall deliver to the Company sole and exclusive possession
of the Facility (subject to the provisions of Section 10.2 and the provisions of
Section 8.3 hereof) and the leasehold estate created hereby shall commence on
the Closing Date and the Company shall accept possession of the Facility at such
time.
(b) Except as provided in Sections 10.2 and 11.1 hereof, the leasehold
estate created hereby shall terminate upon termination of the PILOT Agreement.
(c) The Agency shall, subject to the provisions of Section 8.2 hereof,
neither take nor suffer to permit any action, other than pursuant to Article X
of this Lease Agreement, to prevent the Company during the Lease Term from
having quiet and peaceable possession and enjoyment of the Facility as
hereinabove provided.
Section 5.3. Rents and other Amounts Payable.
(a) Upon execution of this Lease Agreement, the Company shall pay or cause
to be paid as basic rent for the Facility the sum of Ten Dollars ($10.00), such
amount being computed on the basis of one dollar ($1.00) for each calendar year,
or part thereof, that is anticipated to be included within the Lease Term.
(b) In addition to the payments of rent pursuant to Section 5.3(a) hereof,
throughout the Lease Term, the Company shall pay to or upon the order of the
Agency as additional rent, within thirty (30) days of the receipt of demand
therefor, the sum of the reasonable expenses of the Agency and the members
thereof incurred (A) by reason of the Agency's ownership, financing or leasing
of the Facility, including, but not limited to any filing or recording fees
imposed upon the Agency in connection with the filing or recording of any of the
Lease Documents or any other certificates associated therewith and (B) in
connection with the carrying out of the Agency's duties and obligations under
this Lease Agreement, the
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payment of which is not otherwise provided for under this Lease Agreement (the
foregoing shall not be deemed to include any annual or continuing administrative
or management fee beyond any initial fee of the Agency). Agency shall provide
Company with copies of bills and receipts for all expenses for which Agency
seeks repayment.
(c) The Company shall also pay, as rent due hereunder, amounts due pursuant
to the PILOT Agreement at the times and in the manner prescribed therein.
(d) The Company agrees to make the above-mentioned payments without further
notice in lawful money of the United States of America as, at the time of
payment, shall be legal tender for the payment of public and private debts. In
the event the Company shall fail to timely make any payment required in this
Section 5.3, the Company shall pay the same together with interest at an
interest rate of nine percent (9%) per annum until paid.
Section 5.4. Obligations of Company Hereunder. The obligations of the
Company to make the payments required by this Lease Agreement and to perform and
observe any and all of the other covenants and agreements on its part contained
herein shall be general obligations of the Company and shall be absolute and
unconditional irrespective of any defense or any rights of setoff, recoupment or
counterclaim it may otherwise have against the Agency or the Bank. The Company
agrees it will not (i) suspend, discontinue or abate any payment required by
this Lease Agreement or (ii) fail to observe any of its other covenants or
agreements in this Lease Agreement or (iii) except as provided in Section 11.1
hereof, terminate this Lease Agreement for any cause whatsoever including,
without limiting the generality of the foregoing, failure of the Company to
lease, occupy or use part of the Facility as contemplated in this Lease
Agreement or otherwise. Nothing contained in this Section 5.4 shall be construed
to release the Agency from the performance of any of the agreements on its part
contained in this Lease Agreement, and in the event the Agency should fail to
perform any such agreement, the Company may institute such action against the
Agency as the Company may deem necessary to compel performance (subject to the
provisions of Section 12.9 herein) or recover damages for non-performance;
provided, however, that the Company shall look solely to the Agency's estate and
interest in the Facility for the satisfaction of any right or remedy of the
Company for the collection of a judgment (or other judicial process) requiring
the payment of money by the Agency in the event of any liability on the part of
the Agency, and no other property or assets of the Agency shall be subject to
levy, execution, attachment or other enforcement
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procedure for the satisfaction of the Company's remedies under or with respect
to this Lease Agreement, the relationship of the Agency and the Company
hereunder, or the Company's use and occupancy of the Facility, or any other
liability of the Agency to the Company.
Section 5.5. Additional Rent. All moneys payable by the Company under this
Lease Agreement, except those set forth in Section 5.3(a) hereof, shall be
deemed additional rent hereunder.
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ARTICLE VI
MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE
Section 6.1. Maintenance and Modifications of Facility by Company.
(a) The Company agrees that during the Lease Term it will (i) keep the
Facility in good operating condition, ordinary wear and tear excepted, and (ii)
make all necessary repairs and replacements to the Facility (whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen).
(b) For the remainder of the Lease Term, the Company may make any
additions, modifications or improvements to the Facility or any part thereof,
provided that:
(i) the Company shall (A) give, or cause to be given, all notices
required by, and comply or cause compliance with, all laws, ordinances,
municipal rules and regulations and requirements of all governmental
agencies and public authorities applying to or affecting the conduct of
work on such additions, modifications or improvements to the Facility or
part thereof (the applicability of such laws, ordinances, rules and
regulations to be determined both as if the Agency were the owner of the
Facility and as if the Company and not the Agency were the owner of the
Facility), (B) defend and save the Agency and its officers, members,
agents, servants and employees harmless from all fines and penalties due to
failure to comply therewith, (C) promptly procure all permits and licenses
necessary for the prosecution of any work described in this Section 6.l(b)
and (D) make all payments in lieu of taxes required by Section 6.8 hereof.
Agency shall promptly notify Company of any such claim made and Agency
shall fully cooperate in the defense of any such claim;
(ii) the Bank (if required by the Mortgage or Note) has consented to
said additions, modifications or improvements;
(iii) the additions, modifications or improvements to the Facility
shall not constitute an Event of Default; and
(iv) any such addition, modification or improvement to the Facility
shall not cause the Facility to fail to qualify as a "project" under the
Act.
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Section 6.2. Installation of Additional Equipment. The Company from time to
time may install any additional machinery, equipment and other personal property
not constituting part of the Facility on or in the Facility (which may be
attached or affixed to the Facility) as it may deem desirable. The Company from
time to time with the prior written consent of the Bank in accordance with the
Mortgage and Note, may remove or permit the removal of such machinery, equipment
and, with the prior written consent of the Bank in accordance with the Mortgage
and Note, other personal property from the Facility and may create or permit to
be created any Lien on such machinery, equipment or other personal property. The
Agency shall not be responsible for any loss or damage to any property installed
pursuant to this Section 6.2 unless such damage was caused by the negligence or
wrongful acts of the Agency, its employees, agents or contractors.
Section 6.3. Taxes, Assessments and Utility Charges.
(a) The Company agrees to pay, as the same respectively become due, (i) all
taxes and governmental charges of any kind whatsoever which may at any time be
lawfully assessed or levied against or with respect to the Facility and any
machinery, equipment or other property installed or bought by the Company
therein or thereon, (ii) all utility and other charges, including "service
charges", incurred or imposed for the operation, maintenance, use, occupancy,
upkeep and improvement of the Facility and (iii) all assessments and charges of
any kind whatsoever lawfully made by any governmental body for public
improvements, provided that, with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of
years, the Company shall be obligated under this Lease Agreement to pay only
such installments as are required to be paid during the Lease Term.
(b) The Company may in good faith contest any such taxes, assessments and
other charges provided that the Company shall notify the Agency as soon as
practicable of such contest. In the event of any such contest, the Company may
permit the taxes, assessments and other charges so contested to remain unpaid
during the period of such contest and any appeal therefrom, unless the Agency
shall notify the Company that the Agency or its members, officers, agents or
servants may be liable for prosecution for such nonpayment in which event the
Company shall promptly take such action as shall be satisfactory to the Agency.
Agency shall cooperate with Company in any such contest of taxes.
Section 6.4. Insurance Required. At all times throughout the term of the
Lease Agreement, including without limitation
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during the Construction Period, the Company shall, at its sole expense, maintain
insurance against such risks and for such amounts as are customarily insured
against by businesses of like size and type and shall pay, as the same become
due and payable, all premiums in respect thereto, including, but not necessarily
limited to:
(a) Worker's compensation insurance, disability benefits insurance, and
each other form of insurance which the Company is required by law to provide,
covering loss resulting from injury, sickness, disability or death of employees
of the Company who are located at or assigned to the Facility.
(b) Insurance against loss or damage by fire, lightning and other
casualties customarily insured against, with a uniform standard extended
coverage endorsement, such insurance to be in an amount not less than the full
replacement value of the completed Improvements, exclusive of footings and
foundations, as determined by a recognized appraiser or insurer selected by the
Company and acceptable to the Bank, but in no event less that the principal
amount of the Note outstanding.
(c) Insurance protecting the Company against loss or losses from
liabilities imposed by law or assumed in any written contract and arising from
personal injury and death or damage to the property of others caused by any
accident or occurrence, with limits of not less than $3,000,000 per accident or
occurrence on account of personal injury, including death resulting therefrom,
and $1,000,000 per accident or occurrence on account of damage to the property
of others, excluding liability imposed upon the Company by an applicable
worker's compensation law; and a blanket excess liability policy in an amount
not less than $10,000,000, protecting the Company against any loss or liability
or damage for personal injury or property damage. All policies required by this
subsection (c) shall name the Agency as an additional insured.
(d) A policy or policies of flood insurance in an amount not less than the
principal amount of the Bonds or the maximum amount of flood insurance available
with respect to the Project Facility under the Flood Disaster Protection Act of
1973, as amended, whichever is less. This requirement will be waived upon
presentation of evidence satisfactory to the Bank that no portion of the
Improvements is located within an area identified by the U.S. Department of
Housing and Urban Development as having special flood hazards.
The Agency does not in any way represent that the insurance specified
herein, whether in scope or in limits of coverage, is
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adequate or sufficient to protect the Company's business or interests.
Section 6.5. Additional Provisions Respecting Insurance.
(a) All insurance shall be procured and maintained with financially sound
and generally recognized responsible insurance companies selected by the Company
and authorized to write such insurance in the State. Such insurance may be
written with deductible amounts comparable to those on similar policies carried
by other companies engaged in businesses similar in size, character and other
respects to those in which the Company is engaged. All policies evidencing the
insurance required by Section 6.4(b) hereof shall include the Agency as
additional named insured and shall provide for at least ten (10) days prior
written notice of the cancellation or modification thereof to the Agency and the
Bank. All policies evidencing the insurance required by Sections 6.4(b) and (d)
hereof shall contain a standard New York mortgagee clause showing the interest
of the Bank as mortgagee, shall provide for payment to the Bank of the net
proceeds of insurance resulting from any claim for loss or damage thereunder and
all policies of insurance required by Section 6.4 hereof shall provide for at
least thirty (30) days prior written notice of the restriction, cancellation or
modification thereof to the Agency and the Bank.
(b) All such policies of insurance, or a certificate or certificates of the
insurers that such insurance is in force and effect, shall be deposited with the
Agency and the Bank on or before Closing Date. The Company shall deliver to the
Agency and the Bank on or before the first day of each insured year thereafter a
certificate dated not earlier than the immediately preceding month reciting that
there is in full force and effect, with a term covering at least the next
succeeding year, insurance in the amounts and of the types required in the Lease
Agreement. Prior to the expiration of any such policy, the Company shall furnish
the Agency and the Bank with evidence that such policy has been renewed or
replaced or is no longer required by the Lease Agreement. The Company shall
provide such further information to the Agency and the Bank from time to time
with respect to insurance coverage as the Agency or the Bank in their discretion
may reasonably require.
Section 6.6. Application of Net Proceeds of Insurance. The Net Proceeds of
the insurance carried pursuant to the provisions of Section 6.4 (b) hereof shall
be applied toward extinguishment or satisfaction of the liability with respect
to which such insurance proceeds may be paid.
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Section 6.7. Right of Agency to Pay Taxes, Insurance Premiums and Other
Charges. If the Company fails (i) to pay any tax, assessment or other
governmental charge required to be paid by Section 6.3 hereof or (ii) to
maintain any insurance required to be maintained by Section 6.4 hereof, the
Agency may pay such tax, assessment or other governmental charge or for such
insurance, except in such case where the Company's failure to pay under clause
(i) above or to maintain under clause (ii) above arises out of a good faith
contest or challenge by the Company through the appropriate procedures and while
maintaining adequate reserves in accordance with GAAP. The Company shall
reimburse the Agency for any amount so paid by the Agency pursuant to this
Section 6.7 together with interest thereon from the date of payment by the
Agency to the date of reimbursement at the rate of interest equal to nine
percent (9%) per annum, or the maximum rate permitted by law, whichever is less.
Section 6.8. Payments in Lieu of Taxes. It is recognized that under the
provisions of the Act, the Agency is required to pay no taxes or assessments
(other than special assessments) upon any of the property acquired by it or
under its jurisdiction or control or supervision or upon its activities. The
Company therefore agrees to make such payments in lieu of taxes as are required
pursuant to the PILOT Agreement at the times and in the manner called for
therein.
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ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1. Damage or Destruction.
(a) If the Facility shall be damaged or destroyed (in whole or in part) at
any time during the Lease Term:
(i) the Agency shall have no obligation to replace, repair, rebuild or
restore the Facility unless such damage was caused by the negligence or
wrongful acts of the Agency, its employees, agents or contractors;
(ii) there shall be no abatement or reduction in the amounts payable
by the Company under this Lease Agreement or the PILOT Agreement (whether
or not the Facility is replaced, repaired, rebuilt or restored);
(iii) the Company shall promptly give notice thereof to the Agency;
(iv) except as otherwise provided in Section 7.1(b) hereof, the
Company may promptly replace, repair, rebuild or restore the Facility with
such changes, alterations and modifications as may be desired by the
Company provided that such changes, alterations or modifications do not so
change the nature of the Facility that it does not constitute a "project"
as such quoted term is defined in the Act; and
(v) the entire net proceeds of insurance resulting from such damage or
destruction shall be payable to the Bank and subject to the provisions of
Section 7.1(c) below, at the option of the Company, with the approval of
the Bank in accordance with the Mortgage and Note, either (i) be disbursed
by the Bank to replace, repair, rebuild, restore or relocate the Facility
or (ii) pay principal of the Note in an amount equal to such net proceeds.
If the net proceeds of the insurance is not otherwise payable to the Bank
in accordance with the Mortgage and Note, then such net proceeds shall be
payable to the Company.
(b) The Company shall not be obligated to replace, repair, rebuild or
restore the Facility, if the Company shall notify the Agency and the Bank
that, in its sole judgment, it does not deem it practical or desirable to
so replace, repair, rebuild or restore the Facility in which event the net
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proceeds of insurance will be applied by the Bank, in redirection of the
principal balance of the Note.
(c) If the Company elects to replace, repair, rebuild, restore or relocate
the Facility, said determination shall be subject to the approval of the
Bank in accordance with the Mortgage and Note and to the following
conditions: (i) the Facility shall be in substantially the same condition
as existed prior to the damage or destruction; (ii) the Facility shall be
subject to no Liens other than the Mortgage; and (iii) the Bank shall be
satisfied that between the net proceeds of any insurance and additional
sums deposited with the Bank by the Company, there will be sufficient funds
to complete the replacement repair, rebuilding, restoration or relocation
of the Facility.
Section 7.2. Condemnation.
(a) If at any time during the Lease Term the whole or any part of title to,
or the use of, the Facility shall be taken by Condemnation:
(i) the Company shall notify the Agency of such fact;
(ii) the Agency shall not be obligated to restore or replace the
Facility;
(iii) there shall be no abatement or reduction in the amounts payable
by the Company under this Lease Agreement or the PILOT Agreement (whether
or not the Facility is restored or replaced);
(iv) except as otherwise provided in Section 7.2 (b) hereof, the
Company may promptly restore or replace the Facility with such changes,
alterations or modifications as may be desired by the Company, provided
that such changes, alterations and modifications do not so change the
nature of the Facility that it does not constitute a "project" as such
quoted term is defined in the Act; and
(v) the entire net proceeds of any award in such condemnation
proceeding shall be payable to the Bank in accordance with the Mortgage and
Note.
The Company may apply so much as may be necessary of the Net Proceeds of
any award in any Condemnation proceeding to the payment of the costs of the
restoration or replacement of the Facility. In
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the event such Net Proceeds of any Condemnation award are not sufficient to pay
in full the costs of such restoration of the Facility, the Company may pay from
its own moneys that portion of the costs thereof in excess of such Net Proceeds.
(b) The Company shall not be obligated to restore or replace the Facility
if the Company shall notify the Agency and the Bank that, in its sole judgment,
it does not deem it practical or desirable to so restore or replace the Facility
in which event the Net Proceeds of any Condemnation award shall be applied by
the Bank in accordance with the Mortgage and Note in reduction of the principal
balance of the Note.
(c) The Company shall have control of any Condemnation proceeding with
respect to the Facility or any part thereof and may negotiate the settlement of
any such proceeding. The Agency shall, at the sole expense of the Company,
cooperate fully with the Company in the handling and conduct of any such
Condemnation proceeding. In no event shall the Agency voluntarily settle, or
consent to the settlement of, any such Condemnation proceeding without the
written consent of the Company.
Section 7.3. Condemnation of Company-Owned Property. Subject to the rights
of the Bank, the Company shall be entitled to the proceeds of any Condemnation
award or portion thereof made for damage to or taking of any Property which, at
the time of such damage or taking, is owned by the Company and is not part of
the Facility.
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ARTICLE VIII
SPECIAL COVENANTS
Section 8.1. No Warranty of Condition or Suitability by the Agency;
Acceptance "As Is". THE AGENCY MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS
TO THE CONDITION, TITLE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS OF THE
FACILITY OR ANY PORTION THEREOF OR THAT THE FACILITY OR ANY PORTION THEREOF IS
OR WILL BE SUITABLE FOR THE COMPANY'S PURPOSES OR NEEDS. THE COMPANY SHALL AND
DOES ACCEPT POSSESSION TO THE FACILITY "AS IS" WITHOUT RECOURSE OF ANY NATURE
AGAINST THE AGENCY FOR ANY CONDITION NOW OR HEREAFTER EXISTING. NO WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY ARE MADE. IN THE EVENT OF
ANY DEFECT OR DEFICIENCY OF ANY NATURE, WHETHER LATENT OR PATENT, THE AGENCY
SHALL HAVE NO RESPONSIBILITY OR LIABILITY WHATSOEVER WITH RESPECT THERETO.
Section 8.2. Hold Harmless Provisions.
(a) The Company hereby releases the Agency and its members, officers,
agents (other than the Company) and employees from, agrees that the Agency and
its members, officers, agents and employees shall not be liable for and agrees
to indemnify, defend and hold the Agency and its members, officers, agents and
employees harmless from and against any and all (i) liability for loss or damage
to Property or injury to or death of any and all Persons that may be occasioned,
directly or indirectly, by any cause whatsoever pertaining to the Facility or
arising by reason of or in connection with the occupation or the use thereof or
the presence of any Person or Property on, in or about the Facility, (ii)
liability arising from or expense incurred by the Agency's financing,
constructing, owning or selling of the Facility, including without limiting the
generality of the foregoing, all liabilities or claims arising as a result of
the Agency's obligations under the Lease Documents, (iii) all claims arising
from the exercise by the Company of the authority conferred upon it pursuant to
Section 4.1(e) of this Lease Agreement, and (iv) all causes of action and
attorneys' fees and any other expenses incurred in connection with any suits or
actions which may arise as a result of any of the foregoing, provided that any
such losses, damages, liabilities or expenses of the Agency are not incurred or
do not result from the intentional or willful wrongdoing of the Agency or any of
its members, agents (other than the Company) or employees.
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(b) In the event of any claim against the Agency or its officers, members,
employees, servants or agents (other than the Company) by any employee of the
Company or any contractor of the Company or anyone directly or indirectly
employed by any of them or anyone for whose acts any of them may be liable, the
obligations of the Company to indemnify and hold harmless the Agency, its
officers, members, employees or agents (other than the Company) under Section
8.2(a) hereof shall not be limited in any way by any limitation on the amount or
type of damages, compensation or benefits payable by or for the Company or such
contractor under worker's compensation acts, disability benefits or other
employee benefit acts; provided, however, that the parties hereto specifically
acknowledge that there are no third party beneficiaries (other than the members,
employees or agents of the Agency in their capacity as such) to this Section
8.2.
(c) The Company agrees to defend, indemnify and hold harmless the Agency
and its members, employees, agents and officers from and against any claims,
actions, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses (including, without limitation, reasonable attorney and consultation
fees, investigation and laboratory fees, court costs and litigation expenses) of
whatever kind or nature, known or unknown, contingent or otherwise arising out
of or in any way related to:
(l) The disposal, release or threatened release of any hazardous or
toxic substances at, on or in the Facility;
(2) Any personal injury (including wrongful death or property damage,
real or personal) arising out of or related to such hazardous or toxic
substances;
(3) Any lawsuit brought or threatened, settlement reached or
government order given relating to such hazardous or toxic substances;
and/or
(4) Any violation of any law, order, regulation, requirement, or
government authority, or any policies or requirements of the Agency which
are based upon or in any way related to such hazardous or toxic substances.
For purposes of the Section 8.2(c), "hazardous and toxic substances"
includes, without limitation, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances or related
materials defined in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials
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Transportation Act, as amended, the Clean Air Act, the Clean Water Act, the Safe
Water Drinking Act, the Toxic Substances Control Act, the New York Environmental
Conservation Law, the Resource Conservation and Recovery Act, as amended, and in
the regulations adopted and publications promulgated pursuant to any of the
foregoing. The provisions of this Section 8.2(c) shall be in addition to any
other obligations and liabilities the Company may have to the Agency at common
law, and shall survive the transactions contemplated herein.
(d) To effectuate the provisions of this Section 8.2 hereof, the Company
agrees to provide for and insure, in the liability policies required in Section
6.4(b) hereof, its liabilities assumed pursuant to this Section 8.2, to the
extent such insurance is commercially reasonably available.
(e) Notwithstanding any other provisions of this Lease Agreement, the
obligations of the Company pursuant to this Section 8.2 shall remain in full
force and effect after the termination of this Lease Agreement until the
expiration of the period stated in the applicable statute of limitations during
which a claim, cause of action or prosecution relating to the matters herein
described may be brought and the payment in full or the satisfaction of such
claim, cause of action or prosecution and the payment of all expenses and
charges incurred by the Agency, and any of its officers, members, employees,
servants or agents, relating to the enforcement of the provisions herein
specified.
Section 8.3. Right of Access to the Facility. The Agency shall be entitled,
on reasonable notice at reasonable times, to inspect those portions of the
Facility not designated as confidential by the Company. Neither the Agency nor
any agent or assignee of the Agency shall be entitled to inspect areas of the
Facility designated as confidential by the Company or to observe the operations
of the Facility designated as confidential by the Company or to demand or
receive from the Company any information or data regarding the design or
operation of the Facility or the manufacturing process at the Facility (which
shall not be unreasonably withheld or delayed).
Section 8.4. Agreement to Provide Information. The Company agrees, whenever
requested in writing by the Agency, to provide such information as is reasonably
necessary to enable the Agency to make any reports required by law or
governmental regulation.
Section 8.5. Compliance With Orders, Ordinances, Etc.
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(a) The Company agrees that it will, throughout the Lease Term, promptly
comply with all statutes, codes, laws, acts, ordinances, orders, judgments,
decrees, injunctions, rules, regulations, permits, licenses, authorizations,
directions and requirements of all federal, state, county, municipal and other
governments, departments, agencies, commissions, boards, companies or
associations insuring the premises, courts, authorities, officials and officers,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to the Facility or any part thereof, or to any use,
manner of use or condition of the Facility or any part thereof (the
applicability of such laws, ordinances, rules and regulations to be determined
both as if the Agency were the owner of the Facility and as if the Company and
not the Agency were the owner of the Facility).
(b) Notwithstanding the provisions of subsection (a) of this Section 8.5,
the Company may in good faith contest the validity or the applicability of any
requirement of the nature referred to in subsection (a), provided that the
Company shall have first notified the Agency of such contest. In such event, the
Company may fail to comply with the requirement or requirements so contested
during the period of such contest and any appeal therefrom unless the Agency
shall notify the Company that by failure to comply with such requirement or
requirements the Agency or any of its members, officers, agents (other than the
Company) or servants may be liable for prosecution for failure to comply
therewith in which event the Company shall promptly take such action with
respect thereto as shall be satisfactory to the Agency.
Section 8.6. Performance by Agency of Company's Obligations. Should the
Company fail to make any payment or to do any act as herein provided for a
period of thirty (30) days after receiving written notice of such failure to pay
or act, the Agency may, but need not, without releasing the Company from any
obligation herein, make or do the same, including without limitation, appearing
in and defending any action purporting to affect the rights or powers of the
Company or the Agency, and paying all expenses, including, without limitation,
reasonable attorneys' fees; and the Company will pay immediately upon demand all
sums so expended by the Agency under the authority hereof together with interest
thereon from the date of payment by the Agency to the date of reimbursement by
the Company at a rate equal to nine percent (9%) per annum, or the maximum rate
permitted by law, whichever is less.
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ARTICLE IX
ASSIGNMENTS AND SUB-LEASING
Section 9.1. Restriction on Transfer of Facility by Agency.
(a) Except as otherwise specifically provided in Sections 5.2 and 10.2
hereof, the Agency shall not convey, sell, transfer, lease or otherwise dispose
of the Facility or any part thereof, or any of its rights under this Lease
Agreement, to any other Person, without the prior written consent of the Company
and the Bank (if required by the Mortgage, Note or other loan documents).
Further, the Agency shall not, without the prior written consent of the Company
and the Bank (if required by the Mortgage, Note or other loan documents), create
or incur or suffer or permit to be created or incurred or to exist any mortgage,
lien, charge or encumbrance on the Facility or any part thereof.
(b) No conveyance of all or any portion of the Facility or interest therein
effected under the provisions of this Section 9.1 shall entitle the Company to
any abatement or diminution or any amounts payable under this Lease Agreement.
No assignment, sale or other disposition of the Facility or any portion thereof
shall relieve the Company from primary liability for any of its obligations
hereunder.
Section 9.2. Assignment, Sub-leasing or Mortgaging by the Company.
(a) The Company may assign its interest in this Lease Agreement in whole or
in part and may sub-lease the Facility or mortgage its interest therein, as a
whole or in part provided that:
(l) With respect to any assignment to any Person other than to a
parent, subsidiary or other affiliated entity to the Company (as to which
consent is not required), the Agency (which shall not be unreasonably
withheld or delayed) and the Bank (if required by the Mortgage, Note or
other loan documents) give their prior written consent to the form and
content of such assignment of this Lease Agreement.
(2) No assignment, sub-lease or mortgage shall relieve the Company
from primary liability for any of its obligations hereunder;
(3) Any assignee shall assume the obligations of the Company hereunder
to the extent of the interest thereon;
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(4) The Company shall, within ten (10) business days after the
delivery thereof, furnish or cause to be furnished to the Agency and the
Bank a true and complete copy of each such assignment, sub-lease or
mortgage, as the case may be, and, with respect to an assignment, the
instrument of assumption;
(5) The proposed assignee's or sub-tenant's use of the Facility shall
constitute a "project" under the Act; and
(6) No Event of Default after notice and beyond applicable grace
period has occurred and is continuing under the Note or, if caused by the
Company has occurred under this Lease Agreement or any of the Company
Documents.
(b) Prior to the purported effective date of any assignment or sublease
pursuant to subsection (a) of this Section 9.2, the Company, if requested by the
Agency or the Bank, shall furnish the Agency and the Bank with an opinion of
Independent Counsel, in form and substance reasonably satisfactory to the Agency
and the Bank, to the effect that the provisions of paragraphs (2), (3) and (5)
of subsection (a) have been fulfilled.
(c) Except as provided in subsection (a) hereof, the Company shall not
assign this Lease Agreement, in whole or in part, nor sub-lease (except the
Sublease) or mortgage its interest in the Facility in whole or in part.
Section 9.3. Merger of Agency.
(a) Nothing contained in this Lease Agreement shall prevent the
consolidation of the Agency with, or merger of the Agency into, any other public
benefit corporation or political subdivision which has the legal authority to
own and lease the Facility, provided that and upon any such consolidation,
merger or transfer, the due and punctual performance and observance of all the
agreements and conditions of this Lease Agreement to be kept and performed by
the Agency shall be expressly assumed in writing by the public benefit
corporation or political subdivision resulting from such consolidation or
surviving such merger.
(b) At least thirty (30) days prior to the date of any such consolidation
or merger, the Agency shall give notice thereof in reasonable detail to the
Company. The Agency promptly shall furnish such additional information with
respect to any such transaction as the Company reasonably may request.
Section 9.4. Removal of Equipment.
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(a) In any instance where the Company determines that any item of equipment
or any part thereof has become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary, the Company may remove the same from the Facility
and may sell, trade-in, exchange or otherwise dispose of the same, as a whole or
in part.
(b) The removal of any item of equipment from the Facility pursuant to this
Section 9.4 shall not entitle the Company to any abatement or diminution of any
amounts payable under this Lease Agreement.
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ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default Defined.
(a) The following shall be "Events of Default" under this Lease Agreement
and the terms "Event of Default" or "Default" shall mean, whenever they are used
in this Lease Agreement, any one or more of the following events:
(l) The failure of the Company to observe and perform any covenants
contained in Section 8.2 hereof;
(2) (i) Subject to clause (ii), the failure by the Company to observe
and perform any covenant, condition or agreement hereunder on its part
to be observed or performed (except obligations referred to in Section
10.l(a)(l) hereof) for a period of thirty (30) days after written
notice, specifying such failure and requesting that it be remedied, is
given to the Company by the Agency;
(ii) If the covenant, condition or agreement which the Company
has failed to observe or perform is of such a nature that it cannot
reasonably be fully cured within such thirty (30) days, and provided
the Company has obtained the prior written consent of the Agency,
which consent shall not be unreasonably withheld, the Company shall
not be in default if it commences a cure within such thirty (30) days
and thereafter diligently proceeds with all action required to
complete the cure and, in any event, it completes such cure within
sixty (60) days of such written notice from the Agency, unless the
Agency gives its written consent to a longer period.
(3) The occurrence of an "Event of Default" under the PILOT Agreement.
(4) The Company or its Authorized Representative shall have made, in
any certificate, statement, representation or warranty heretofore or
hereafter furnished to the Agency in connection with the financing of the
Facility, a material representation which proves to have been false and
misleading as of the time such statement was made, or any such certificate,
statement, representation or warranty shall omit
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to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(b) Notwithstanding the provisions of Section 10.l(a), if by reason of
force majeure either party hereto shall be unable in whole or in part to carry
out its obligations under the Lease Agreement and if such party shall give
notice and full particulars of such force majeure in writing to the other party
and to the Bank within a reasonable time after the occurrence of the event or
cause relied upon, the obligations under this Lease Agreement of the party
giving such notice, so far as they are affected by such force majeure, shall be
suspended during the continuance of the inability, which shall include a
reasonable time for the removal of the effect thereof. The suspension of such
obligations for such period pursuant to this subsection (b) shall not be deemed
an Event of Default under this Section 10.1. Notwithstanding anything to the
contrary in this subsection (b), an event of force majeure shall not excuse,
delay or in any way diminish the obligations of the Company to make the payments
required by Sections 4.2, 5.3, 6.3, 6.7, 6.8 and 8.6 hereof, to obtain and
continue in full force and effect the insurance required by Sections 6.4 and 6.5
hereof, to provide the indemnity required by Section 8.2 hereof and to comply
with the provisions of Sections 2.2(d), 4.2, 6.7 and 8.2 hereof. The term "force
majeure" as used herein shall include, without limitation, acts of God, strikes,
lockouts or other industrial disturbances, acts of public enemies, orders of any
kind of the government of the United States of America or of the State or
municipal government or any of their departments, agencies, governmental
subdivisions, or officials, or any civil or military authority, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fire, hurricanes, storms,
floods, washouts, droughts, arrests, restraint of government and people, civil
disturbances, explosions, breakage or accident to machinery, transmission pipes
or canals, partial or entire failure of utilities, or any other cause or event
not reasonably within the control of the party claiming such inability. It is
agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the party having
difficulty, and the party having difficulty shall not be required to settle any
strike, lockout and other industrial disturbances by acceding to the demands of
the opposing party or parties.
Section 10.2. Remedies on Default.
(a) Whenever any Event of Default exists the Agency may, to the extent
permitted by law, take any one or more of the following remedial steps:
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(l) Declare, by written notice to the Company, to be immediately due
and payable, whereupon the same shall become immediately due and payable,
all unpaid installments of the rent payable pursuant to Section 5.3,
provided that the payments not yet due under Section 5.3(c) shall not be
accelerated but shall remain payable in accordance with the PILOT
Agreement;
(2) Terminate the Lease Term and all rights of the Company under this
Lease Agreement except as set forth in Section 11.3 hereof;
(3) Bring any other action at law or in equity which may appear
necessary or desirable to collect any amounts then due or thereafter to
become due hereunder and to enforce the obligations, agreements or
covenants of the Company under this Lease Agreement.
(b) No action taken pursuant to this Section 10.2 shall relieve the Company
from its obligation to make all payments required by Sections 5.3 and 8.2
hereof.
Section 10.3. Remedies Cumulative. No remedy herein conferred upon or
reserved to the Agency is intended to be exclusive of any other available
remedy, but each and every such remedy shall be cumulative and in addition to
every other remedy given under this Lease Agreement or now or hereafter existing
at law or in equity. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Agency to exercise any remedy reserved to it in this Article X, it shall not
be necessary to give any notice, other than such notice as may be herein
expressly required in this Lease Agreement.
Section 10.4. Agreement to Pay Attorneys' Fees and Expenses. In the event
the Company should default after notice and beyond applicable grace period under
any of the provisions of this Lease Agreement and the Agency should employ
attorneys or incur other expenses for the collection of amounts payable
hereunder or the enforcement of performance or observance of any obligations or
agreements on the part of the Company herein contained, the Company shall, on
demand therefor, pay to the Agency the reasonable fees of such attorneys and
such other expenses so incurred.
Section 10.5. No Additional Waiver Implied by One Waiver. In the event any
agreement contained herein should be breached by
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either party and thereafter such breach be waived by the other party, such
waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.
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ARTICLE XI
EARLY TERMINATION OF LEASE AGREEMENT;
OPTIONS IN FAVOR OF COMPANY
Section 11.1. Early Termination of Lease Agreement. So long as no Event of
Default or any event, which with notice or a lapse of time would become an Event
of Default after notice and beyond applicable grace period, shall have occurred
and be continuing, the Company shall have an option, in its sole discretion, to
terminate the Lease Term at any time upon filing with the Agency a certificate
signed by an Authorized Representative of the Company stating the Company's
intention to do so pursuant to this Section 11.1 and upon compliance with the
requirements set forth in Sections 11.2, 11.3 and 11.4 hereof.
Section 11.2. Conditions to Early Termination of Lease Agreement. In the
event the Company exercises its option to terminate the Lease Term in accordance
with Section 11.1 hereof, and at the time of such exercise all amounts payable
to the Agency under this Lease have not been paid in full, the Company shall
comply with the requirements set forth in the following two subsections:
(a) The following payments shall be made:
(l) To the Agency: an amount certified by an Authorized Representative
of the Agency sufficient to pay all reasonable unpaid fees and expenses of
the Agency and its members, officers, agents and employees, incurred under
this Lease Agreement;
(2) To the appropriate Person: an amount sufficient to pay all other
reasonable fees, expenses or charges, if any, due and payable or to become
due and payable under this Lease Agreement and not otherwise paid or
provided for.
Agency shall provide Company with copies of bills and receipts for all
expenses for which Agency seeks repayment.
(b) The Company shall exercise its option to terminate the Lease Term in a
certificate signed by an Authorized Representative of the Company and specifying
the date upon which the payments pursuant to subdivision (a) of this Section
11.2 shall be made.
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Section 11.3. Obligation to Purchase Facility. Upon expiration of the Lease
Term in accordance with Section 5.2(b) hereof, or upon early termination of the
Lease Term, in accordance with Section 11.1 hereof, Section 10.2 hereof, or any
other section of this Lease Agreement or upon termination of the Lease Term for
any other reason or as a result of any other action or condition, the Company
shall purchase the Facility from the Agency for the purchase price of One Dollar
($1.00) and the Agency and the Company shall promptly terminate this Lease
Agreement. The closing on the purchase of the Facility shall take place not
later than sixty (60) days after the termination of the Lease Term, or such
later date as shall be mutually acceptable to the Agency and the Company.
Section 11.4. Conveyance on Purchase. At the closing of the purchase of the
Facility pursuant to Section 11.3 hereof, the Agency shall, upon receipt of the
purchase price and, if applicable, the payment of all payments set forth in
Section 11.2 (a) herein, deliver to the Company all necessary documents (a) to
convey to the Company title to the Property being purchased, as such Property
exists, subject only to the following: (i) any Liens to which title to such
Property was subject when conveyed to the Agency, (ii) any Liens created at the
request of the Company, to the creation of which the Company consented or in the
creation of which the Company acquiesced, including without limitation, the
Mortgage, (iii) any Liens resulting from the failure of the Company to perform
or observe any of the agreements on its part contained in this Lease Agreement
or arising out of an Event of Default, (b) to release and convey to the Company
all of the Agency's rights and interest in and to any rights of action or any
Net Proceeds of insurance or Condemnation awards with respect to the Facility.
Upon conveyance of title to the Company, the Company shall assume the
obligations of the Agency under the Mortgage. Upon delivery of such title by the
Agency, the Company shall deliver a release and agreement that the exculpation
provisions and the obligations of the Company in Sections 5.3(b) and 8.2 hereof,
together with the obligation to insure the same, shall survive such conveyance
on purchase of the Facility.
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court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 12.4. Amendments, Changes and Modifications. This Lease Agreement
may not be amended, changed, modified, altered or terminated except by an
instrument in writing executed by the parties hereto.
Section 12.5. Execution of Counterparts. This Lease Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 12.6. Applicable Law. This Lease Agreement shall be governed
exclusively by the applicable laws of the State.
Section 12.7. Survival of Obligations. The obligations of the Company to
make the payments required by Section 5.3(b) hereof and to provide the indemnity
required by Section 8.2 hereof shall survive the termination of this Lease
Agreement.
Section 12.8. Table of Contents and Section Headings Not Controlling. The
Table of Contents and the Headings of the several Sections in this Lease
Agreement have been prepared for convenience of reference only and shall not
control, affect the meaning or be taken as an interpretation of any provision of
this Lease Agreement.
Section 12.9. No Recourse; Special Obligation.
(a) All covenants, stipulations, promises, agreements and obligations
(collectively, the "Obligations") of the Agency contained in this Lease
Agreement and in the other Lease Documents shall be deemed to be the Obligations
of the Agency and not of any member, officer, servant or employee of the Agency
(collectively, the "Employee of the Agency") in his individual capacity, and no
recourse under or upon any Obligation in the Lease Documents contained or
otherwise based upon or in respect of this Lease Agreement or the other Lease
Documents, or for any claim based thereon or otherwise in respect hereof or
thereof, shall be had against any past, present or future Employee of the
Agency, as such, or of any successor public benefit corporation or political
subdivision or any person so executing any of the Lease Documents on behalf of
the Agency, either directly or through the Agency or any successor public
benefit corporation or political subdivision or any person executing any of the
Lease Documents, it being expressly understood that Lease Documents issued
thereunder are solely corporate obligations, and that no such personal liability
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whatever shall attach to, or is or shall be incurred by any such Employee of the
Agency or of any successor public benefit corporation or political subdivision
or any person so executing the Lease Documents or under or by reason of the
Obligations, contained in the Lease Documents or implied therefrom; and that any
and all such personal liability of, and any and all such rights and claims
against, every Employee of the Agency because of the creation of the
indebtedness thereby authorized by the Lease Documents, or under or by reason of
the Obligations contained in any of the Lease Documents or implied therefrom,
are, to the extent permitted by law, expressly waived and released as a
condition of, and as a consideration for, the execution of the Lease Documents.
(b) The Obligations and agreements of the Agency contained herein shall not
constitute or give rise to an obligation of the State of New York, or the Town
of Waterford, New York and neither the State of New York nor the Town of
Waterford, New York shall be liable thereon, and further such Obligations shall
not constitute or give rise to a general obligation of the Agency, but rather
shall constitute limited obligations of the Agency payable solely from the
revenues of the Agency derived and to be derived from the lease or other
disposition of the Facility.
(c) Notwithstanding any provision of this Lease Agreement to the contrary,
the Agency shall not be obligated to take any action pursuant to any provision
hereof unless (i) the Agency shall have been requested to do so in writing by
the Company and (ii) if compliance with such request is reasonably expected to
result in the incurrence by the Agency (or any member, officer, agent, servant
or employee of the Agency) of any liability, fees, expenses or other costs, the
Agency shall have received from the party making such request security or
indemnity satisfactory to the Agency for protection against all such liability
and for the reimbursement of all such fees, expenses and other costs.
Section 12.10. Recording and Filing. This Lease Agreement or a memorandum
thereof shall be recorded by the Agency in the Office of the Clerk of Saratoga
County, New York, or in such other office as may at the time be provided by law
as the proper place for the recordation or filing thereof.
Section 12.11. Subordination. This Lease Agreement and the rights of the
Company hereunder are in all respects subject and subordinate to the Mortgage.
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IN WITNESS WHEREOF, the Company and the Agency have caused this Lease
Agreement to be executed in their respective names by Authorized
Representatives, and the Agency and the Company have caused this Lease Agreement
to be dated as of March 16, 1998.
WATERFORD INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ JOHN E. LAWLER
--------------------------
John E. Lawler, Chairman
GRAND LLC
By: /s/ Nourollah Elghanayan
--------------------------
Nourollah Elghanayan
STATE OF NEW YORK )
COUNTY OF Albany ) ss.:
On this 18th day of March, 1998 before me personally came JOHN E. LAWLER,
to me known, who being by me duly sworn, did depose and say that he resides in
the Town of Waterford, New York, that he is the CHAIRMAN of WATERFORD INDUSTRIAL
DEVELOPMENT AGENCY, the public benefit corporation of the State of New York
described in and which executed the within Lease Agreement; and that he signed
his name thereto by authority of such public benefit corporation.
/s/ CHRISTOPHER M. SCARINGE
----------------------------------------
Notary Public
CHRISTOPHER M. SCARINGE
Notary Public, State of New York
No. 4976097
Qualified in Albany County
Commission Expires January 14, 1999
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STATE OF NEW YORK )
COUNTY OF Suffolk ) ss.:
On this 16th day of March, 1998, before me personally came Nourollah
Elghanayan to me known, who being by me duly sworn, did depose and say that he
resides in 135 Engineers Rd, Hauppauge, NY, that he is a member of GRAND LLC,
the business limited liability company described in and which executed the
within Lease Agreement and that he had authority to sign the foregoing
instrument on behalf of said company; and that he duly acknowledged to me that
he executed the foregoing instrument as the act and deed of said corporation.
/s/ ROBERT JOSEPH KNOPF
----------------------------------------
Notary Public
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30, 1998
42
AGREEMENT
THIS AGREEMENT is entered into as of the 23rd day of November, 1992, by and
between BOISE CASCADE CORPORATION, a Delaware corporation (hereinafter called
"Boise Cascade") and AMERICAN TISSUE MILLS OF OREGON, INC., a New York
corporation (hereinafter called "American Tissue");
In consideration of the covenants and agreements made herein by the
parties, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions.
(a) "Accounting Code" means the Costing/Billing Method at the St. Helens
Paper Mill attached hereto as Exhibit C.
(b) "Boise Cascade" means Boise Cascade Corporation, a Delaware
corporation.
(c) "Direct Costs" are those costs so-defined in the Accounting Code.
(d) "Exhibits" are those exhibits attached hereto and are incorporated
herein by reference as though fully set forth in the body of this Agreement.
(e) "Excluded Costs" are those costs so-defined in the Accounting Code.
(f) "Indirect Costs" are those costs so-defined in the Accounting Code.
(g) "Mill" means the St. Helens, Oregon, pulp and paper mill premises owned
and operated by Boise Cascade as more fully described in Exhibit B. Boise
Cascade represents that the
<PAGE>
description set forth in Exhibit B is true, accurate, and complete.
(h) "American Tissue" means American Tissue Mills of Oregon, Inc., a New
York corporation.
(i) "Paper Machine" means the No. 3 Tissue Paper Machine located at the No.
3 Paper Machine Building at the Mill ("No. 3 Paper Machine Building"), as more
fully set forth on Exhibit A, but specifically excludes the Real Property. The
Paper Machine does not include any part of the foundation; i.e., the support
which lies below the sole plate of the machine. The Paper Machine shall be
deemed to be personal property.
(j) "Real Property" means the No. 3 Paper Machine Building and the land
lying directly underneath same, as more fully described on Exhibit B-l, and
fixtures, facilities and appurtenances within the No. 3 Paper Machine Building,
but specifically excluding the Paper Machine.
(k) "Ton" is 2,000 pounds.
(1) "Capital Costs" are those costs defined in the Accounting Code as
capital improvements or capital repairs.
2. Purchase of Paper Machine. Boise Cascade hereby sells to American Tissue
and American Tissue hereby purchases from Boise Cascade the Paper Machine for
the purchase price of $5,000,000.00, payable as follows:
(a) $833,333.00 upon execution of this agreement;
(b) $166,667.00 by American Tissue's assumption of Boise Cascade's
obligation to Koplik Paper Associates ("Koplik") pursuant to a certain
agreement between
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Boise Cascade and Koplik dated October 20, 1992, a copy of which is
annexed hereto as Exhibit H; and
(c) $4,000,000.00 pursuant to the terms of a certain Promissory Note in
the form annexed hereto as Exhibit I executed by American Tissue in
favor of Boise Cascade simultaneously with the execution of this
Agreement.
Simultaneously with the execution hereof, Boise Cascade shall duly execute and
deliver to American Tissue an agreement to sell property in respect of the Paper
Machine in the form annexed hereto as Exhibit J. Except as otherwise provided
herein, American Tissue may remove the Paper Machine from the Mill. The Paper
Machine shall not be removed during the term of this Agreement, except that
component parts may be removed only for refurbishing or for the purpose of being
replaced by new components. Boise Cascade shall provide access to American
Tissue's title company representatives to survey the Real Property and/or the
Warehouse Lease Site at American Tissue's expense. Such access shall be given
upon 24 hours' advance notice.
3. Warranty. Boise Cascade warrants that it is the sole owner and has good
and marketable title to the Paper Machine, free and clear of any and all liens,
restrictions, reservations, security interests (except the security interest
created pursuant to Section 4 hereof), conditional sales agreements, leases,
claims and encumbrances of any nature whatsoever. Except for Boise Cascade's
representations set forth in Section 10 of this Agreement, the Paper Machine is
sold "AS IS, WHERE IS." THE WARRANTIES SET FORTH IN THIS SECTION 3 ARE EXCLUSIVE
AND IN LIEU
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OF ALL OTHER WARRANTIES RELATING TO THE PHYSICAL CONDITION OF THE PAPER MACHINE,
EXPRESS OR IMPLIED BY LAW OR TRADE USAGE, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BOISE CASCADE SHALL NOT BE
LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, IF ANY, INCLUDING BUT NOT
LIMITED TO LOSS OF USE OR LOSS OF ANTICIPATED PROFITS, WHETHER ARISING IN
CONTRACT, TORT, PRODUCT LIABILITY, OR OTHERWISE, ARISING OUT OF BREACH OF ANY
WARRANTY RELATING TO THE PHYSICAL CONDITION OF THE PAPER MACHINE.
4. Security Interest. To secure the timely payment and performance of the
Obligations (as defined below), American Tissue does hereby grant a purchase
money (to the fullest extent permitted by applicable law) security interest in
favor of Boise Cascade in and to all the estate, right, title, and interest of
American Tissue, whether now or later acquired, in and under the Paper Machine
(including all future improvements and additions and replacements thereto), and
all leasehold improvements hereafter made by American Tissue at the No. 3 Paper
Machine Building (collectively, the "Collateral"). American Tissue shall also
execute, deliver, and record a deed of trust, the form of which is attached as
Exhibit R. The "Obligations" means all obligations of American Tissue now
existing or hereafter arising under this Agreement, including but not limited to
the Promissory Note annexed as Exhibit I and the obligation of American Tissue
to make all payments and perform all obligations pursuant to the provisions of
this Agreement and to transfer title to the Paper Machine to Boise Cascade under
certain circumstances in accordance with the provisions of this Agreement. If
American
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Tissue is in default under the provisions of this Agreement after notice and the
expiration of any grace or cure periods provided for in this Agreement, then
upon not less than ten (10) days' notice to American Tissue, Boise Cascade may
exercise all the applicable rights and remedies granted to a secured party by
applicable law, including but not limited to the Uniform Commercial Code of the
state of Oregon. American Tissue represents, warrants, and covenants that the
security interest created hereby is prior to any other security interest or lien
created or suffered by American Tissue in the Collateral. American Tissue agrees
that from time to time, at the expense of American Tissue, American Tissue will
promptly execute and deliver all further instruments and documents and take all
further action that may be reasonably necessary or that Boise Cascade may
reasonably request in order to perfect and evidence the security interest
granted pursuant to this section, including the execution and filing of such
financing or continuation statements or amendments thereto as may be reasonably
necessary. The security interest shall remain in full force and effect until
payment in full of the Obligations and shall be binding upon American Tissue,
its successors and assigns, and shall inure to the benefit of Boise Cascade and
its successors and assigns. Notwithstanding the foregoing or anything else to
the contrary set forth in this Agreement, the security interest in favor of
Boise Cascade created pursuant to this Agreement shall be and shall be deemed to
be subordinate to the lien(s) and/or security interest(s) hereafter granted by
American Tissue to one or more third parties unrelated to American Tissue in
connection with the
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financing of the Paper Machine and all improvements, additions and replacements
hereafter made to the Paper Machine, provided, however, no such subordination
shall be effective unless substantially all of the net proceeds of such
financing (whether by way of a direct loan to American Tissue or a guarantee by
American Tissue of such financing from an unrelated third party) are applied
first in full or partial payment or prepayment of the promissory note from
American Tissue to Boise Cascade in the principal amount of $4,000,000.00 of
even date herewith referred to in Section 2 of this Agreement; provided further,
the maximum aggregate principal amount of all such financing to which Boise
Cascade's lien and security interest shall be subordinate ("Maximum Subordinated
Debt") with respect to the Paper Machine (in its current condition) shall equal
(i) $4,000,000.00 and (ii) the total accumulated costs of all those
improvements, additions and replacements made to the Paper Machine which are
capitalized pursuant to the capitalization and depreciation policies set forth
in Exhibit K during the three-year period commencing on the date of this
Agreement, without any deduction for depreciation. Such subordination shall be
automatic and no further instrument of subordination or other documentation
shall be required to effectuate or evidence such subordination. However, upon
the request of American Tissue or any third party(ies) providing any such
financing, Boise Cascade agrees from time to time, at the expense of Boise
Cascade, to promptly execute and deliver to American Tissue or any such third
party(ies) all further documents or instruments and take all further action
that may be reasonably necessary or that American
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Tissue may reasonably request to effectuate and/or evidence such subordination,
including the execution and filing of such documents as may be reasonably
necessary.
5. Lease. (a) Boise Cascade hereby leases the Real Property to American
Tissue for the term hereof and subject to the terms and conditions hereinafter
set forth. American Tissue shall obtain Boise Cascade's prior written consent
for any leasehold improvements or any improvements to loading docks which may be
utilized by American Tissue. Boise Cascade shall not unreasonably withhold or
delay such consent. Title to leasehold improvements to the Real Property shall
pass to Boise Cascade, without any payment owed to American Tissue, upon
termination of this Agreement. American Tissue shall have no title to any
improvements to the loading dock.
(b) American Tissue shall have the exclusive use of the second floor of the
No. 3 Paper Machine Building and shall have the non-exclusive use of all other
portions of the Real Property. Boise Cascade shall have access rights to the
second floor for Mill related purposes, but such access shall not unreasonably
interfere with American Tissue's use of the Paper Machine. American Tissue shall
have access rights to the Real Property, subject to Boise Cascade's Mill access
guidelines. Boise Cascade represents that such guidelines will not unreasonably
interfere with American Tissue's access to the Real Property or the use of the
common areas at the Mill.
(c) Boise Cascade shall maintain in good working order and repair the
exterior, public and structural portions of the Real Property and all systems,
facilities and installations
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relating thereto, including, without limitation, the plumbing, electrical,
heating, ventilating and air conditioning systems serving the Real Property,
with payment of the costs and expenses for such maintenance and repair to be in
accordance with Section 7 of this Agreement. Anything herein to the contrary
notwithstanding, any expenditure relating to first floor of the Real Property
which does not directly and exclusively benefit American Tissue shall be
appropriately apportioned between the parties.
(d) Boise Cascade hereby covenants, warrants and represents as follows: (i)
Boise Cascade has not received any notice of any claim, suit or other action or
investigation with respect to the violation of any Federal, state or local
environmental laws rules or regulations or OSHA regulations (or the state
equivalent thereof) due to the presence of hazardous materials on the Real
Property that remain unresolved or are pending; (ii) Boise Cascade is the
beneficial and record owner of the Real Property in fee absolute, and there are
no mortgages, liens, encumbrances, charges, tenancies, licenses, covenants,
conditions, restrictions, rights-of-way, easements, encroachments or other
restrictions of any nature or character whatsoever that unreasonably restrict or
prevent American Tissue's use of the Real Property; and (iii) Boise Cascade has
the full right and authority to lease the Real Property to American Tissue and
American Tissue may peaceably and quietly enjoy the Real Property. Boise Cascade
shall warrant and defend American Tissue's quiet enjoyment of the Real Property.
The foregoing
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representations shall survive the expiration or earlier termination of this
Agreement;
(e) Except with respect to hazardous waste placed on the Real Property by
American Tissue or its agents, employees and invitees (including contractors
hired by American Tissue), Boise Cascade shall be fully and solely responsible,
at Boise Cascade's sole and exclusive cost and expense, for any and all
maintenance, repairs or improvements, structural or otherwise, required due to
the presence of hazardous materials improperly deposited on the Real Property
and/or hazardous waste and any other preexisting conditions, normal wear and
tear excepted (i.e., the cost of repairing any part of the Real Property that
breaks or fails after the date hereof shall be a Direct Cost, but the cost of
repairing, replacing, or restoring any item damaged, broken, or currently
inoperative or defective shall be an Excluded Cost) in or upon any portion of
the Real Property and shall promptly perform any and all work relating to the
presence of such hazardous materials and any other preexisting conditions in
compliance with all applicable Federal, state and local rules and regulations.
None of such costs or expenses shall be borne by or passed along to American
Tissue, directly or indirectly;
(f) Simultaneously with the execution hereof, Boise Cascade and American
Tissue shall execute a Memorandum of Lease for recording, substantially in the
form annexed hereto as Exhibit M.
6. Operation of the Paper Machine. Boise Cascade shall, for the period
commencing on the date hereof and ending December 31, 2012:
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(a) Operate, service, and maintain the Paper Machine as directed by
American Tissue and handle, store and ship the finished paper from the Paper
Machine in such manner as American Tissue may direct, including the furnishing
of all labor, materials, parts, supplies, and sundries as may be reasonably
necessary or as American Tissue may so reasonably direct, all consistent with
Boise Cascade's historical practices. Boise Cascade shall use commercially
reasonable efforts to operate the Paper Machine efficiently and at a cost level
consistent with prior management practices at the Mill. Both parties recognize
that machine malfunction and down-time is a common occurrence associated with
the operation of the Paper Machine and such malfunctions and down-time shall not
be considered a breach or default under this Agreement, including where caused
by employee error, provided, however, that Boise Cascade generally manages and
supervises the operation and maintenance of the Paper Machine with the same
general level of care and supervision as with the other paper machines at the
Mill. The Paper Machine and the Real Property shall be maintained and operated
by Boise Cascade at American Tissue's expense as herein set forth in as good a
state of repair as the same now are and shall be maintained and repaired in
compliance with all federal, state, and local laws, rules, and regulations as
are now in force or as hereafter may be in force and in accordance with Boise
Cascade's safety standards and agreements applicable to the Mill. Both parties
shall use commercially reasonable efforts to reduce costs to be incurred by
American Tissue hereunder. Boise Cascade has obtained and shall maintain in full
force and effect continuously throughout the
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term of this Agreement, all permits, licenses, certificates and other
authorizations which are required with respect to the operation of the Paper
Machine and the Mill under and pursuant to all applicable laws, rules and
regulations except for general corporate business licenses that American Tissue
must obtain in its own name. Boise Cascade shall provide adequate manpower
levels for manning the operation of the Paper Machine at full capacity and in
accordance with any applicable labor agreements. Full capacity shall include any
increase in productive capacity as a result of capital improvements, operating
efficiencies and/or grade mix efficiencies.
(b) Without having to modify the current configuration of the Real Property
or any other property in any material respect, provide and maintain the Real
Property, including all structural facilities used in conjunction with the Paper
Machine (but excluding only the portions used for the roll grinder and slitter
grinder located in the No. 3 Paper Machine Building) and all services therein in
good condition so as to assure the continued operation of the Paper Machine in
accordance with this Agreement and, in addition, provide the necessary
equipment, facilities, and labor for transporting finished paper to the truck
facilities used in shipping finished paper from the Mill;
(c) Without having to modify the current configuration of the Real Property
or any other property in any material respect, provide to American Tissue in
connection with its operation of the Paper Machine, the use of such truck
facilities as may from time to time be necessary. If in the ordinary of business
Boise Cascade shall be unable to ship the finished
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paper from the Mill as American Tissue may direct or if American Tissue shall
decide to store any finished paper, Boise Cascade shall furnish storage
facilities, as set forth on Exhibit D, the location of which may be changed by
Boise Cascade from time to time; provided, however, that any alternate storage
facilities shall be comparable in size and accessibility to the storage
facilities described on Exhibit D and shall not be located so as to be
unreasonably inconvenient to American Tissue. Boise Cascade shall bear all of
the costs involved in relocating any material required to be moved to alternate
storage facilities as may be designated by Boise Cascade pursuant hereto. Boise
Cascade has no obligation to furnish storage facilities in excess of those
described on Exhibit D.
(d) Furnish to American Tissue from the pulp facilities at the Mill for use
in the Paper Machine, pulp in such quantities, types, and qualities as set forth
on Exhibit E and pursuant to all the terms and conditions of this Agreement and
Exhibit E. American Tissue shall have the right, at its own expense, to install
any necessary capital equipment solely in the Real Property to utilize secondary
fiber in addition to the minimum volume obligations on Exhibit E. American
Tissue shall have the right to provide its own pulp from outside sources from
time to time in addition to the pulp being furnished by Boise Cascade to
American Tissue pursuant to this Agreement. Use of fiber from third parties
shall not reduce American Tissue's or Boise Cascade's obligations under Exhibit
E.
(e) American Tissue shall be excused from the Exhibit E pulp purchase
requirements for any calendar year during
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the term of this Agreement to the extent that Boise Cascade is unable to produce
at least 35,000 tons per year from the Paper Machine as directed by American
Tissue, provided that American Tissue shall complete the capital improvement
items listed in Exhibit N in the time frame set forth in Section 9 of this
Agreement, American Tissue has consented to or approved all of Boise Cascade's
reasonable recommended maintenance and capital repair items in respect of the
Paper Machine, and American Tissue's designated mix of products produced by the
Paper Machine is generally consistent with the current mix of products produced
by the Paper Machine for the months of January 1992 and March 1992 as set forth
in Exhibit P; if so, Boise Cascade shall also give American Tissue a year-end
credit with respect to each such calendar year that Boise Cascade is unable to
produce at least 35,000 tons of tissue paper in accordance with the following
formula:
35,000 - (S+D)
------------------- x C = Year End Credit
35,000
Where: S = Tons of tissue paper produced in the
Calendar Year.
D = Lost tons due to market related
downtime requested by American Tissue
or capital repair or improvement
down-time requested by American Tissue
plus any tons that are not produced as
a result of an event of force majeure,
calculated based on 96 tons per day.
C = Indirect Costs plus Direct Costs
excluding the following items: steam,
power, fuel, dyes and chemicals.
Without in any way limiting Boise Cascade's obligations as set forth in
this Agreement, the failure of Boise Cascade to
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produce 35,000 tons in any calendar year shall not be considered a default
hereunder. Because the Agreement does not begin on January 1, there shall be a
modification of the calculation for the period beginning on the date of this
Agreement and ending December 31, 1993, as follows: The same formula as above
shall be utilized, except the numbers will be appropriately adjusted to reflect
the longer period of time (i.e., the 35,000 figure in the numerator and the
denominator shall be increased by a fraction: number of days from the date of
this Agreement to December 31, 1993, divided by 365).
7. Payment for Pulp and Services. For the services, facilities, and pulp
furnished by Boise Cascade in accordance with this Agreement, American Tissue
shall make payments to Boise Cascade as follows:
(a) All Direct Costs attributable to the operation, servicing, and
maintenance of the Paper Machine and the Real Property;
(b) For pulp, American Tissue shall pay Boise Cascade an amount for each
ton furnished in accordance with Exhibit E;
(c) Capital Costs with respect to the Paper Machine and Real Property and
Indirect Costs, as set forth on Exhibit C.
(d) All records of costs shall be kept in accordance with the Accounting
Code, and together with all related documentation shall be made available to
American Tissue upon request for review and audit pursuant to the provisions of
Section 19 hereof and determinations as to which are Direct Costs, Indirect
Costs, Excluded Costs, and Capital Costs shall be consistent with the Accounting
Code;
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(e) Direct Costs and Capital Costs shall be paid on or before the last day
of each calendar month against the invoice for the immediately preceding
calendar month, which invoice shall be received by American Tissue no later than
the tenth day of the month payment is due. Interest on the Direct Costs and the
amount due for pulp (Exhibit E) shall accrue beginning on the 16th day of the
month in which payment is due and continue until the amount due is paid.
Interest shall be calculated at the prime rate on the 15th of each calendar
month (or for the previous banking day if the 15th falls on a non-banking day)
plus 1%. The prime rate shall be "the base rate on corporate loans as posted by
at least 75% of the nation's 30 largest banks" as quoted by the edition of the
Wall Street Journal published on the 16th day of each calendar month (or on the
next day the Wall Street Journal shall be published).
Indirect costs shall be reasonably estimated for each calendar month and
payable on the 15th day of the calendar month in which they are actually
incurred. The estimate shall be adjusted and American Tissue shall pay, or be
credited, as the case may be, on the 15th day of the following calendar month,
to cause the amount paid to reflect the actual Indirect Costs for the preceding
month.
8. Mill Rules and Other Agreements. To the extent that American Tissue's
employees or contractors are at the Mill, they shall comply with all Mill rules,
standards, and guidelines, and all applicable laws, rules, and regulations, and
will take no action inconsistent with any contracts or agreements to which Boise
Cascade is a party, including but not limited to the labor
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agreement. Simultaneously with the execution hereof, Boise Cascade and American
Tissue shall execute an Assignment and Assumption Agreement in the form annexed
hereto as Exhibit Q.
9. Improvements to and Maintenance of the Paper Machine. American Tissue
may from time to time, at its sole cost and expense, improve or upgrade the
Paper Machine so as to enhance the production capabilities of the Paper Machine
and/or the quality or types of products produced by the Paper Machine. American
Tissue shall have the right to refuse approval of any suggested capital repair
or capital improvement not necessary for safe operation (in accordance with
Boise Cascade's Mill standards) or obligatory pollution control. Notwithstanding
anything to the contrary in this Agreement, American Tissue shall cause at
American Tissue's sole cost and expense, the required capital improvements set
forth on Exhibit N to be installed prior to December 31, 1995. All repairs,
maintenance, and improvements shall be scheduled so as to minimize disruption to
Boise Cascade's operations to the extent reasonably practicable. At American
Tissue's request, and to the extent reasonably and commercially practicable,
American Tissue shall have the right to approve, in advance, any extraordinary
repairs or maintenance which Boise Cascade intends to perform with regard to the
Paper Machine. Boise Cascade has the right to make all repairs as herein set
forth necessary for the Paper Machine to comply with its safety and
environmental standards described in Section 6 hereof. Boise Cascade shall
charge American Tissue its actual costs incurred in making or performing all
such maintenance, repairs and improvements, without the addition of any
"mark-up,"
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all in accordance with the Accounting Code. American Tissue shall not create or
suffer any liens or encumbrances against Boise Cascade's property, including the
Real Property.
10. Representations and Warranties of Boise Cascade. Boise Cascade
represents and warrants to American Tissue that:
(a) Boise Cascade is a corporation duly organized and validly existing
under the laws of the state of Delaware, has the corporate power and authority
to own, operate, and carry on the business of the Mill as contemplated by this
Agreement and is duly qualified and in good standing in the state of Oregon;
(b) Boise Cascade has obtained all necessary authorizations and approvals
from its Board of Directors required for the execution, delivery and performance
of this Agreement. Boise Cascade has the corporate power to execute and deliver
this Agreement and consummate such transactions contemplated hereby; such
execution and delivery does not, and such consummation will not, violate any
provision of Boise Cascade's Certificate of Incorporation or Bylaws or of any
mortgage, indenture, agreement, instrument, order, or decree to which Boise
Cascade is a party or by which it is bound and to the best of its knowledge will
not violate any law, governmental regulations, or restriction of any kind; and
the officers of Boise Cascade are duly authorized to execute this Agreement;
(c) Boise Cascade has no contractual or other obligations of any kind
outstanding which would be violated by or result in the imposition of a lien on
the Paper Machine or the Real Property by reason of the execution or performance
of this Agreement by Boise Cascade;
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(d) No consent, approval or authorization of, or registration,
qualification or filing with, any court, governmental agency or authority or any
other third party is required for the execution, delivery and performance of
this Agreement by Boise Cascade;
(e) No claims, actions, suits, proceedings or investigations exist relating
to or affecting this Agreement which, if adversely determined, would materially
adversely affect American Tissue's rights and remedies under this Agreement in
any material respect, nor does Boise Cascade know of any such threatened claims,
actions, suits, proceedings or investigations;
(f) No representation or warranty of Boise Cascade contained herein, or any
of the historical data in Exhibit 2B which is attached to Exhibit C, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein, or therein, not misleading;
(g) The financial projections set forth in Exhibit S, previously delivered
to American Tissue, have been made by Boise Cascade in good faith and are based
upon all existing agreements and obligations with respect to the Mill (inclusive
of the pulp mill). The projections are not predictions. All of Boise Cascade's
material contracts that affect Direct Costs are set forth on Exhibit L and have
not been amended or modified except as set forth in Exhibit L. To the best of
Boise Cascade's knowledge, there are no existing agreements or obligations that
will materially increase Indirect Costs, taken as a whole, inconsistent with
historical data set forth in Exhibit 2B which is attached to Exhibit C. To the
best of Boise Cascade's
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knowledge and belief, no material defaults exist in any such agreements or
obligations.
(h) Boise Cascade has the unrestricted right to sell the Paper Machine to
American Tissue pursuant to the terms and conditions of this Agreement.
11. Representations and Warranties of American Tissue. American Tissue
represents and warrants to Boise Cascade that:
(a) American Tissue is a corporation duly organized and validly existing
under the laws of the state of New York, has the corporate power and authority
to own, operate, and carry on the business as contemplated by this Agreement and
shall promptly take such actions so as to become duly qualified and in good
standing in the state of Oregon;
(b) Execution and delivery of this Agreement and consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of American Tissue and American Tissue has the corporate power and
authority to execute and deliver this Agreement and consummate such
transactions; such execution and delivery does not, and such consummation will
not, violate any provision of American Tissue's Certificate of Incorporation or
Bylaws or of any mortgage indenture, agreement, instrument, order, or decree to
which American Tissue is a party or by which it is bound and to the best of its
knowledge will not violate any law, governmental regulation, or restriction of
any kind;
(c) No consent, approval or authorization of, registration, qualification
or filing with, any court, governmental agency or authority or any other third
party is
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required for the execution, delivery and performance of this Agreement by
American Tissue;
(d) No claims, actions, suits, proceedings or investigations are pending or
threatened against American Tissue relating to or affecting this Agreement
which, if adversely determined, would adversely affect Boise Cascade's rights
and remedies under this Agreement in any material respect, nor does American
Tissue know of any grounds for any such claims, actions, suits, proceedings or
investigations;
(e) No representation or warranty of American Tissue contained herein
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein, or therein, not
misleading.
12. Brokers or Finders. To the best of each party's knowledge and belief,
neither American Tissue nor Boise Cascade has paid nor shall be required nor
requested to pay, directly or indirectly, any finder's or brokerage fee in
connection with the transaction contemplated hereby, except Koplik Paper
Associates, whose fee shall be paid solely by American Tissue (who agrees to pay
Boise Cascade's portion of the amount due as a credit against the purchase
price) in accordance with the letter agreement between the parties dated October
21, 1992, as modified by Exhibit 0.
13. Force Majeure and Labor Disturbances. If, by reason of fire, accident,
explosion, or strike, or if by reason of an event beyond Boise Cascade's and
American Tissue's control, such as a flood, freeze, drought, epidemic, embargo,
an inadequate supply of facilities or labor, power, fuel or any other material,
war,
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riot, acts of God or the public enemy, or a law, rule or regulation prohibiting
Boise Cascade or American Tissue from fully or partially complying with its
respective obligations hereunder (collectively, "force majeure,") Boise Cascade
shall be unable to deliver or provide or American Tissue shall be unable to
receive or use any portion of the pulp or of the services contracted for in this
Agreement, such portion of the pulp or services to be delivered or provided
hereunder during the period of any such disability shall be deemed eliminated
from this Agreement and the amounts payable by American Tissue pursuant to this
Agreement for such pulp or services during the period of any such disability
shall be eliminated in the case of total disability or reduced proportionately
in the case of partial disability, provided that during the period of such total
or partial disability, American Tissue shall pay to Boise Cascade the continuing
Direct Costs and Indirect Costs which are applicable.
Following the occurrence of any disability as aforesaid, which involves
damage or destruction to property, the party whose ability to perform hereunder
shall have been curtailed will immediately undertake and prosecute diligently to
repair and restore the property damaged or destroyed to a condition
substantially equivalent to its condition prior to such damage or destruction.
Boise Cascade and American Tissue shall provide and maintain the insurance
policies required by Exhibit F.
Any strike, lockout, or other labor disturbance shall be deemed an event of
force majeure. Boise Cascade shall have no
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obligation to American Tissue to operate the Mill during any period of strike or
lockout even though it may be within Boise Cascade's power to do so.
If Boise Cascade operates the Mill or any part thereof during any event of
force majeure, Boise Cascade shall operate the Paper Machine and supply pulp
therefore at the same relative rate of capacity as Boise Cascade operates the
other paper machines then owned by Boise Cascade at the Mill, provided that no
pulp produced by the Mill will be shipped to Vancouver, Washington, or elsewhere
until the pulp requirements of American Tissue are satisfied.
An event of force majeure shall include excessive governmental laws and
regulations enacted, promulgated, or issued after the date of this Agreement.
"Excessive governmental laws and regulations" are any federal, state, or local
laws, rules, regulations, and ordinances which, taken as a whole (i.e., the
cumulative effect of all such laws and regulations), would require for
compliance the expenditure by Boise Cascade of amounts exceeding $25 million
(exclusive of any monies currently being expended by Boise Cascade) over any
three-year period (part of which may include monies already spent at the time a
force majeure event is declared by Boise Cascade) with respect to the pulp mill.
14. Defaults; Waivers.
(a) If any party hereto shall fail to perform any material covenant or
agreement herein contained on its part to be performed, other than by reason of
Force Majeure as provided for in Section 13 hereof, and such default shall
continue for a
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period of 30 days, 10 days in the case of a monetary default (monetary defaults
are material), after written notice thereof given by the other party, the party
giving such notice may, at its option, terminate this Agreement by giving not
less than 3 business days' prior written notice of such termination to the
defaulting party, provided, however, that in the event a nonmonetary default
cannot be cured by the exercise of reasonable diligence within such period of 30
days, no such termination shall be effective if the defaulting party shall
promptly commence, within such 30-day period, the steps necessary to cure such
default and shall thereafter proceed with due diligence to complete the steps
necessary to cure such default as expeditiously as possible.
(b) If any party hereto files a debtor's petition for insolvency,
bankruptcy, or reorganization under any chapter of the Federal Bankruptcy Code
or state law relating to insolvency or bankruptcy, or if there is filed against
any party hereto any involuntary petition under any such law relating to
insolvency or bankruptcy praying that such party be reorganized or liquidated or
declared bankrupt which is not stayed or dismissed within 60 days after such
filing, or if a receiver or a trustee is appointed by any court to take
possession of all or a major portion of the assets of such party, then the other
party hereto may terminate this Agreement by giving not less than 3 business
days' prior written notice of such termination to the defaulting party.
(c) The failure of either party to exercise any right to terminate this
Agreement in the event of default shall not
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<PAGE>
constitute a waiver of the defaulting party's obligation to perform strictly in
accordance with the terms of this Agreement. Any such right to terminate shall
remain in full force and effect and may be exercised so long as such default
continues.
(d) Whether or not this Agreement is terminated by either party by reason
of any default of the other party hereto, the defaulting party shall at all
times be liable for all damages sustained as a result of its default except as
limited by Section 15(d) hereof.
(e) Each party shall use commercially reasonable efforts to mitigate the
damages suffered by the non-defaulting party with regard to any breach or
default of such party under the provisions of this Agreement except that Boise
Cascade shall be under no obligation to sell, lease or otherwise dispose of the
Paper Machine if Boise Cascade obtains possession or title to the Paper Machine.
(f) If Boise Cascade shall default under this Agreement and such default
prevents the operation of the Paper Machine, then for such period of time as
such default shall continue, American Tissue shall not be required to pay the
Direct Costs and Indirect Costs which are attributable to such period of
down-time.
(g) No waiver by either party of any default by the other party in the
strict and literal performance of or compliance with any provision, condition,
or requirement herein shall be deemed to be a waiver of strict and literal
performance of and compliance with any other provision, condition, or
requirement herein nor to be a waiver of or in any manner release
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<PAGE>
such other party from strict compliance with any provision, condition, or
requirement in the future; nor shall any delay or omission of either party
hereto to exercise any right hereunder in any manner impair the exercise of any
such right accruing to it thereafter. Except when otherwise expressly stated, no
remedy expressly granted herein to either party shall be deemed to exclude any
other remedy which would otherwise be available, including but not limited to a
lawsuit for damages filed in state or federal court in Oregon.
(h) If American Tissue shall default, after notice and the expiration of
any applicable cure period, under any financing obtained by American Tissue
secured by the Paper Machine or improvements thereto to which Boise Cascade's
lien pursuant to Section 4 has been subordinated, then such default shall
constitute a material default by American Tissue under this Agreement. American
Tissue shall provide Boise Cascade with prompt notice of any notice of default
received by American Tissue with regard to any other such financing.
(i) If American Tissue offsets any amounts owed to Boise Cascade hereunder
against any credits or other amounts American Tissue asserts that it is owed
from Boise Cascade, Boise Cascade may, if all or any material portion of such
setoff was improper, give written notice of default pursuant to the provisions
of Section 14(a) hereof and shall have all of the rights as set forth in Section
14(a). If American Tissue disputes any invoice from Boise Cascade, American
Tissue shall pay the undisputed portion of the invoice within the time for
payment set forth in Section 7 hereof.
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<PAGE>
15. Termination by Boise Cascade and American Tissue and Purchase Option.
There are four circumstances described below in subsections (a) through (d) in
which one of the parties has a right to purchase or an obligation to sell the
Paper Machine and, in some cases, certain leasehold improvements. In all such
cases the calculation of the sales price is based in whole or in part on the
"Net Book Value" (or "NBV") of the Paper Machine or leasehold improvements. NBV
is defined as the acquisition cost of the Paper Machine (including but not
limited to the purchase price of $5,000,000.00) or leasehold improvements, and
the cost of all capital improvements to the Paper Machine and/or other leasehold
improvements incurred by American Tissue, less depreciation, all in accordance
with generally accepted accounting principles and the capitalization and
depreciation policies set forth in Exhibit K. Capitalization and depreciation
methods otherwise utilized by American Tissue for financial statements or income
tax purposes shall not be controlling for purposes of this Section 15. In no
case shall the useful life of any asset exceed 20 years from the date such asset
is placed in service for purposes of calculation of the NBV. At the closing of
any sale of the Paper Machine or leasehold improvements to Boise Cascade,
American Tissue shall give the same warranties of title to Boise Cascade as
those given by Boise Cascade to American Tissue pursuant to Exhibit J attached
hereto, except for any liens or encumbrances incurred or suffered by Boise
Cascade, and except as otherwise provided in subsection 15(d) hereof. The
closing of any sale of the Paper Machine shall also constitute termination of
this Agreement in accordance with Section 16 of
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<PAGE>
this Agreement, and shall automatically terminate the Warehouse Site Lease. For
purposes of this Section 15, the Paper Machine shall be deemed to include all
capital improvements thereto.
(a) Default of American Tissue and Expiration of Term. Upon any termination
of this Agreement due to the default of American Tissue or upon the expiration
of the fixed term of this Agreement on December 31, 2012, Boise Cascade shall
have the option to purchase the Paper Machine on the date of termination of this
Agreement. In the event of American Tissue's default, the purchase price for the
Paper Machine shall be the NBV of the Paper Machine on the date of termination;
Boise Cascade's damages against American Tissue may be applied against the
purchase price. In the event of the expiration of the fixed term of this
Agreement, the purchase price for the Paper Machine shall be the higher of (i)
the NBV of the Paper Machine on December 31, 2002 or (ii) the "fair market
value" of the Paper Machine, calculated on the following basis: The Paper
Machine shall be valued on the assumption that it has been removed from the Mill
and is in storage (but shall not be so removed by American Tissue if such option
is exercised) in Portland, Oregon and there shall be deducted from the resulting
value the estimated cost of removing and transporting the Paper Machine to
Portland, Oregon, and estimated costs of restoration of the Real Property for
any damage that would be caused by the removal of the Paper Machine. In the case
of the expiration of the fixed term of this Agreement, Boise Cascade shall give
American Tissue not less that 120 days' notice prior to the expiration of the
fixed term of this Agreement exercising its option to purchase the Paper
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<PAGE>
Machine. If Boise Cascade fails to exercise its option to purchase the Paper
Machine as aforementioned, the provisions of Section 16 of the Agreement shall
apply. If Boise Cascade exercises its option to purchase the Paper Machine, the
closing shall take place on the fixed expiration date of this Agreement.
In the case of termination of this Agreement prior to the expiration of the
term hereof by reason of American Tissue's default, Boise Cascade shall have a
30-day period after such termination to elect whether or not to exercise its
option to purchase the Paper Machine, during which time the Paper Machine shall
not be removed from the No. 3 Paper Machine Building or altered in any manner.
If Boise Cascade exercises its option to purchase the Paper Machine within said
30-day period and otherwise in accordance with the provisions of this Agreement,
the closing shall take place ten days after the expiration of said 30-day
period. If Boise Cascade does not exercise its option to purchase the Paper
Machine within such 30-day period and otherwise in accordance with the
provisions of this Agreement, the provisions of Section 16 of the Agreement
shall apply.
(b) Force Majeure. If Boise Cascade declares an event of force majeure with
respect to excessive governmental laws and regulations in accordance with the
last paragraph of Section 13 of this Agreement and, in connection therewith,
permanently closes its pulp mill at the Mill, American Tissue shall have the
right to require Boise Cascade to purchase the Paper Machine for a purchase
price equal to the NBV of the Paper Machine plus $5,000,000.00 and to purchase
American Tissue's leasehold
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<PAGE>
improvements to the Real Property and to the premises subject to the Warehouse
Site Lease for a purchase price equal to the NBV of such assets as calculated on
the date the pulp mill is permanently closed. Such right shall be exercisable by
American Tissue's giving Boise Cascade notice of such exercise within 30 days of
the closing of the pulp mill and closing shall take place within 30 days after
the giving of such notice. This Agreement shall be terminated at the closing of
such transaction and the applicable provisions of Section 16 shall apply.
(c) American Tissue's Option. At any time during the six-month period
ending December 31, 2001, American Tissue shall have the right to make a request
to Boise Cascade in writing that any or all of the terms and conditions of this
Agreement be renegotiated. The parties shall have a period of 90 days after such
written request (the "Negotiation Period") to renegotiate any or all of the
terms and conditions of this Agreement. If the parties are unable to reach an
agreement on new terms and conditions for any reason, then American Tissue shall
have the option to terminate this Agreement effective as of December 31, 2002,
by written notice given to Boise Cascade within 90 days after the expiration of
the Negotiation Period. In such event, Boise Cascade shall have the option to
purchase the Paper Machine at a closing to be held on the termination date for a
purchase price equal to the NBV of the Paper Machine as of the date of closing
less $5,000,000.00. If the resulting purchase price figure is negative, such
amount shall be paid to Boise Cascade at the closing. Boise Cascade must
exercise its right to purchase the Paper Machine by giving American Tissue
written notice
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<PAGE>
thereof within 150 days after the expiration of the Negotiation Period.
(d) Third-Party Action; Breach of Warranty. If any action or proceeding is
commenced by any third party contesting in any manner Boise Cascade's warranty
of title to the Paper Machine or seeking relief that, if granted, would cause
Boise Cascade's warranty of title to the Paper Machine to be breached or would
prohibit American Tissue's ownership, use or possession of the Paper Machine or
the Real Property pursuant to this Agreement (where such prohibition results
other than by reason of American Tissue's fault), Boise Cascade shall, at Boise
Cascade's sole cost and expense (including attorneys' fees by counsel to be
chosen by Boise Cascade, subject to the approval of American Tissue, which
approval shall not be unreasonably withheld or delayed) vigorously defend such
action or proceeding on behalf of Boise Cascade and/or American Tissue. The
parties shall give prompt notice to each other upon learning of any such action
or proceeding. American Tissue shall have the right, but not the obligation, to
participate with Boise Cascade in defending such action or proceeding with
separate counsel of American Tissue's choice, at American Tissue's expense. If
by reason of such action or proceeding, American Tissue must relinquish the
ownership, use or possession of the Paper Machine for a period of at least three
years, then American Tissue shall have the right to terminate this Agreement
effective at any time after the expiration of such three-year period and to
require Boise Cascade to purchase the Paper Machine for a purchase price equal
to the NBV of the Paper Machine plus $5,000,000.00 and to purchase
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<PAGE>
American Tissue's leasehold improvements to the Real Property and to the
Warehouse Site Lease premises for the NBV of such assets (such NBV calculated in
both cases as of the date that American Tissue was required to relinquish such
ownership, use, or possession). The closing of such purchase shall be held 30
days after American Tissue gives notice to Boise Cascade of American Tissue's
election to terminate this Agreement and to require Boise Cascade to purchase
such assets. Simultaneously with the receipt and collection of all of the
closing funds, American Tissue will quit claim to Boise Cascade by using a bill
of sale or other appropriate document or instrument under applicable law, any
and all right, title and interest American Tissue has or may have acquired in
the Paper Machine and shall warrant title to other assets conveyed in accordance
with the first paragraph of this Section 15 and to the extent that American
Tissue has title consistent with the terms of this Agreement. Without limitation
of the foregoing, during the period American Tissue shall have been required to
relinquish ownership, use, or possession of the Paper Machine and thereafter
until such time as American Tissue elects to require Boise Cascade to purchase
the Paper Machine and leasehold improvements pursuant to this Section 15(d) and
the closing in respect thereof is held, (i) all of American Tissue's obligations
under and pursuant to this Agreement shall be suspended, (ii) Boise Cascade
shall not be obligated to furnish to American Tissue the pulp and services
called for in this Agreement and (iii) Boise Cascade shall pay to American
Tissue monthly in arrears, on the fifth day of each month for the previous
month, interest on the NBV of the Paper Machine and
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<PAGE>
leasehold improvements to the Real Property and to the Warehouse Site Lease as
of the date that American Tissue was required to relinquish such ownership, use,
or possession at an interest rate equal to the Prime Rate on the fourth day of
each such month plus 1%. The interest rate calculation shall be made in the same
manner as interest rate calculations are made pursuant to Exhibit I, for
purposes of identifying the Prime Rate. If Boise Cascade is able to restore full
title, use and possession to the Paper Machine to American Tissue on or before
the expiration of the aforementioned three-year period upon all of the terms and
conditions set forth in this Agreement, then it shall do so, and upon such
restoration all such interest accruals and payments shall thereupon cease and
this Agreement shall thereupon be fully reinstated. Such reinstatement shall not
lengthen the term of this Agreement. Boise Cascade shall indemnify American
Tissue for and hold American Tissue harmless against any and all amounts payable
to third parties, such as damages, penalties, costs and expenses (including
reasonable attorneys' fees and court costs) incurred by or asserted against
American Tissue arising out of or in connection with the third party action or
proceeding referred to in this subsection 15(d). The remedies set forth in this
subsection 15(d) shall be American Tissue's sole remedies with respect to the
subject matter of this subsection.
16. Termination. Upon expiration or termination of this Agreement, American
Tissue shall remove its inventory from the Mill and shall surrender the office
which it occupies pursuant to Section 18 hereof, and the Real Property to Boise
Cascade in as good condition as when received by American Tissue, as same may
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<PAGE>
have been improved or altered pursuant to this Agreement, ordinary wear and tear
excepted. If Boise Cascade does not exercise its purchase option as set forth in
subsections 15(a) and 15(c), American Tissue must, no less than 60 days prior to
termination if termination occurs at the expiration of the term of this
Agreement or in accordance with subsection 15(c) hereof, or within 45 days after
termination if termination otherwise occurs prior to the expiration of the term
of this Agreement, give written notice of its intention to remove or abandon the
Paper Machine. Failure of American Tissue to provide such notice, time being of
the essence, shall result in an abandonment of the Paper Machine to Boise
Cascade without the necessity of any further documentation or conveyances by
American Tissue and the warranties of title required by the first paragraph of
Section 15 hereof shall apply. If American Tissue elects to remove the Paper
Machine, American Tissue must remove the entire Paper Machine, but shall not
remove any of the Real Property, and shall place the Real Property in a safe,
stable, and commercially reasonable condition, and shall have 180 days from the
date of written notice to complete all removal and other related work, such time
period to be tolled by any period of force majeure which prevents or materially
impairs removal of the Paper Machine. If American Tissue abandons the Paper
Machine, no portion of the Paper Machine, or improvements shall be removed. Upon
termination of this Agreement for any reason, American Tissue and Boise Cascade
shall each execute and deliver all documents reasonably requested by the other
party to evidence termination of the lease of the Real Property and the
Warehouse
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<PAGE>
Site Lease, and, in the case of abandonment, documents of conveyance of the
Paper Machine and leasehold improvements to Boise Cascade, free and clear of all
liens, except as otherwise provided hereunder.
17. Assignment. Except as may be otherwise agreed by the parties hereto, no
party shall assign this Agreement or any interest herein (whether through a sale
of the Paper Machine, sale of stock, merger, consolidation, or otherwise)
without the prior written consent of the other party, which consent each party
covenants shall not be unreasonably withheld or delayed provided that such
assignment is to a financially responsible third party and provided further, no
such assignment shall be permitted to an assignee who is a competitor of Boise
Cascade's business operated at the Mill. However, Boise Cascade may assign all
of its rights and obligations hereunder to any corporation into which it shall
be merged or consolidated or to which it shall sell all or substantially all of
its assets, provided that such corporation assumes all of the obligations so
assigned and that Boise Cascade may assign this Agreement to a purchaser of
substantially all the assets of the Mill which assumes all of the obligations so
assigned. Either party hereto, without such consent, may also assign any or all
of its rights or obligations hereunder to any subsidiary of such party, provided
that such subsidiary shall assume all of the obligations so assigned and that
the assigning party shall unconditionally guarantee performance of such
obligations by such subsidiary. No assignment shall relieve the assignor of any
of its duties, obligations, or liabilities hereunder. Notwithstanding the
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<PAGE>
foregoing, American Tissue shall not assign this Agreement to any third party
which does not simultaneously purchase the Paper Machine.
18. Facilities for Representatives of American Tissue. Without limitation
of any other provisions of this Agreement, Boise Cascade shall furnish to
American Tissue sufficient enclosed office space (no more than two offices) at
the Mill for the use of representatives authorized by American Tissue while at
the Mill and for the storage of records with respect to the Paper Machine. Boise
Cascade shall also furnish such representatives with such identification papers
as may be necessary to gain access to those parts of the Mill which relate to
the Paper Machine and other facilities relating to the production, storage, and
shipping of the paper from the Paper Machine.
19. Inspection of Books and Records. Without limitation of any other
provisions of this Agreement, American Tissue shall have the right to inspect
the books, records, related documentation, meters, scales and other measuring
equipment of Boise Cascade for the purpose of determining the accuracy of the
determinations required to be made by Boise Cascade hereunder, such as those
relating to the determination of the pulp price, Direct Costs, Indirect Costs,
Capital Costs, and Excluded Costs. Such inspections shall be conducted during
normal business hours and not more frequently than monthly. Such inspections may
be conducted by employees of American Tissue or by duly authorized
representatives of American Tissue, and all information of Boise Cascade
obtained during or as a result of such inspections shall
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be kept strictly confidential and shall be used only for the purposes herein
provided.
20. Payment of Expenses. Each party shall pay the costs and expenses
(including fees of attorneys and accountants) incurred by it in connection with
the negotiation, execution, delivery, and consummation of this Agreement.
21. Further Documents. Each party will execute and deliver to the other
party such further instruments and documents as such other party may reasonably
request in connection with the consummation of the transactions contemplated by
this Agreement.
22. Survival of Representations and Warranties. All representations and
warranties included herein shall survive the execution of this Agreement,
notwithstanding any investigation by any party. Each party shall indemnify and
hold the other party harmless from and against any and all claims, damages,
demands, liabilities, actions, proceedings, judgments, penalties, losses, costs,
and expenses (including, without limitation, reasonable attorneys' fees and
court costs) suffered or incurred by the indemnified party arising out of or in
connection with the breach of any representation or warranty by the indemnifying
party.
23. Governing Law. This Agreement shall be deemed to have been entered into
pursuant to, and shall be governed by the laws of the state of Oregon.
24. Notices. Any notice, request, or other communication required or
permitted to be given or made hereunder shall be deemed properly given or made
if delivered personally or if mailed by certified mail, return receipt
requested, in the ordinary course, postage prepaid, as follows:
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<PAGE>
If to Boise Cascade: Boise Cascade Corporation
Attn: Director of Finance, White Paper
One Jefferson Square
P.O. Box 50
Boise, ID 83728-0001
With a copy of any
notice of default to: Boise Cascade Corporation
Attn: Legal Department
One Jefferson Square
P.O. Box 50
Boise, ID 83728-0001
If to American Tissue: American Tissue Mills of Oregon, Inc.
Attn: Messrs. Medhi
Gabayzadeh and Frank DiMaio
50 Cabot Court
Hauppauge, New York 11788
With a copy of any
notice of default to: Mandel & Resnik P.C.
Attn: Barry H. Handel, Esq.
220 East 42nd Street
New York, New York 10017
25. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
26. Captions. The titles of the sections and subsections of this Agreement
have been prepared and assigned for convenience only and shall not be construed
as limiting, defining, or affecting the substantive terms of this Agreement.
27. Entire Agreement. This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated hereby and
supersedes all previous written or oral negotiations, representations,
commitments, and writings with respect to such transactions.
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<PAGE>
28. Option to Lease. By written notice given at any time prior to December
31, 1997, American Tissue may cause the terms and conditions of the Warehouse
Site Lease annexed hereto as Exhibit G to become effective as of the date which
is 30 days after the date of the notice, without the necessity for any further
signatures or actions by either party.
29. Venue. The venue for any action brought by one party against the other
party shall be in state or Federal court in Oregon.
30. Good Faith. There is an obligation of good faith and fair dealing for
both parties with respect to all aspects of this Agreement.
31. Cumulative Remedies. Except as specifically set forth in subsection
15(d), all remedies available to either party under this Agreement, at law
and/or in equity, shall be cumulative, and such remedies may be exercisable
separately, concurrently, and in any manner or order of priority.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers the day and year first above written.
ATTEST: BOISE CASCADE CORPORATION
/s/ ILLEGIBLE By /s/ ILLEGIBLE
- ------------------------------ -------------------------------
Assistant Secretary VICE PRESIDENT
ATTEST: AMERICAN TISSUE MILLS OF
OF OREGON, INC.
/s/ ILLEGIBLE By /s/ Nourollah Elghanayan
- ------------------------------ -------------------------------
Secretary Title Pres.
DP2lO16C.V3
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LEASE
AGREEMENT, made this 15th day of December, 1995 by and between
CURTISS-WRIGHT FLIGHT SYSTEMS/SHELBY, INC., an Ohio corporation, with an office
at 1200 Wall Street West, Lyndhurst, N.J. 07071 (hereinafter called "Curtiss")
and AMERICAN TISSUE CORPORATION, a New York corporation with offices at 50 Cabot
Court, Hauppauge, New York 11788 (hereinafter called "Tenant"):
WITNESSETH:
That in consideration of the mutual agreements herein contained, the
parties do hereby covenant to and with each other as follows:
1. PREMISES:
1.1 Curtiss hereby leases to Tenant and Tenant hereby hires from Curtiss,
upon and subject to the terms hereof, a portion of the property known as
Curtiss-Wright Building #2 (the "Building") comprising building area #24
(160,000 sq. ft.), building area #30 (100,320 sq. ft.), building area #34
(90,000 sq. ft.), and building area #74N (138,320 sq. ft.), located at Passaic
Street, Wood-Ridge, New Jersey, consisting of an agreed figure of 488,640 square
feet, (excluding the two electrical substations shaded in red], and 2 exclusive
parking areas, all as outlined in red on a plot plan labeled Exhibit "A" which
is attached hereto and made a part
<PAGE>
hereof, (said property hereinafter sometimes
called the "Premises"). The Building is a part of the Curtiss-Wright Wood-Ridge
Business Complex (the "Facility"). Curtiss represents and warrants to Tenant
that as of the date of this Lease the gross rentable square footage (the "Gross
Rentable Area") of the Facility is 2,322,104 square feet. Curtiss hereby grants
to Tenant without the payment of additional rent during the term of this Lease
and all extensions thereof, the non-exclusive right to use the right of way
shaded in yellow on Exhibit "A" (said right of way hereinafter called
"non-exclusive area") for the purposes of vehicular and pedestrian ingress and
egress only. (The Premises and the non-exclusive area are herein sometimes
referred to as the "Lease Area".) Tenant shall not obstruct nor allow its
customers or employees, or its invitees or licensees, to obstruct the
non-exclusive area. Curtiss shall not be responsible to Tenant for actions by
co-tenants of Curtiss' property, or for actions by other third parties or by
guests or visitors to Curtiss' property, other than the actions of Curtiss,
Curtiss' employees, agents, servants, invitees, contractors and representatives,
which if committed by Tenant, would constitute violations of the provisions of
this Section 1.1; provided, however, if a third party or co-tenant of Curtiss'
property should obstruct or impede ingress or egress by Tenant over such
non-exclusive area, Curtiss shall make every reasonable effort to remove any
such impediment.
1.2 Curtiss also hereby grants to Tenant without the payment of additional
rent during the term of this Lease and all extensions
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<PAGE>
thereof, a non-exclusive area of up to 100 automobile parking spaces located in
the existing parking area east of said premises. In addition, Tenant shall have,
at all times hereunder, the non-exclusive use of the walkways to said parking
area. Said non-exclusive parking area is shaded in yellow on Exhibit "A". The
rents payable hereunder include the consideration payable with respect to the
exclusive parking areas and non-exclusive areas. Tenant shall have access to the
Lease Area 24 hours per day, 365 days per year.
2. TERM AND OCCUPANCY:
2.1 The term of this Lease shall be for ten (10) years, 4-months and shall
commence on April 1, 1996 and end on July 31, 2006.
2.2 Subject to the provisions of Article 8 hereof, occupancy of the
Premises shall be delivered as follows (with the date of delivery for each
building area being hereinafter referred to as a "delivery date"):
160,000 sq. ft (#24) 4/1/96
100,320 sq. ft (#30) 5/1/96
90,000 sq. ft (#34) 6/1/96
138,320 sq. ft (#74N) 7/1/96
In the event Curtiss is for any reason unable to deliver occupancy at the
commencement of the term, Curtiss shall not be subject to any liability therefor
and Tenant waives any claim for damages, including but not limited to
consequential damages, due to
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<PAGE>
such failure of delivery except as provided in Section 2.3 herein. Curtiss
waives all rentals and other charges due for each space to be delivered until
possession of such space is delivered to Tenant in the condition required under
this Lease, with all work required to be performed by Curtiss substantially
complete (as such term is defined in Article 8 hereof) and with a temporary
Certificate of Occupancy having been issued by the appropriate governmental
authority for the Premises and each building area thereat permitting the use
thereof for warehousing, distribution and manufacturing of paper products and
related activities (the date on which each building area is so delivered shall
be referred to as an "Occupancy Date"). Provided however, except as set forth in
Section 2.3, failure to deliver occupancy shall not affect the validity of this
Lease nor extend the term thereof.
2.3 Notwithstanding anything to the contrary contained herein, if any of
the building areas which compose the Premises shall not have been delivered by
Curtiss to Tenant in the condition required under this Lease, with all work to
be performed by Curtiss substantially completed and with a temporary Certificate
of Occupancy having been delivered in accordance with the provisions of Section
2.2, on or before July 1, 1996 then in addition to the right of specific
performance, Tenant shall have the right to terminate this Lease as same relates
to the undelivered building areas upon 30 days' written notice to Curtiss.
Further, in addition to the rental abatements provided for in Article 3, if the
work to be performed by Curtiss with respect to each building area
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<PAGE>
shall not be substantially completed or if a temporary certificate of occupancy
as hereinabove set forth shall not have been delivered to Tenant by the delivery
date applicable to such building area, then without limiting any other rights
Tenant may have, Tenant shall receive one day of free Base Rent for each day (or
portion thereof) beyond each applicable delivery date that substantial
completion of the work or delivery of the temporary certificate of occupancy is
delayed. Provided Curtiss notifies Tenant in writing of the anticipated delay to
be caused thereby, no free rent shall be received for any day of delay caused
directly by (i) Tenant's failure to submit to Curtiss promptly after Curtiss has
requested information needed to complete the items on Exhibit B or (ii) a Tenant
initiated change order.
3. BASE RENT:
3.1 All Base Rents (calculated solely by reference to square footages of
the areas in question) and all charges for electricity, (metered separately for
each building area) and water and sewer (also metered separately by building
area) payable with respect of each building area shall be fully abated for a
four month period commencing on the Occupancy Date of each such building area
(each, an "Abatement Period").
3.2 Subject to the preceding paragraph, Tenant hereby agrees to pay as Base
Rent for the term hereof the following sums:
(a) from and after the expiration of the Abatement Period applicable
to each building area to July 31, 1998 at the Base Rent of $1.75 per square
foot per year, or $855,120 per year
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<PAGE>
subject to the applicable Abatement Periods during this period;
(b) from August 1, 1998 to July 31, 2000 at the Base Rent of $1.80 per
square foot per year, or $879,552 per year during this period;
(c) from August 1, 2000 to July 31, 2002 at the Base Rent of $1.95 per
square foot per year, or $952,848 per year during this period;
(d) from August 1, 2002 to July 31, 2006 at the Base Rent of $2.15 per
square foot per year, or $1,050,576 per year during this period.
All rents, other than utilities, shall be payable in advance in monthly
installments on the first day of each calendar month during the term hereof.
Rents for any partial month shall be appropriately prorated.
All installments of Base Rent and all amounts hereinafter denominated
additional rent are payable without notice, demand, abatement, deduction, or
set-off, during the term hereof to Curtiss at the address specified in Article
26 hereof, or elsewhere as Curtiss may, in writing, direct.
3.3 No payment by Tenant or receipt by Curtiss of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement on any
check or' any letter accompanying any check or payment as rent or additional
rent be deemed an accord and satisfaction, and Curtiss may accept such
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<PAGE>
check or payment without prejudice to Curtiss' right to recover the balance of
such rent or additional rent or pursue any other remedy in this Least provided.
If at any time a dispute shall arise as to any amount or sum of money to be paid
by one party to the other under the provisions hereof, the party against whom
the obligation to pay the money is asserted shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment,
and there shall survive the right on the part of said party to institute suit
for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said party to pay such sum or any part thereof, said
party shall be entitled to recover such sum or so much thereof as if it was not
legally required to pay under the provisions of this Lease, together with
interest thereon at the statutory rate of interest. Tenant's payment of rent
shall not be or be deemed to be a waiver of any of its rights or remedies
hereunder.
3.4 In the event Base Rent or additional rent is not paid hereunder, within
7 days of when due, interest shall accrue on said Base Rent or additional rent,
at an annual rate of twelve percent (12%) from and after the due date of any
payment due hereunder. Said interest shall become additional rent payable with
the installment of Base Rent next due hereunder, and shall be without prejudice
to Curtiss' other remedies provided hereunder or by law for Tenant's default.
3.5 All amounts, other than Base Rent, required hereunder to be paid by
Tenant to Curtiss shall be deemed additional rent
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whether or not so designated herein.
4. SECURITY DEPOSIT:
4.1 Tenant shall furnish Curtiss upon the signing hereof, a letter of
credit in the amount of One Hundred Thousand Dollars ($100,000.00) in such form
and with such bank in the State of New Jersey as is reasonably acceptable to
Curtiss as security for the faithful performance and observance by Tenant of the
terms, provisions and conditions of this Lease. A letter of credit shall be
valid for a minimum term of one year. In the event the original letter shall be
for less than the term of the Lease and any extension thereof, a substitute
letter of credit, in the same amount, and likewise valid for a term of at least
one year, shall be furnished Curtiss at least 20 days before the expiration of
the preceding letter of credit, so that a letter of credit shall be kept in
force continuously during the entire term of this Lease. In the event of a
default by Tenant beyond the notice and cure periods provided for in this Lease
in the performance of its material obligation under this Lease or failure of
Tenant to procure the succeeding letter of credit (or at Tenant's option
substitute security) in such form and with such bank in the State of New Jersey
as is reasonably acceptable to Curtiss, the letter of credit shall be payable
upon presentation to the issuing bank of a sight draft, accompanied by a
certification signed by an authorized representative of Curtiss stating that (i)
Tenant has defaulted under a material provision of this Lease, (ii) that any
required
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notice of such default has been given to Tenant by Curtiss and (iii) that Tenant
has failed to cure such default within applicable cure period. Failure of Tenant
to secure the succeeding letter of credit following five business day's written
notice shall be a material breach of this lease justifying termination as for a
failure to pay rent under paragraph (e) of Section 17.1 except that the notice
provision specified in Section 17.1 shall not apply. If for any reason the
issuer of the letter of credit ceases to be acceptable to Curtiss, Tenant agrees
that it shall promptly provide a replacement letter of credit issued by a bank
that is reasonably acceptable to Curtiss. It is agreed that in the event Tenant
defaults beyond the notice and cure period provided in this Lease in respect of
any of the material terms, provision, and conditions of this Lease, including,
but not limited to, the payment of Base Rent or additional rent, Curtiss may use
said letter of credit to the extent required for the payment of any Base Rent or
additional rent or any other sum as to which Tenant is in default or for any sum
Curtiss may expend or may be required to expend by reason of Tenant's default
beyond the notice and cure period in respect of any of the material terms,
covenants and conditions of the Lease, including but not limited to any damages
or deficiency in the relettinq at the Premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Curtiss. If Curtiss so uses or applies all or any portion of said letter of
credit, Tenant shall within ten (10) days after written demand therefor obtain a
new letter of credit from a bank reasonably acceptable to Curtiss in an amount
sufficient to restore
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said letter of credit to the full amount hereinabove stated and Tenant's failure
to do so shall be a material breach of this Lease.
4.2 Tenant may at any time substitute cash security for the letter of
credit in which event (i) the letter of credit shall be immediately returned to
Tenant, and (ii) Curtiss shall immediately consent in writing to the termination
of the letter of credit, provided, however, that if Curtiss subsequently uses or
applies all or any portion of the cash security, Tenant shall within ten (10)
days after written demand post additional cash security in an amount sufficient
to restore said cash security to the full amount hereinabove stated and Tenant's
failure to do so shall be a material breach of this lease. The security deposit
shall be maintained in an interest bearing account and interest shall be paid
annually to Tenant.
4.3 At the end of the term of the Lease or any earlier termination and
within 10 days after delivery of the entire possession of the Premises to
Curtiss, any remaining security that is not to be or has not been used, applied
or retained in accordance with the preceding paragraphs shall be returned to
Tenant. In the event of a sale of the land of which the Premises form a part,
Curtiss shall have the right to transfer the security to the vendee, who shall
acknowledge receipt of the same, and Curtiss shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new landlord solely for the return of said security; and it is
agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new landlord.
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4.4 Tenant further covenants that it will not assign or encumber or attempt
to assign or encumber the security provided herein, and that neither Curtiss nor
its successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
5. PURPOSE AND USE:
5.1 Tenant shall use and occupy the Premises for the purpose of
warehousing, distribution and/or manufacturing including without limitation
warehousing, distribution and manufacturing of paper products, any related
business, and offices in connection therewith, and for no other purpose. Curtiss
represents and warrants to Tenant that the Premises are located in a LIP (light
industrial park) zone and may lawfully be used by Tenant for warehousing,
distribution and manufacturing of paper products and related activities.
Promptly following completion of the work to be performed by Landlord, pursuant
to Article 8 hereof, Curtiss shall make application for, and shall take all such
action as shall be necessary or appropriate and shall use its best efforts, to
obtain, a permanent Certificate of Occupancy ("Certificate") permitting the use
of the Premises and each building area [ILLEGIBLE] for warehousing, distribution
and manufacturing purposes [ILLEGIBLE] in connection with occupancy of the
Premises by Tenant hereunder and Tenant shall, at its own expense, furnish
Curtiss such information as may be required to enable Curtiss to obtain such
Certificate. Curtiss agrees to contest the Borough's failure to issue a
Certificate or any action taken by the Borough or other
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governmental authority contesting Tenant's right of occupancy if an adequate
basis in law and fact exists. Tenant shall have the right to participate at its
own cost and expense in any such proceeding by counsel of its own choosing and
Curtiss shall not settle or compromise such proceeding without Tenant's consent
which shall not be unreasonably withheld, which litigation shall be undertaken
at Curtiss' expense. If thereafter the Certificate shall not have been issued
for any reason other than due to a default by Tenant, Tenant shall have the
right to terminate this lease upon sixty (60) days written notice to Curtiss.
Upon vacating the Premises, the letter of credit delivered pursuant to Article
4, the then current monthly rent, appropriately apportioned, and any other
prepaid sums shall be returned to Tenant and Curtiss shall immediately consent
in writing to the termination of the letter of credit. In the alternative, in
addition to any other abatements provided for herein, Tenant shall be entitled
to a rent abatement for up six (6) months during the period that Tenant's use of
the Premises in accordance with Article 5.1 shall not be in compliance with law
as a result of the Certificate not having been issued for any reason other than
due to a default by Tenant, upon the expiration of which period, Tenant shall
vacate the Premises and neither party shall have any further obligations or
liabilities hereunder. Upon vacating the Premises, the letter of credit
delivered pursuant to Article 4, and any other prepaid sums shall be returned to
Tenant and Curtiss shall immediately consent in writing to the termination of
the letter of credit. Nothing herein, however, shall release Tenant from its
obligation to repay the loan made pursuant to a
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certain Loan Agreement dated December 15, 1995.
5.2 Tenant shall not knowingly permit any part of the Lease Area to be used
for any unlawful purpose, nor do or permit anything to be done in or on the
Lease Area which in any way violates the Certificate of Occupancy affecting the
Premises or makes void or voidable any insurance then in force with respect
thereto, or causes an increase in insurance rates therefor, or which will cause
or be likely to cause structural damage to the Lease Area or any part thereof,
or which will constitute a public or private nuisance. If Tenant's manner of use
of or operations in the Premises or Tenant's failure to comply with this
Article, directly causes the fire insurance rate for all or any part of the
Premises or Curtiss' other property at the Facility at any time during the term
hereof to be higher than it otherwise would have been, then Tenant shall
reimburse Curtiss, as additional rent, within thirty (30) days of notice of the
amount thereof, accompanied by appropriate supporting documentation for such
additional part of all fire insurance premiums thereafter paid by Curtiss by
reason of such use by Tenant or failure by Tenant to so comply.
5.3 Anything elsewhere in this Lease to the contrary notwithstanding, if,
either in response to a requirement of the fire insurer of the property of which
the Premises are a part, or of any general regulation of a federal, state or
local government agency, or to prevent the imposition of a penalty or charge
against the full allowance for a sprinkler system in the insurance rate set by
said insurer, a sprinkler system in addition to the existing sprinkler system
must be installed, or modifications or alterations
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must be made to the existing sprinkler system hereunder by reason of Tenant's
operation or business or the location of partitions, trade fixtures or other
contents of the Premises, Tenant shall, at Tenant's expense, promptly make such
sprinkler system installation, changes, modifications or alterations, and supply
additional sprinkler heads or other equipment as required, whether the work
involved shall be structural or non-structural in nature.
6. OBSERVATION OF LAWS, RULES AND REGULATIONS:
6.1 Tenant will promptly comply with all requirements of federal, state,
municipal and other governmental laws, orders, regulations, inspections,
licenses and permits, with respect to the Premises and will pay promptly all
fees and charges connected therewith, failing which Curtiss may, but need not,
pay any and all such fees and charges for the account of Tenant, said sums
constituting and being collectible as additional rent. Tenant shall at its
expense furnish to Curtiss or its designee all information necessary to
determine if Tenant has complied with this Lease and all applicable laws with
which Tenant is required to comply. Tenant shall also on request by Curtiss
furnish at Curtiss' expense such information as Curtiss may reasonably require
in connection with seeking and obtaining an approved negative declaration or an
approved cleanup plan under the Industrial Site Recovery Act of the State of New
Jersey ("ISRA"). Curtiss represents and warrants to Tenant that the Premises,
Lease Area and all appurtenances, fixtures, facilities and installations
relating thereto are and shall be delivered to Tenant in full compliance
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with all laws, including, without limitation, the ISRA, all other environmental,
pollution, health, safety, fire and building code laws, and that to the best of
Curtiss' knowledge the same are and shall be free of any and all hazardous
substances which may give rise to a violation of such laws. There are no
violations, whether or not of record, affecting the Premises or the Building and
Curtiss knows of no facts, circumstances, conditions, bases or ground for any
such violations. Curtiss covenants and agrees to defend, hold harmless and
indemnify Tenant, its shareholders, officers, directors, employees, agents,
permitted subtenants and assigns from and against any and all liabilities,
losses, claims, actions, causes of action, damages, demands, judgments, fines
penalties, costs and expenses, including, without limitation, attorneys' fees,
court costs and disbursements, (collectively, "Claims") arising out of or in
connection with the presence of hazardous materials in or about the Premises.
With respect to the foregoing, Tenant shall have the right to participate in the
defense of, or at its option, to assume the defense of, any action, suit,
proceeding, demand, assessment or judgment brought by any party against Tenant.
Curtiss shall be fully and solely responsible, at Curtiss' sole cost and
expense, for any clean-up and repairs, structural or otherwise, required due to
the presence of hazardous materials in the Lease Area. If any clean-up, repair
or similar action is required by any governmental or quasi-governmental agency
as a result of hazardous materials in the Lease Area not generated by Tenant,
and such action materially interferes with the conduct of Tenant's business at
the Premises, Base Rent
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and additional rent will abate in proportion to the interference or damage
sustained by Tenant during such period, provided, however, if such interference
with the operation of Tenant's business causes a material financial impact which
shall continue for a period in excess of thirty (30) days, Tenant may terminate
this Lease upon giving not less than sixty (60) days' written notice. The
applicable provisions of this paragraph shall survive the expiration or earlier
termination of this Lease.
6.1.1 Tenant shall not generate, discharge or allow the escape of any
hazardous substance or pollutant in or about the Premises in violation of
applicable environmental laws. Tenant further agrees to remove any pollutant or
hazardous substance entering into the Premises during the term of this lease
which occurs as a result of Tenant's negligence. Tenant shall indemnify, defend
and hold Curtiss, its officers, directors, shareholders, employees and agents
harmless from any costs and expenses including remediation expenses incurred
resulting from Tenant's breach of any of said obligations,
6.2 Tenant covenants and agrees that if, other than with respect to or as a
result of conditions and/or hazardous materials at the Premises or Lease Area
existing as of the date hereof, or as of the Occupancy Date applicable to each
building area (other than the installation of the concrete floor by Tenant), or
for which Curtiss is otherwise liable pursuant to section 6.1, Tenant's use or
cessation of use of the Lease Area at any time during the term or extended term
or any period of holding over hereunder shall be such as to make Tenant subject
to ISRA with respect to such use,
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Tenant shall at least six (6) months before the expiration of the term or any
extended term hereof file such notice or notices and initiate such other action
as shall under ISRA or regulations issued pursuant thereto then be required of
an operator of an industrial establishment who has already made public the
decision to close operations. Tenant further covenants and agrees to exert its
best efforts to complete any actions then required in order to obtain either an
approved negative declaration or a certification by the Department of
Environmental Protection that Tenant's cleanup plan has been executed and the
Lease Area, other than with respect to or as a result of conditions and/or
hazardous materials at the Premises or Lease area existing as of the date hereof
or as of the Occupancy Date applicable to each building, or for which Curtiss is
otherwise liable pursuant to Section 6.1 has been detoxified (as the concepts of
approved negative declaration and certification by the Department of
Environmental Protection are used in ISRA) within the term or extended term
hereof. Tenant shall be responsible for all costs of or associated with any
compliance with ISRA that may be required as the result of Tenant's use of the
Lease Area, other than with respect to or as a result of conditions and/or
hazardous materials at the Premises or Lease area existing as of the date hereof
or as of the Occupancy Date applicable to each building, or for which Curtiss is
otherwise liable pursuant to section 6.1, regardless of whether such costs be
incurred during or subsequent to the term or any extended term hereof. The
obligations of this Section 6.2 are in addition to those imposed by section 6.1.
6.3 Tenant shall not place any load on the floor of the
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Premises which shall exceed 800 lbs. per square foot, nor will it do or permit
any act or thing to be done in or to the Lease Area which, directly or
indirectly, may be dangerous to life, limb or property, or which shall subject
Curtiss to any liability to any person for any damage whatsoever.
6.4 Tenant shall pay all costs, expenses, fines, penalties or damages,
including but not limited to reasonable legal expenses, which may be incurred by
Curtiss by reason of Tenant's failure to comply with the provisions of this
Article.
7. CONDITION 0F PREMISES, REPAIR, MAINTENANCE, REMOVAL 0F TRADE FIXTURES:
7.1 Tenant has examined the Premises before signing this Lease and is
satisfied with the condition thereof excepting (i) such alterations,
improvements and repairs which are specifically provided for by Article 8 and
(ii) latent defects, and provided that the representations of Curtiss herein
contained with respect to the Premises are true and accurate. Except as provided
in this Article and Article 8, Tenant's occupancy of any portion of the Premises
after commencement of the Lease term shall be conclusive evidence against Tenant
that the Premises are in good order and repair at the time of delivery other
than for latent defects.
7.2 No promise of Curtiss to alter, remodel, improve, repair, decorate or
clean, and no representation, statement or warranty express or implied,
respecting the condition of the Premises, or any other matter relating to this
Lease, has been made by Curtiss to Tenant, nor is any representative of Curtiss
authorized to make
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any such promise, representation, statement or warranty, unless the same is
contained in this Lease or is in a writing expressly made a part hereof.
7.3 Curtiss shall, at its sole cost, repair and maintain in good working
order, condition and repair and in tenantable condition, the Premises'
foundations, load-bearing walls, roof and the underground or covered portions of
the plumbing and sewer systems, all portions of the electrical and water
distribution systems up to the Premises, all transformers and electrical
substations, and the non-exclusive areas unless such repairs are necessitated by
the negligent acts of Tenant, its employees, agents or other invitees or
licensees. Except as otherwise provided in Article 12, no allowance shall be
made to Tenant for any diminution in the value of the Premises nor shall Curtiss
be liable to Tenant for any inconvenience or damage to Tenant's business arising
from Curtiss' failure to meet its obligations under this Section 7.3.
7.4 Tenant shall make all other repairs and replacements to the Premises,
including but not limited to the floor, above ground and uncovered portions of
the plumbing and sewer systems and the entire electrical, heating, ventilating,
air conditioning, sprinkler, hot and cold water systems, and exclusive yard and
parking areas so as to keep same in tenantable and proper condition without cost
to Curtiss. Further, in no event shall Tenant be liable for any repairs or
replacements due to the negligent acts of Curtiss or Curtiss' employees, agents
or representatives. In no event shall Tenant be obligated to make repairs to the
items identified in Section 7.3 unless due to Tenant's negligence.
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Except as to Curtiss' obligation under Article 8 hereof, Tenant shall also make
any and all repairs or changes which may be necessary to make the Premises and
the use thereof comply with applicable laws, ordinances, orders or regulations
of any federal, state, county or municipal authority now or hereafter in effect
except as otherwise provided elsewhere in this Lease.
7.5 All repairs made by Tenant hereunder shall be of quality or class equal
to the original work or construction and to the reasonable satisfaction of
Curtiss. If Tenant shall fail to make the repairs or perform the maintenance
required thereof following 30 days' written notice from Curtiss, Tenant shall be
liable for any damage to the Premises and Curtiss may have such repairs or
maintenance done at the expense of Tenant, said damage, and expense constituting
and being collectible as additional rent within five (5) days of notification to
Tenant of the amount involved accompanied by appropriate invoices and receipts
therefore.
7.6 Tenant shall supply all janitorial services required to maintain the
exterior and interior of the Premises in a neat, clean and orderly condition,
and shall further be responsible to remove any litter or debris created by or
attributable to Tenant's operations, employees, or other invitees or licensees,
in the non-exclusive area. Commencing upon the Occupancy Date applicable to each
building area, Tenant shall pay Curtiss, monthly, as additional rent, within ten
(10) days after Tenant is billed therefor, its share, as defined below, of all
costs and expenses, direct and indirect, incurred by Curtiss in maintaining and
repairing the common areas which are deemed to serve, be associated
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with or benefit the area in which the Premises are located, consisting of roads,
fencing, gates, non-exclusive parking lots, sidewalks, stairways, and landscaped
areas. Costs and expenses incurred in connection with the common area shall
include, but not be limited to, those relating to (a) removal of snow, ice and
debris; (b) traffic regulation, paving and curbing; (c) landscaping, planting
and shrubbery; and (d) lighting plus administrative costs incurred in connection
with the aforesaid items. In no event shall such costs and expenses include: (a)
the cost of any capital improvements to the Building or related property or the
cost of any item that is or should in accordance with generally accepted
accounting principles be capitalized on the books of Curtiss, (b) costs or
repairs, alterations or replacements necessitated by casualty losses or the
exercise of the rights of eminent domain or which relate to any violations or
notices of violation issued against the Facility or the common or exterior areas
other than due to Tenant acts, or (c) fees and/or expenses incurred with regard
to leasing, selling or financing any portion of the Building, Facility or the
common areas thereof, or (d) fees, costs and/or expenses incurred in connection
with work or services performed for or exclusively benefitting another tenant in
the Facility; (e) or cost or expenses on account of computations where the
aggreqate of the proportionate shares for all tenants of the Facility subject to
the common area charge equal a number greater than 100 percent of such charge.
Curtiss represents and warrants to Tenant that the rentable building area
presently served, associated with or benefitted by the common areas is 2,139,074
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square feet, which measurement may be changed from time to time to reflect
additions to or deletions from the rentable building area. Tenant's share shall
be appropriately reduced in the event of additions to the rentable building
area. Tenant's share of common area costs and expenses shall be a decimal
portion of the total calculated in accordance with the following formula:
Square Footage of Premises
Tenant's Portion = -----------------------------------
Square Footage of Rentable Building
Area Served, Associated with or
Benefitting the Common Areas,
provided, however, that Tenant's share of common area costs shall not exceed
five (5) cents per annum per square foot of the Premises leased hereunder and
any overpayments made by Tenant during any lease year shall be promptly refunded
by Curtiss to Tenant. This obligation shall survive the expiration or earlier
termination of this Lease. All common area costs for any partial month falling
within the term shall be appropriately pro-rated. Curtiss shall provide an
annual statement setting forth the manner in which such amounts were calculated.
Curtiss shall furnish to Tenant, within ten (10) business days of Tenant's
request therefor, any and all additional information and documentation
reasonably required by Tenant to confirm and verify such calculations. Tenant
shall have the annual right during the term of this Lease to conduct an audit of
Curtiss' books, documents, records, papers and files relating to the common area
costs for any year. For any such audit, upon reasonable advance notice, Curtiss
shall make such documents available at Curtiss' office in New Jersey for
examination during business hours by Tenant, Tenant's agents,
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representatives and/or employees. Curtiss agrees that it shall keep the
non-exclusive areas free of snow, debris and any other obstruction or
interference to the extent practical, but shall not be liable to Tenant for any
inconvenience or damage to Tenant's business for failure to do so provided it
exerts its best efforts.
7.7 Machinery and mechanical equipment belonging to the Tenant which cause
vibration, noise, cold or heat that may be transmitted to the building structure
or to any portion thereof to such degree as to be likely to damage the Premises,
shall be placed and maintained in such a way as to eliminate or prevent such
vibration, noise, cold or heat.
7.8 At the expiration or sooner termination of the Lease, Tenant shall
deliver the Premises to Curtiss in substantially the same condition in which
they existed at the inception of this Lease, and as modified by Landlord's work,
reasonable wear and tear, and damage by fire or other casualty, excepted.
7.9 Tenant shall have the right at all times and, at Curtiss' request, the
obligation, upon the termination of this Lease or termination of any renewal
thereof to remove any and all trade fixtures, machinery and equipment furnished
by it. Should Tenant exercise its rights hereunder, or should Curtiss by notice
to Tenant no later than thirty (30) days prior to the date fixed as the
termination of this Lease, notify Tenant to remove said trade fixtures,
machinery and equipment, the same shall be removed from the Premises by Tenant
forthwith at Tenant's expense, and Tenant will repair and restore all surfaces
from which trade fixtures, machinery and equipment are removed to at least the
equal of their
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condition prior to installation, reasonable wear and tear and damage by fire or
other casualty excepted. All property permitted or required to be removed by
Tenant at the end of the term remaining in the Premises after Tenant's removal,
shall be deemed abandoned and may, at Curtiss' election, either be retained as
Curtiss' property or may be removed from the Premises by Curtiss at Tenant's
expense, which expense to the extent reasonable shall be collectible as
additional rent within five (5) days after notice to Tenant of the amount
involved.
8. MODIFICATIONS BY LANDLORD:
8.1 On or before the delivery date applicable to each building area,
Curtiss shall substantially complete the changes, modifications and alterations
applicable to such building area as is listed on Exhibit "B", which is attached
hereto and made a part hereof, at its sole cost, subject only to delays in
making said changes, modifications and alterations caused by strikes, acts of
God or other causes beyond its control. For purposes hereof, the work shall be
deemed "substantially complete" on the date that all such work has been
performed, in accordance with Exhibit B annexed to this agreement, and in a good
and workerlike manner, in compliance with all applicable laws with the exception
only of minor punchlist items which shall be completed by Curtiss within thirty
(30) days from substantial completion provided however that if any punchlist
item is not capable of being performed within such thirty (30) day period then
Curtiss shall perform such items with due diligence. All such work shall be
performed by Curtiss in a
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good and workerlike manner in accordance with all applicable laws, orders, rules
and regulations of all governmental authorities having or asserting jurisdiction
of the Premises. Any and all defects in workmanship shall be promptly corrected
by Curtiss. Tenant shall have thirty (30) days from the date of written notice
of completion by Curtiss of any item of work listed on Exhibit "B" to notify
Curtiss in writing of any objections it has to that item of work. In the absence
of notification within such period, said work shall be deemed conclusively to
have been satisfactorily completed in accordance with Exhibit "B" except with
respect to latent defects. Tenant shall have the benefit of any warranties
obtained by Curtiss in connection with the modifications and alterations made by
or for Curtiss hereunder. To the extent such warranties are not assignable
Tenant shall have the right to enforce such warranties in the name of Curtiss at
Tenant's expense.
9. UTILITIES.
9.1 Curtiss shall, at its expense, furnish to the Premises gas-fired
heating units which are and shall be in good working order, repair and condition
and sufficient to heat the Premises to a temperature of 70 degrees Fahrenheit
when the exterior temperature is 0 degrees Fahrenheit. Tenant shall, at its
expense, service, maintain and operate the heating units so as to maintain a
minimum temperature in the Premises of 50 degrees Fahrenheit at all times. Gas
to the Premises is supplied by PSE&G.
Tenant shall, as promptly as practicable after the signing of this Lease,
apply to PSE&G for service of gas to the Premises and shall obtain from and pay
said utility directly for
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gas consumed by Tenant.
9.2 Tenant shall purchase its electric power from Curtiss on the following
terms. Curtiss shall install and maintain meters at its own expense to measure
the electric power supplied to Tenant. Tenant shall pay monthly for the power
supplied at the rate determined and adjusted by Curtiss in accordance with the
provisions of Sections 9.2 and 9.3 of this Lease, which as of December 1, 1995,
was .1217 per kilowatt hour. The initial rate will be a projected rate for the
remaining monthly billing period between the first day following the expiration
of each Abatement Period applicable to each building area and the final day of
the September billing period next ensuing and will include all of Curtiss'
projected costs applicable to that period both direct and indirect to purchase
and distribute the power. This projected rate will be adjusted each year based
on Curtiss' projection of such costs for the following 12 month period
commencing with the October billing and ending with the September billing of the
following year. Such adjusted projected rate will be billed Tenant commencing
with the October billing of each year. By December 1 of each year, Curtiss will
advise Tenant of its final rate for the prior 12 months (i.e., from the October
billing of the preceding year to and including the September billing of the
current year). The first billing after the determination of the actual costs
will include a debit or credit measured by the difference between the projected
rate billed and actual rate, which debit or credit will be due or payable by
Curtiss or Tenant, as the case may be, with
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such billing. The obligation to remit any credits or debits shall survive the
expiration or earlier termination of the Lease term.
9.3 The rate shall be calculated according to the following formula:
Total Cost plus
10% of such Total Cost
Rate/kilowatt hour = ------------------------
Total Consumption (in
kilowatt hours)
wherein Total Cost shall mean all of Curtiss' costs as defined in Section 9.4 of
purchasing and distributing the total amount of electric power consumed by all
users in the Facility during the relevant time period; and Total Consumption
shall mean the total amount of electric power consumed by Tenant and all other
users in the Facility of electric power purchased by Curtiss during the relevant
time period, it being recognized that such total Consumption will fluctuate from
time to time by reason of increases and decreases in user's needs for electric
power during the period and the withdrawal of existing users or addition of new
users to the total user base, and thus that the Rate will be adjusted not only
for changes in individual elements of costs but also may vary with the volume of
Total Consumption.
9.4 The costs of purchasing and distributing electric power shall include
each and every expense incurred in connection with the ownership,
administration, management, operation and maintenance of the electric
transformer and distribution system, including but not limited to costs of
purchase net of any discounts and/or rebates; wages, salaries and fees paid to
persons either employed by Curtiss or engaged as independent contractors in the
operation of the electric power supply system; transformer, and
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distribution losses; repairs, maintenance, alterations, additions and
improvements to the electric power supply system which are expended, whether
made by persons employed by Curtiss or engaged as independent contractors,
taxes, insurance, and administration costs; "costs" as used herein shall not
include costs incurred to remedy any violation of applicable Federal, State or
local laws, rules, orders, or regulations. All such costs shall be reflected on
a reasonably detailed comparative statement (the "Statement") accompanied by
appropriate supporting documentation which shall be delivered to the Tenant upon
request in writing made within ninety (90) days after Tenant's receipt of notice
of the effective date of the change in rate and the applicable provisions of
Section 7.6 above relating to Tenant's right to audit the books and records of
Curtiss shall apply and are deemed incorporated herein by reference. If Tenant
shall commence manufacturing at the Premises, Curtiss agrees to negotiate in
good faith with Tenant for a discounted rate for Tenant's electric consumption.
9.5 Notwithstanding any other provisions of this Lease, (1) Curtiss shall
have no responsibility to supply electric power which exceeds the capacity of
Curtiss' present supply system, (but Curtiss hereby warrants that its present
system shall supply a minimum of 1200 amps of electrical power to the Premises)
and (2) Curtiss shall have the right to terminate the supply of electric power
to Tenant on six months' advance notice in writing based upon Curtiss'
reasonable determination that the system is unable to accommodate Tenant's
electrical power requirements. If, notwithstanding Tenant's efforts to obtain
direct service, Tenant is unable to do so within such six (6) month period,
Curtiss agrees
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that it shall not terminate the supply of electric power to Tenant for an
additional two month period. Following the effective date of termination Tenant
shall be responsible for obtaining its own supply of electric power directly
from the utility company at its own expense in which event Tenant shall have no
further liabilities or obligations under Section 9.2. Curtiss agrees to
reasonably cooperate in the installation of such direct service including
granting all necessary utility easements; provided, however, the work of
installing direct service to Tenant shall be subject to the provisions of
Article 10 hereof, provided however, Curtiss' disapproval of Tenant's plans for
the installation of direct service may be based solely on its reasonable
determination that the proposed work will materially interfere with the Building
systems and is incompatible with the Building structure, and in no event shall
Tenant's installation impair the supply of utility service to other tenants.
9.6 Tenant shall purchase water from Curtiss on the following terms.
Curtiss shall install and maintain meters at its own expense to measure the
water supplied to Tenant. Tenant shall pay for water supplied at the rate
determined and adjusted by Curtiss from time to time in accordance with the
provisions of Section 9.7 below. The initial rate will be a projected rate for
the remaining monthly billing periods between the first day following the
expiration of each Abatement Period applicable to each building area and the
final day of the September billing period next ensuing and will include Curtiss'
projection of all of its costs applicable to that period both direct and
indirect to acquire and distribute the water and furnish sewer service,
excluding the cost of water
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meters, the cost of which shall be billed as a separate meter charge. Said meter
charge shall be equivalent to that charged by the Passaic Valley Water
Commission for water meters of the same size as those installed on the Premises.
This projected rate will be adjusted each year based on Curtiss' projection of
such costs for the following 12-month period commencing with the October billing
and ending with the September billing of the following year. Such adjusted
projected rate will be billed Tenant commencing with the October billing of each
year. By December 1 of each year, Curtiss will advise Tenant of its final rate
for the prior 12 months (i.e., from the October billing of the preceding year to
and including the September billing of the current year). The first billing
after the determination of the actual costs will include a debit or credit
measured by the difference between the projected rate billed and actual rate,
which debit or credit will be due or payable by Curtiss or Tenant, as the case
may be, with such billing. The obligation to remit the credit or debit, as the
case may be, shall survive the expiration or earlier termination of this Lease.
9.7 The rate shall be calculated according to the following formula:
Total Cost plus 10%
of such Total Cost
Rate/cubic foot = --------------------
Total consumption
(in cubic feet)
wherein Total Cost shall mean all of Curtiss' costs as defined in Section 9.8 of
acquiring and distributing the total amount of water consumed by all users in
the Facility during the relevant time period; and Total Consumption shall mean
the total amount of water consumed by Tenant and all other users in the Facility
of water
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supplied by Curtiss during the relevant time period, it being recognized that
Total Consumption will fluctuate from time to time by reason of increases and
decreases in users' needs for water during the period and the withdrawal of
existing users or addition of new users to the total user base, and thus that
the Rate will be adjusted not only for changes in individual elements of cost
but also may vary with the volume of Total Consumption.
9.8 The costs of acquiring and distributing water shall include each and
every expense incurred in connection with the ownership, administration,
management, operation and maintenance of the water supply system and sewage
system, including but not limited to costs of purchase net of any discounts
and/or rebates; wages, salaries and fees paid to persons either employed by
Curtiss or engaged as independent contractors in the operation of the water
supply system and sewage system; electricity; transmission and distribution
losses; repairs, maintenance, alterations, additions and improvements to the
water supply system and sewage system which are expended, whether made by
persons employed by Curtiss or engaged as independent contractors, taxes,
insurance, and administrative costs; "costs" as used herein shall not include
costs incurred to remedy any violation of applicable Federal, State or local
laws, rules, orders or regulations. All such costs shall be reflected on a
reasonably detailed comparative statement (the "Statement") accompanied by
appropriate supporting documentation which shall be delivered to the Tenant upon
request in writing made within ninety (90) days after Tenant's receipt of notice
of the effective date of a change in rate and the applicable provisions of
Section 7.6 above relating to Tenant's right to audit the books and
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records of Curtiss shall apply and are deemed incorporated herein by reference.
9.9 The expenses referred to in this Article shall be determined in
accordance with generally accepted accounting principles consistently applied
and each Statement furnished shall be certified by Curtiss as true and correct.
Tenant or its representatives shall have the right, at Tenant's expense, upon
reasonable notice and during reasonable hours, to inspect the books of Curtiss
to the extent necessary to verify the information contained in any Statement,
provided prior written request for such inspection shall be made by Tenant
within ninety (90) days after receipt of such Statement.
9.10 Notwithstanding any other provisions of this Lease, (1) Curtiss shall
have no responsibility to supply water which exceeds the capacity of Curtiss'
present supply system and (2) Curtiss shall have the right to terminate the
supply of water to Tenant on six (6) months' advance notice in writing based
upon Curtiss' reasonable determination that the system is unable to accommodate
Tenant's water requirements. If notwithstanding Tenant's best efforts to obtain
direct service, Tenant is unable to do so within such six (6) month period,
Curtiss agrees that it shall not terminate the supply of water to Tenant for an
additional two (2) month period. Following the effective date of termination
Tenant shall be responsible for obtaining its own supply of water directly from
the utility company at its own expense, in which event Tenant shall have no
further liabilities or obligations under Section 9.6. Curtiss agrees to
reasonably cooperate in the installation of such direct service including
granting all necessary utility easements;
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provided, however, the work of installing direct service to Tenant shall be
subject to the provisions of Article 10 hereof, and in no event shall Tenant's
installation impair the supply of utility service to other tenants provided,
however, Curtiss' disapproval of Tenant's plans for the installation of direct
service may be based solely on its reasonable determination that the proposed
work will materially interfere with the Building systems and is incompatible
with the Building structure.
9.11 Sanitary wastes from the Premises may be discharged into Curtiss'
sanitary sewers. Tenant shall make no connection to Curtiss' system without
first obtaining in advance Curtiss' written approval thereto, which shall not be
unreasonably withheld.
9.12 Tenant agrees that it will, at no time, discharge into Curtiss' sewer
system any substance, liquid or solid, which may be detrimental to or cause
disintegration of or damage to Curtiss' sewer line or system, or which may
violate local, state or federal laws or statutes. Without limitation of Curtiss'
rights under Article 17 of this Lease, Tenant shall promptly after the discovery
of any such improper or unlawful use take all necessary steps to discontinue
such use. Tenant shall indemnify Curtiss against all costs, expenses,
liabilities, losses, damages, injunctions, suits, fines, penalties, claims and
demands, including reasonable counsel fees; arising out of any violation of this
covenant.
9.13 Tenant will be billed no more often than monthly for the above
utilities. In the event Curtiss' charges to Tenant for the supplying of
utilities hereunder remain unpaid for a period of fifteen (15) days after the
same are billed, Curtiss may, upon
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three (3) days' notice, discontinue all utility services while such charge
remains unpaid without prejudice to Curtiss' rights hereunder for default in the
payment of additional rent, without releasing Tenant from any liability under
this Lease and without Curtiss or its agents or employees incurring any
liability for any damage or loss sustained by Tenant by such discontinuance of
service. All utility charges payable under this Lease shall be considered
additional rent hereunder.
9.14 Curtiss does not warrant that any utility service, including electric,
water and sewerage will be free from interruptions caused by repairs, renewals,
improvements, changes of service, alterations, strikes, lockouts, labor
controversies, accidents, laws, orders or regulations of any federal, state or
municipal authorities, inability of Curtiss to obtain fuel or supplies or any
other cause or causes whether or not beyond the reasonable control of Curtiss.
While Curtiss shall attempt to restore such service using its best efforts and
taking into account Tenant's business operations using its best efforts to
minimize interference with Tenant's operations, any such interruption shall
neither be deemed an eviction or disturbance of Tenant's use and possession of
the Premises or any part thereof nor relieve Tenant from full performance of
Tenant's obligations under this Lease.
9.15 Curtiss shall not in any wise be liable or responsible to Tenant for
any loss or damage or expense which Tenant may sustain or incur if either the
quantity or character of the utility service is changed or interrupted, or if no
longer available or suitable for Tenant's requirements.
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9.16 Should Curtiss or a public utility require a change in the method of
supplying Tenant with a utility hereunder, Curtiss shall immediately notify
Tenant of such required change and may either effectuate such change or advise
Tenant of its election not to supply said utility. In such latter event, Tenant
shall obtain said utility directly at its cost and shall have no further
liability to Curtiss for the cost therefor.
9.17 In the event Tenant converts or attempts to convert to its own use,
any utility supplied to it or to another Tenant at the Facility without payment
therefor as provided herein, Tenant shall promptly pay to Curtiss for the
utility service converted or attempted to be converted a sum equal to the total
billing charges for the six (6) month preceding the date of such act.
9.18 Curtiss shall not be obligated to supply Tenant with any utilities
other than as set forth hereunder.
9.19 Curtiss will, at Tenant's request and reasonable expense, upon
reasonable notice by Tenant and at reasonable times, disconnect or interrupt
utilities supplied to or routed through the Premises if same is required for the
purpose of Tenant performing construction or maintenance on the Premises.
10. ALTERATIONS BY TENANT:
10.1 Tenant shall make no alterations or changes in the Lease Area,
including alterations or changes to utility systems serving the Premises, other
than of a decorative or cosmetic nature without the prior written consent of
Curtiss first had and obtained. Detailed plans and specifications showing any
such proposed
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alterations and changes shall be submitted to Curtiss for approval with the
application for such consent, which consent and approval shall not be
unreasonably withheld. Curtiss' failure to grant or deny its consent or approval
as the case may be within ten (10) days of receipt of Tenant's written request
therefor shall constitute Curtiss' consent and/or approval, as the case may be.
10.2 All alterations and changes by Tenant shall be made at the sole cost
and expense of Tenant and under the supervision of Curtiss. All alterations and
changes by Tenant shall be made in a workmanlike manner and in conformance with
all municipal, state or other governmental regulations, and built-in
non-moveable alterations shall, upon installation, become the property of
Curtiss. All moveable property, furniture, furnishings, equipment, improvements,
installations and trade fixtures may be freely removed from the Premises,
including interior partitions. Upon Curtiss' request given no later than sixty
(60) days prior to the termination of this Lease, Tenant shall, not later than
the termination of this Lease, remove all alterations, additions and
improvements made by Tenant pursuant to this Article, and Tenant will repair and
restore all surfaces from which alterations, additions or improvements are
removed to at least the equal of their condition prior to installation,
reasonable wear and tear and damage by fire or other casualty excepted. All
alterations, additions and improvements required to be removed by Tenant
pursuant to this Section 10.2 remaining after the termination of this Lease may
be removed from the Premises by Curtiss at Tenant's expense, which expenses to
the extent reasonable, shall be
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collectible as additional rent. Curtiss shall not, in any event or under any
circumstances, have any liability or responsibility for any such alterations,
additions or improvements.
11. MECHANIC'S LIENS:
11.1 Tenant will not create and will discharge within 30 days of Tenant's
receipt of notice of the filing thereof, by filing the bond required by law, or
otherwise, any mechanic's, laborer's or materialman's lien which shall be or
become a lien, encumbrance or charge upon the Premises or any part thereof or
the income therefrom, as a result of any action by or on behalf of Tenant, and
will not suffer any other matter or thing arising out of its use and occupancy
whereby the estate, rights and interests of Curtiss in the Premises or any part
thereof would be impaired. Notice is hereby given that Curtiss shall not be
liable for any labor or materials furnished or to be furnished to Tenant upon
credit, and that no mechanic's or other lien for any such labor or materials
shall attach to or affect the reversionary or other estate or interest of
Curtiss in and to the Premises.
12. DAMAGE BY FIRE OR OTHER CASUALTY:
12.1 In the event the Premises are rendered totally unusable by fire or
other casualty, this Lease shall terminate and be of no further force and effect
as of the date of said fire or other casualty and Tenant shall forthwith vacate
and surrender the Premises. In the event of fire or other casualty by any cause
which renders less than thirty percent (30%) of the Premises unusable, Curtiss
shall repair such damage with reasonable
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diligence. During the period of repair the Lease shall remain in force,
provided, however, the Tenant shall be entitled to a proportionate reduction of
said rental for that portion of the Premises not usable. In the event of fire or
other casualty which renders at least thirty percent (30%) of the Premises
unusable, Curtiss may, at its option, exercisable within thirty (30) days of
such fire or casualty, either terminate this Lease or elect to repair such
damage. In the event Curtiss decides to make such repairs, Tenant shall have the
right to terminate this Lease within 30 days of Curtiss' election, otherwise
this Lease shall continue in full force and effect, but Tenant shall be entitled
to a proportionate reduction of said rental for that portion of the Premises not
usable. In the event Curtiss determines not to repair the Premises, this Lease
shall be deemed terminated as of the date of said fire or casualty, except that
Tenant shall have thirty (30) days from the date of said notice to vacate and
surrender the Premises. During the period prior to Tenant's vacating the
Premises, rent shall be due and payable on the usable portion of the Premises at
the rates provided for herein, and the provisions of the Lease shall continue to
govern such occupancy to the extent applicable.
13. EMINENT DOMAIN OR CONDEMNATION:
13.1 If the whole or any part of the Premises shall be condemned or taken
by any municipal, county, federal, state or other lawful authority for any
purpose, then the term of this Lease shall cease on the part so taken from the
day and the possession of
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that part shall be required by the taking agency and the rent shall be paid up
to that day on the part so taken. Curtiss shall have the right either to cancel
this Lease and declare the same null and void,' or to require Tenant to continue
in the possession of the remainder of the same under the terms herein provided,
if less than thirty percent (30%) of the space is taken, except that the rent
shall be reduced in proportion to the amount of the Premises taken. If more than
thirty percent (30%) of the space is taken, Curtiss or Tenant shall have the
option to cancel this Lease. All damage awarded for such taking shall belong to
and be the property of Curtiss, whether such damage shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
Premises herein leased or as severance damages, provided, however, that nothing
contained herein shall be construed to preclude Tenant from prosecuting any
claim directly against the condemning authority in such condemnation proceedings
for loss of business, or depreciation to, damage to, or cost of removal and
relocation of, or for the value of stock, trade fixtures, furniture and other
personal property belonging to Tenant.
14. RIGHT TO INSPECT AND EXHIBIT:
14.1 Curtiss or its agents may enter the Premises at all reasonable times
upon reasonable advance notice in order to inspect the same, to monitor utility
consumption and install additional utility consumption measuring devices, to
determine compliance with the terms of this Lease or existing laws, rules or
regulations affecting the Premises, to service its equipment, to make repairs
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or alterations required to be performed by Curtiss, or to exhibit the Premises
to real estate agencies and other associated persons and prospective purchasers
or mortgagees and, during the last six (6) months of the term, to prospective
tenants, provided said entrance does not unreasonably interfere with Tenant's
operations. At any time Curtiss may affix a "For Sale" sign, and during the last
six months of the term Curtiss may affix a notice that the Premises are for
rent, in each case to a suitable part of the Premises, exclusive of doors and
windows and so as not to obstruct Tenant's signs. If Tenant shall not be
personally present to open and permit an entry into the Premises at any time
when due to an emergency entry therein shall be necessary to prevent damage to
persons or property, Curtiss or its agents may enter the Premises without
rendering Curtiss or such agents liable therefor other than for physical damage
or for loss due to its or their acts (during such entry Curtiss or its agents
shall accord reasonable care to Tenant's property) and without in any manner
affecting the obligations and covenants of this Lease.
15. LIABILITY OF LANDLORD, INDEMNIFICATION AND INSURANCE BY TENANT:
15.1 Tenant hereby agrees that Curtiss shall not be liable for injury to
Tenant's business or any loss of income therefrom or for damage to the goods,
wares, merchandise or other property of Tenant, Tenant's employees, customers,
or any other invitee or other person in or about the Premises, injury to the
person of Tenant, Tenant's employees, agents, contractors, or other invitees,
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regardless of whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures or from any other cause or whether the
said damage or injury results from conditions arising upon the Premises, or from
other sources or places for whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Tenant.
15.2 Tenant further assumes all risk of and responsibility for, and agrees
to indemnify and hold Curtiss harmless from, any claim, loss, liability, or
judgment for any personal injury or loss of life and for any damages to the
property of any person, corporation or other entity (including but not limited
to the parties hereto, their respective agents, contractors or employees)
arising out of or in any manner connected with the acts or omissions of Tenant
hereunder, or the use, construction, operation or condition of the facilities
erected by Tenant on the Lease Area, or any other act, omission or breach of
legal obligation by Tenant (whether or not such act, omission or breach is
deemed negligent); and regardless whether any such claim or loss is sustained by
Tenant, Curtiss, or their respective agents, contractors, or employees, or by
any other persons or corporations which seek to hold Curtiss liable therefor.
Tenant shall also, at its own cost and expense, pay all reasonable charges of
attorneys and all reasonable costs and expenses arising from any of the
aforesaid claims or losses, or incurred in connection therewith, including
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all reasonable charges of attorneys and reasonable Costs and expenses incurred
by Curtiss in connection with the enforcement of this Section against Tenant in
any action or claim brought against Tenant and Curtiss by third parties, or in
any separate action or claim under this Article brought against Tenant, or in
any other action or claim. With respect to any claim as to which Curtiss is
indemnified hereunder, Tenant shall have the sole right to control the conduct
of the defense of any such action, suit or proceeding and to settle and
compromise any claim. Notwithstanding the foregoing, Curtiss agrees to waive its
right of recovery against Tenant for loss or damage to the Lease Area covered by
fire and supplemental casualty insurance carried by Curtiss on the Lease Area to
the extent of recovery by Curtiss under such insurance. At all times during the
Lease term and extensions thereof, Curtiss shall maintain insurance on the Lease
Area against fire or other casualty in an amount not less than 80% of the
replacement value thereof.
15.3 Tenant shall, at Tenant's sole cost and expense and for the mutual
benefit of Curtiss and Tenant, maintain public liability (including contractual
liability) insurance. Tenant shall also maintain property insurance on its own
property (including specifically fire and extended risks ("all risks") insurance
covering all types of water damage) and employers liability and compensation
insurance. The public liability insurance shall insure Tenant and Curtiss
against claims for personal injury, death or property damage occurring upon, in
or about the Premises, in the total amount of not less than Five Million Dollars
($5,000,000) combined single limit per occurrence. Such insurance shall not have
a deductible in excess of $35,000 unless Tenant posts adequate
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security for Curtiss' liability in the amount of the excess deductible. Tenant
agrees that it will procure endorsements on the policy or policies providing
such insurance wherein and whereby the insurance company will agree that Curtiss
shall be given thirty (30) days' advance written notice of any cancellation or
reduction of insurance under such policy or policies, and that copies of all
endorsements issued after the date of such policy or policies shall be forwarded
to Curtiss. All such policies shall name Curtiss as additional insured and
Tenant shall furnish Curtiss within ten (10) days before the commencement of the
term of this Lease with a certificate of insurance from the insurance company
showing Curtiss to be an additional insured as specified hereunder. At the same
time, or as soon as practicable after the policies are issued, Curtiss shall
also be furnished with a copy of all such policies. Failure to procure and
maintain such insurance shall be deemed a material default of Tenant justifying
termination of this Lease for default under Section 17.1(a). In the event Tenant
fails to pay any premium on such policy or policies within 10 days of when due,
Curtiss may, but shall not be obligated to, pay the same. Any amount paid by
Curtiss shall be deemed additional rent and shall be payable within five (5)
days' notice to Tenant of such payment and amount.
16. RIGHTS OF LANDLORD TO CURE BREACH, ADDITIONAL RENT:
16.1 Without prejudice to the rights of Curtiss under other provisions
herein calling for additional rent, in the event that any breach hereunder by
Tenant, continues beyond the notice and cure period provided in this Lease,
Curtiss may on five (5) business days notice to Tenant cure such breach for the
account and
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at the expense of Tenant (except that no notice need be given in event of an
emergency). If Curtiss, at any time by reason of such breach, is compelled to
pay or elects to pay, any sum of money or do any act which will require the
payment of any sum of money, or is compelled to incur any expense, including
reasonable attorneys' fees, in instituting, prosecuting and/or defending any
action or proceeding to enforce Curtiss' rights hereunder or otherwise, the sum
or sums so paid by Curtiss with interest at the statutory rate shall be deemed
to be additional rent hereunder and shall be payable within thirty (30) days'
notice to Tenant of such payment of the amount involved.
17. EVENTS OF DEFAULT AND RIGHTS OF LANDLORD:
17.1 Curtiss may terminate this Lease on five (5) days' notice in any of
the following circumstances (all of which shall be deemed events of default
hereunder):
(a) If Tenant shall be in default in the performance of any covenant of
this Lease (other than the covenants for the payment of Base Rent, additional
rent or any other payment required to be made by Tenant hereunder which are
covered in subdivision (e) of this Section) and if such default is not cured
within twenty (20) days after written notice thereof given by Curtiss; or, if
such default shall be of such nature that it cannot be cured completely within
such twenty (20) day period, if Tenant shall not have promptly commenced within
such twenty (20) day period or shall not thereafter proceed with reasonable
diligence and in good faith to remedy such default.
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(b) (i) The making by Tenant of any general arrangement or assignment for
the benefit of creditors; (ii) If Tenant becomes a "debtor" as defined in 11
U.S.C. Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Tenant, the same is dismissed within ninety (90) days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within ninety
(90) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within sixty (60)
days.
(c) If the Premises become vacant or deserted.
(d) If this Lease shall be assigned by operation of law, other than by
merger or consolidation with an affiliate of Tenant, or the Premises or any
portion thereof shall be sublet without the prior written consent of Curtiss
except as permitted in Article 24.
(e) If Tenant shall be in default in the payment of any Base Rent or
additional rent or any other payment required to be made by Tenant following
five (5) days written notice from Curtiss (provided, however, in no event shall
Curtiss be required to serve more than one such notice for the non-payment of
Base Rent during any six (6) month period).
17.2 If such default is not cured within the notice and cure period
provided in Section 17.1 and Curtiss shall give five (5) day notice of
termination provided in Section 17.1, then at the expiration of such five (5)
day period this Lease shall terminate
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as completely as if that were the date herein definitely fixed for the
expiration of the term of this Lease, and Tenant shall surrender the Premises to
Curtiss. If this Lease shall so terminate, Curtiss may at its option, without
formal demand or notice of any kind, re-enter the Premises by an action to
recover possession of the Premises or a summary dispossession action or by any
other lawful means, and to remove Tenant therefrom without being liable for any
damage therefor. In the event of such legal action by Curtiss, Tenant hereby
agrees that it shall not interpose any counterclaim of any nature whatsoever in
such action.
17.3 Tenant shall remain liable for all its obligations under this Lease,
despite Curtiss' re-entry, and Curtiss may re-rent or use the leased property
without releasing Tenant from liability. Tenant waives any legal requirement for
notice of intention to reenter and any right of redemption. Curtiss hereby
covenants to and shall use all commercially reasonable efforts to (i) relet the
Premises at fair market rentals and (ii) upon such reletting, collect all rents
due thereunder, to mitigate its damages.
17.4 Nothing in this Article shall be deemed to require Curtiss to give
Tenant any notice, other than such notice as may be required by statute or
Section 17.1 of the Lease, prior to the commencement of an unlawful detainer
action or for nonpayment of any Base Rent or additional rent, it being intended
that the five (5) day notice specified in Section 17.1 is only for the purpose
of creating a conditional limitation hereunder pursuant to which this Lease
shall terminate.
17.5 If the Lease shall terminate as provided in this Article,
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Curtiss shall have the right, at its election at any time, to recover from
Tenant the rent and charges due or payable hereunder for the balance of the
term, except to the extent that Curtiss has been able to re-rent the Premises
and mitigate Curtiss' damages.
17.6 Tenant shall pay and indemnify Curtiss against all legal costs and
charges, including reasonable counsel fees, incurred in obtaining possession of
the Premises after a default by Tenant, for such costs and charges incurred
after Tenant's default in surrendering possession upon the expiration or earlier
termination of the term of the Lease, and for such costs and charges incurred
enforcing any covenant of Tenant herein contained.
17.7 Nothing contained in this Article 17 hereof shall limit or prejudice
the right of Curtiss to prove far and obtain as damages from Tenant by reason
of termination or default hereunder an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater than the amount of the difference referred to in Section 17.5.
17.8 No act or thing done by Curtiss or its agents or employees during the
term hereof shall be deemed an acceptance of a surrender of the Premises and no
agreement to accept such surrender shall be valid unless in writing, signed by
Curtiss.
17.9 No remedy herein conferred upon or reserved by Curtiss is intended to
be exclusive of any other remedy herein or by law provided, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at
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law, in equity or by statute, and Tenant hereby waives whatever rights it may
have under N.J.S.A. 2A:18-60.
18. TAXES AND ASSESSMENTS:
18.1 In addition to the rent herein, for the period commencing upon the
Occupancy Date applicable to each building area, Tenant also agrees to pay,
monthly during the term of this Lease or any renewal or extension thereof,
(notwithstanding the abatement provided in Section 3.1 herein), as additional
rent, one-twelfth (1/12) of the Annual Tax Payable by Tenant for real estate
taxes, charges and assessments for space occupied by Tenant computed in
accordance with the following formula:
PA/CA x AV x R = T
where
PA = Premises Area of 488,640 square feet (or lesser areas identified in
Article 2.2 above during periods identified above);
CA = Curtiss Wood-Ridge Rentable Building Areas as of Assessment Date,
which as of the date hereof is 2,322,104 square feet;
AV = Assessed Tax Value;
R = Annual Tax Rate; and
T = Annual Tax Payable by Tenant;
provided, however, that Tenant shall not bear the cost of tax increases to the
extent they result from increases in assessed tax value brought about by
improvements to Curtiss' Wood-Ridge building
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any interest or penalties imposed in respect of any taxes or charges. To the
extent Curtiss incurs expenses, including but not limited to administration
expenses (which for the purpose of this Article, shall be deemed to be 20% of
counsel fees) and counsel fees, in challenging real estate taxes or assessments
to obtain a reduction or prevent or minimize an increase in such taxes or
assessments for any year or years during the term or any renewal or extension of
this Lease, the above calculation for the year or years challenged shall be
modified or recalculated by adding the expenses attributable to each such
challenged year to the taxes and assessments (AV x R) in the formula for that
year, so as to charge Tenant with so much of said expenses as are attributable
to the Premises. For the purpose of the modifications and recalculations
discussed in the preceding sentence, the portion of the expenses that shall be
attributed to each challenged year shall be determined by dividing the total of
the expenses equally among the challenged years in connection with which such
expenses were incurred. The additional rent reflecting Tenant's real estate
taxes and assessments liability will be due in monthly installments payable
concurrently with the Base Rent specified in Article 3 hereof. In the event that
as the result of the resolution (by way of court decision or agreement) of a
challenge (through legal proceedings or otherwise) to the real estate taxes
assessed on Curtiss' Wood-Ridge buildings, the amount of taxes attributable to
the Premises on account of any tax year, computed in accordance with the above
formula, is changed from the amount of taxes for that year as originally so
computed and paid by Tenant to Curtiss:
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(a) Tenant shall pay to Curtiss the amount of any increase in said taxes
attributable to the Premises for that year in six (6) equal monthly
installments, starting with the thirtieth (30th) day after Curtiss shall have
given Tenant written notice of such increase; or
(b) Curtiss shall, at its election exercised by written notice to Tenant,
either refund to Tenant or credit Tenant with the amount of any decrease in said
taxes attributable to the Premises for that year (i) such refund to be made in
six (6) equal monthly installments starting with the tenth (10th) day after
receipt by Curtiss of such refund and interest which obligation shall survive
the expiration or earlier termination of this Lease, or (ii) such credit to be
applied by Curtiss first against any amounts payable by Tenant to Curtiss at the
time of such receipt by Curtiss and then against amounts thereafter becoming
payable by Tenant to Curtiss as the same becomes payable, until such credit is
utilized in full and if the term of this Lease shall expire or terminate before
such credit, is utilized in full, the amount remaining thereon shall be
immediately paid to Tenant, which obligation shall survive the expiration or
termination of this Lease.
The notices from Curtiss to Tenant of increased or decreased taxes shall
set forth the calculation by Curtiss of the amount of increase or decrease
involved. If the Facility is affected by an assessment which is payable in
annual installments, then Tenant shall pay its prorata share of the installments
that are due and payable during the term of this Lease. Curtiss represents and
warrants to Tenant that as of the date of this Lease (i) Curtiss
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has no knowledge of any proposed or pending special assessments affecting the
Facility or any part thereof and that (ii) no part of the Facility is subject to
or affected by any assessment for public improvements, whether or not presently
a lien thereon or due and payable. All sums assessed prior to but payable in
whole or in installments after the commencement of the Lease term and all sums
assessed during the term or any renewals or extensions thereof but payable in
whole or in installments after the Lease term or any renewals or extensions
thereof shall be adjusted and prorated so that Curtiss shall pay its prorated
share for the period prior to and for the period subsequent to the Lease term or
renewals or extensions thereof and Tenant shall pay the prorated share for the
period of the Lease term and for any renewals or extensions thereof. Curtiss
agrees upon written request to submit tax bills and evidence of expenses for
Tenant's inspection.
18.2 If and to the extent that due to a change in the method of taxation or
assessment, any franchise, capital stock, capital gains, rent, income, profit or
any other tax or charge shall be substituted in whole or in part for the current
ad valorem taxes now or hereafter imposed upon the Premises, such franchise,
capital stock, capital gains, rent, income, profit or any other tax or charge
shall be deemed included in the term real estate taxes, charges and assessments
for the purposes of this Article 18 but only, to the extent of the amount
thereof that would be levied if Curtiss's interest in the land and building were
the only assets of Curtiss. Notwithstanding the foregoing sentence, in no event
shall Tenant be liable for any taxes on Curtiss' net income, regardless
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of the characterization of such taxes.
18.3 The term "Rentable Building Areas" as used in this Article 18 shall
mean the square footage of the Premises and that rented by all other tenants in
the Curtiss Wood-Ridge facility plus the square footage of vacant rentable space
in said facility as the same may be adjusted by any future increase/decrease in
the gross rentable area of the Facility.
19. PEACEFUL POSSESSION:
19.1 Curtiss hereby covenants and agrees that if Tenant shall perform all
of the material covenants and agreements herein stipulated to be performed on
Tenant's part, Tenant shall at all times during the term and any extension or
renewal hereof have the peaceable and quiet enjoyment and possession of the
leased Premises, subject, however, to the terms of this Lease.
20. SUBORDINATION TO MORTGAGES OR OTHER ENCUMBRANCES:
20.1 This Lease shall be subject and subordinate at all times to mortgages,
ground or other underlying leases or other encumbrances which may now or
hereafter affect the real property of which the Premises are a part, and to any
renewal modification, consolidation, replacement or extension thereof, provided
that the holder of such mortgage, lease or encumbrance agrees in writing, and
shall deliver an agreement in form and substance reasonably satisfactory to
Tenant and its counsel which provides, that if, by dispossess, foreclosure, or
otherwise such holder, or any successor in interest, shall come into possession
of the Premises or shall
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become the owner of such real property, or take over or exercise the right of
Curtiss in the Premises, it will not disturb the possession, use or enjoyment of
the Premises by Tenant, nor disaffirm this Lease or Tenant's rights hereunder,
so long as Tenant shall not be in default of its material obligations beyond
applicable periods of notice and cure as provided in Article 17. Although no
instrument or act on the part of Tenant shall be necessary to effectuate such
subordination, Tenant will, nevertheless, execute and deliver such further
instruments subordinating this Lease to the lien of any such mortgages, leases
or other encumbrances as may be desired by the mortgagee or lease or encumbrance
holder. If any mortgagee, trustee or ground lessor shall elect to have this
Lease treated as being prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Tenant, this Lease shall
be deemed prior to such mortgage, deed of trust or ground lease, whether this
Lease is dated prior or subsequent to the date of said mortgage, deed of trust
or ground lean or the date of recording thereof. Curtiss represents and warrants
to Tenant that there are no mortgages, ground or underlying leases, and that
there are no encumbrances that could foreclose the interest of Tenant in this
Lease.
21. SIGNS:
21.l Without the prior written consent of Curtiss, no sign, notice, display
or lettering shall be exhibited, inscribed, painted or affixed by the Tenant on
any part of the Premises if the same is visible from the outside of the
Premises. In the event of the violation of the foregoing by Tenant, Curtiss may
remove same
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without liability, and may charge the reasonable expense incurred for such
removal to Tenant as additional rent, which shall be payable within five (5)
days of notice to Tenant hereof.
22. HOLDING OVER:
22.1 In the event Tenant shall for any reason remain in possession after
the expiration of either the stated tern hereby granted or any renewal or
extension thereof, or after the termination of this Lease by reason of default
by Tenant hereunder, such possession shall be as a tenancy at sufferance during
which time Tenant shall pay as Base Rent and additional rent an amount equal to
double that accruing during the last month of the preceding term. This provision
does not waive Curtiss' right of re-entry or any other right hereunder; and
Curtiss may institute an action to recover possession of the Premises, or a
summary dispossession action, without first providing Tenant with notice to
quit.
23. BROKER:
23.1 The parties hereto agree that Alliance Real Estate Group, Inc. brought
about this Lease and that Curtiss shall pay the broker's commission therefor
pursuant to separate agreement. Each party represents and warrants to the other
that it has not dealt with any other broker or finder with respect to this
transaction of Lease and each party shall hold the other harmless from and
indemnify the other party against any brokerage fee or claim attributable to its
own act or deed.
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24. ASSIGNMENT AND SUBLETTING OF PREMISES:
24.1 The Tenant shall not sublet the Premises nor any portion thereof nor
shall this Lease be assigned by Tenant without the prior written consent of
Curtiss which consent shall not be unreasonably withheld, delayed or
conditioned. Notwithstanding anything to the contrary contained herein, the
provisions of this Article shall not apply, and Tenant shall have the absolute
right to assign this Lease and to sublet all or any portion of the Premises, to
any affiliate of Tenant and any person, corporation or other entity which
controls, is controlled by or is under common control with Tenant (collectively
"Affiliates") without releasing Tenant from liability hereunder.
24.2 The terms "assigned" and "assign" as used in Section 24.1 and 24.7
hereof shall refer to any transfer of Tenant's interest in the Premises to a
third party, except a sale, merger, or acquisition involving all of Tenant's
business at the Premises, and, in addition, a transfer of the Lease to any
person, corporation or other entity which is acquiring a controlling interest in
Tenant by purchase of stock, merger, consolidation or otherwise, or is acquiring
all or substantially all of Tenant's business or assets shall not be deemed an
assignment or transfer hereunder, including but not limited to:
(a) any assignment or transfer of this Lease by operation of law;
(b) any mortgage, pledge or collateral assignment of this Lease;
(c) any involuntary assignment or transfer of this Lease
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in connection with bankruptcy, insolvency, receivership or otherwise.
24.3 Curtiss shall not be liable for damages in the event Curtiss refuses
to consent hereunder to a subletting or assignment by Tenant except to the
extent such refusal is arbitrary, capricious or made in bad faith. Subject to
the preceding the sole remedy available to Tenant or any third party for such
failure to consent shall be the right to bring an action for a declaratory
judgment to determine the reasonableness of Curtiss' refusal to so consent.
24.4 Any such subletting or assignment shall be upon the following
conditions:
(a) That such disposition or transfer be subject to all the terms and
conditions of this Lease to the extent applicable;
(b) That upon subletting Tenant shall remain primarily liable to Curtiss
for the payment of rent or other charges stipulated herein and performance of
all terms and conditions of this Lease undertaken to be kept and performed by
Tenant.
(c) That upon assignment the assignee shall expressly assume and agree to
perform and comply with all the covenants and provisions of this Lease on the
part of the Tenant and shall be jointly and severally liable with the Tenant for
any default in respect of such covenant or provisions;
(d) That at the time of such subletting or assignment Tenant shall not then
be in default of its material obligations beyond the applicable periods of
notice and cure;
(e) That such assignment or sublease shall be in writing and Tenant shall,
along with its request for consent thereto,
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except in the case of a proposed assignment or sublease to an Affiliate, have
given Curtiss a copy of the sublease or assignment, proposed sublease or
assignment, as applicable, the names of the officers and directors or principals
of assignee or subtenant, bank references, and other available detailed
information sufficient to enable Curtiss to determine the financial
responsibility of the proposed assignee or sublessee, information concerning the
business to be conducted in the Premises, and such further information as may be
reasonably requested by Curtiss concerning the assignee or sublessee.
(f) Except in the case of a proposed assignment or sublease to an
Affiliate, that Tenant shall have given Curtiss forty-five (45) days advance
written notice of a proposed subletting or assignment.
(g) That any assignment or subletting by Tenant shall be for a term ending
not later than the last day of the term of this Lease.
(h) That if a subletting is for less than all the Premises, Tenant shall
pay all separation costs, if any, as required by Code and the cost of
restoration of the Premises to their original condition at the time of the
original subletting. All permits required in order to effectuate such separation
and restoration shall be obtained by and at the expense of Tenant or subtenant
and Curtiss shall be provided with additional security adequate to cover the
cost of such restoration.
24.5 Other than in the case of a subletting to an Affiliate, in the event
Tenant sublets the Premises in whole or in part at a Base Rent per square foot
in excess of the Base Rent per square
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foot provided for herein, Tenant shall pay and turn over to Curtiss fifty
percent (50%) of all such excess sums received from such subtenant when and as
received excluding sums paid for the sale or rental of Tenant's equipment,
furniture, furnishings or other personal property and less sums paid on account
of utilities and the costs and expenses incurred by Tenant in connection with
such subletting, including, without limitation, professional fees, brokerage
commissions and advertising costs.
24.6 As additional security for the prompt payment of the rent herein
reserved to Curtiss and for the faithful performance and punctual observance of
all the other covenants and conditions herein contained to be performed or
observed on the Tenant's part, subject to the rights of any lender of Tenant,
the Tenant hereby assigns to Curtiss all of the Tenant's right, title and
interest in and to any subleases which may be made by the Tenant affecting the
Premises, or any part thereof, and in and to the rents due or to become due
under the terms of any such subleases. The assignment by the Tenant to Curtiss
of its interest in and to any subleases which may be made by the Tenant, as
aforesaid, shall take effect, however, (a) only in the event of any material
default hereunder made beyond the applicable periods of notice and cure or
suffered by the Tenant, (b) after written notice of any such default given by
Curtiss to the subtenant or subtenants, (c) only as to such subleases as Curtiss
shall elect to continue in full force and effect.
24.7 In the event Tenant proposes to assign this Lease to another party
satisfactory to Curtiss, Curtiss shall consent to
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such assignment provided that other than an Affiliate, Curtiss shall be entitled
to fifty percent (50%) of any consideration received by Tenant from its assignee
for such assignment, payable when and as received by Tenant excluding sums paid
for the sale or rental of Tenant's equipment, furniture, furnishings or other
personal property, less the costs and expenses reasonably incurred by Tenant in
connection with such assignment, including, without limitation, professional
fees, brokerage commissions and advertising costs.
25. NON-WAIVER:
25.1 The failure of either party to insist upon strict performance of any
of the covenants or conditions of this Lease in any one or more instances shall
not be construed as a waiver or relinquishment for the future of that or any
other covenant or condition, and the same shall be and remain in full force and
effect.
26. NOTICES:
26.1 Any notice or other communication required or permitted to be given or
served under this Lease shall be in writing and shall be deemed to be
sufficiently given or served if (i) delivered personally or, (ii) mailed by
certified or registered mail, postage prepaid, or (iii) sent by facsimile
transmission with a confirmation copy sent by overnight courier no later than
the next succeeding business day and addressed as follows:
(a) if to Curtiss:
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CURTISS-WRIGHT FLIGHT SYSTEMS/SHELBY, INC.
c/o CURTISS-WRIGHT CORPORATION
One Passaic Street
Wood-Ridge, New Jersey 07075
Attention: Real Estate Department
(b) if to Tenant:
American Tissue Corporation
35 Engle Street
Hicksville, New York 11801
Attention: Nourollah Elghanayan
Facsimile: (516) 435--8980
Either party may from time to time, specify by notice in writing to the other,
given in the manner set forth above, a new address at which any such notice
shall thereafter be given or served.
A copy of any notice sent to Tenant pursuant to Article 17 shall be
furnished to Tenant's counsel Mandel and Resnik, 220 E.42nd Street, New York, NY
10017.
27. NOTICE OF CERTAIN EVENTS:
27.1 Tenant shall give notice to Curtiss promptly after Tenant learns
thereof, of (a) any accident in or about the Lease Area, (b) any fire in the
Premises, or (c) any damage to or defects in the Premises whether required to be
repaired by Curtiss or Tenant.
28. APPLICABLE LAW:
28.1 This Lease and the rights, duties and obligations of the
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parties as set forth herein, shall be settled and determined in accordance with
the laws of the State of New Jersey.
29. LEASE BINDING ON SUCCESSORS AND ASSIGNS; SEVERABILITY:
29.1 Each and every obligation contained in this Lease shall be binding
upon the respective parties, their legal representatives, heirs, successors and
assigns. If any provision of this Lease shall be declared invalid or
unenforceable by a court of competent jurisdiction, the remainder of this Lease
shall continue in full force and effect.
30. NO ORAL MODIFICATIONS:
30.1 It is acknowledged that the covenants and obligations contained herein
are the complete and exclusive statement of agreement between the parties,
superseding all proposals or prior agreements, oral or written, and all other
communications between the parties or with any broker relating to the subject
matter of this Lease. No alterations, amendments or changes to this Lease shall
be binding unless first reduced to writing and executed with the same formality
as this Lease.
31. NUMBER, GENDER, CURTISS, TENANT:
31.1 All words herein which refer to Curtiss or Tenant shall be considered
of the number and gender required. The word "Curtiss" shall include its
successors in interest, assigns, grantees and transferees, and the word "Tenant"
shall include all persons liable for any payment hereunder, and all parties
lawfully occupying the subject premises or part thereof by virtue of this
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Lease.
32. RENEWALS.
32.1 Provided Tenant shall not then be in default beyond applicable periods
of notice and cure of its material obligations hereunder, Tenant shall have the
option to renew this Lease on the same terms and conditions, as specified
herein, except as to the amount of Base Rent, for 2 successive terms of five (5)
years each, provided Tenant shall, on or before nine (9) months prior to the
expiration of the previous term, give Curtiss a written notice of its election
to make such renewal. The Base Rent for each renewal year from August 1, 2006 to
July 31, 2011, shall be $2.30 per square foot per year, and for each renewal
year from August 1, 2011 to July 31, 2016, shall be $2.50 per square foot per
year.
33. ADDITIONAL SPACE:
33.1 In the event that space adjacent to the Premises becomes available
during the initial or renewal lease term Tenant shall have the exclusive right,
subject to the prior right of Rose Art Industries, a tenant of the Facility, to
lease such additional space. Curtiss will thereupon give written notice to
Tenant of its availability. Tenant shall have 60 days thereafter within which to
notify Curtiss in writing of its election to take the space. If Tenant elects to
take the space, it shall be added to this Lease at the same rental rate per
square foot and on the other terms and conditions as the premises then under
lease to Tenant. Curtiss shall deliver such additional space to Tenant following
Curtiss'
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receipt of Tenant's notice in broom-clean condition, free of all debris,
material and refuse and free of all tenancies and rights of occupancy, and
otherwise in a condition suitable for the conduct of Tenant's business thereat.
Tenant's payment of rents with respect to such additional space shall commence
upon Landlord's delivery of possession thereof to Tenant in the condition
required in this Section 33.1, provided that Curtiss shall give Tenant five (5)
days prior notice thereof together with a temporary certificate of occupancy. If
Tenant elects not to take the space or fails to make a timely election, Curtiss
shall have the absolute right to offer any part or all of said space to others.
If Rose Art Industries elects not to or fails to timely exercise its option with
respect to any space subject thereto, Tenant shall have the exclusive right to
lease such space in accordance with the provisions hereof.
34. SECURITY MEASURES AND FIRE PROTECTION:
34.1 Tenant hereby acknowledges that the rental payable to Curtiss
hereunder does not include the cost of guard service, fire protection, or other
security measures, and that Curtiss shall have no obligation whatsoever to
provide same. Tenant assumes all responsibility for the protection of Tenant,
its agents, invitees and property.
35. ESTOPPEL CERTIFICATE AND FINANCIAL STATEMENTS:
35.1 Tenant agrees at any time and from time to time, upon not less than
ten (10) days' prior written request, that Tenant shall execute, acknowledge and
deliver to Curtiss, or its designee, a
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statement in writing certifying: that this Lease is unmodified and is in full
force and effect (or if there have been modifications, the specifics thereof and
that the Lease is in full force and effect as modified); the dates to which the
Base Rent and additional rent have been paid; and the amount of all rents paid
in advance, if any. It is intended hereby that any such statement delivered
pursuant to this Article may be relied upon by a prospective purchaser of
Curtiss' interest, or a mortgagee of Curtiss' interest, or any assignee of any
mortgage upon Curtiss' interest, in the Premises. If Curtiss desires to finance,
refinance or sell the Building in which the Premises are located, Tenant hereby
agrees to deliver to any lender or purchaser designated by Curtiss such
statements of Tenant (excluding financial statements) as may reasonably be
required by such lender or purchaser. All such statements shall be received by
Curtiss and such lender or purchaser in confidence and shall be used only in
connection with such purchase or loan. The foregoing obligation shall be deemed
a substantial obligation of the tenancy, the breach of which shall give Curtiss
those remedies herein provided for in event of default.
36. AUTHORITY:
36.1 If Tenant is a corporation, trust or general or limited partnership,
Tenant represents and warrants that the individual executing and delivering this
Lease on behalf of said entity is duly authorized to execute and deliver this
Lease on behalf of said entity, and that such execution and delivery of this
Lease by Tenant does not and shall not violate any provision of any
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agreement, by-law, charter, order, judgment, government regulation, law or other
obligation to which Tenant is a party or is subject. If Tenant is a corporation,
trust or partnership, Tenant shall, upon execution of this Lease, deliver to
Curtiss evidence of such authority and compliance reasonably satisfactory to
Curtiss.
37. CAPTIONS:
37.1 The captions herein are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope of this Lease
nor the intent of any provision hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease the
day and year first above written and caused their corporate seals to be affixed
hereto.
CURTISS-WRIGHT-FLIGHT SYSTEMS/
SHELBY, INC
By: /s/ David Lady
---------------------------
An Authorized Representative
Attest:
/s/ [ILLEGIBLE]
- -----------------------------------
AMERICAN TISSUE CORPORATION
By: /s/ Nourollah Elghanayan
----------------------------
An Authorized Representative
Attest:
/s/ [ILLEGIBLE]
- -----------------------------------
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RIDER TO LEASE, DATED AS OF DECEMBER 15, 1995, BETWEEN
CURTISS WRIGHT FLIGHT SYSTEMS/SHELBY, INC., AS
LANDLORD, AND AMERICAN TISSUE CORPORATION, AS TENANT
----------------------------------------------------
1. If any of the provisions of this rider conflict or are otherwise inconsistent
with any of the provisions of the Lease, the provisions of this rider shall
control and be binding. All capitalized terms not otherwise defined herein shall
have the same meanings as set forth elsewhere in this Lease.
2. As a material inducement to Tenant's execution, delivery and performance of
this Lease, Landlord hereby represents, warrants and, where applicable,
covenants to Tenant, as follows:
(i) Landlord is the fee owner of the Premises and has full power and
authority to execute, deliver and perform this Lease; this Lease has been
duly authorized, executed and delivered by Landlord and constitutes the
legal, valid and binding agreement of Landlord, enforceable against
Landlord in accordance with its terms;
(ii) No consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or authority or any
third-party is required for the execution, delivery and performance of this
Lease by Landlord;
(iii) The execution, delivery and performance of this Lease is not a
violation of the terms of any underlying leases or underlying mortgages;
Landlord shall give Tenant not less than thirty (30) days' prior written
notice of any underlying leases and underlying mortgages;
(iv) The Premises and all installations, facilities and systems
relating thereto shall be delivered to Tenant vacant and in broom clean
condition, free of all tenancies and other rights of occupancy, fully
operational and in good working order and condition;
(v) Except with respect to an order issued by the New Jersey
Department of Environmental Protection under its ISRA regulations with
respect to soil and ground water contamination at the Premises which
Landlord is currently complying with, Landlord has not received any notice
of any claim, suit or other action or investigation with respect to the
violation of any laws, orders, rules, regulations or requirements of any
federal, state or local governmental agency, including, without limitation,
environmental and occupational hygiene laws, rules and regulations due to
the presence of hazardous materials in or about the Premises or otherwise.
Except as set forth in the preceding sentence, Landlord knows of no facts
or circumstances that may give
<PAGE>
rise to any future civil, criminal or administrative proceeding relating to
environmental or occupational hygiene matters or any other matter affecting
the Premises;
(vi) Notwithstanding anything to the contrary contained elsewhere in
this Lease, except with respect to Dane Paper Board Company and four other
tenants currently at the Facility, during the term of this Lease, Tenant
shall be treated no less favorably than any other tenant at the Facility
benefitted by the common areas with respect to any and all of Tenant's
rights and liabilities set forth in Section 7.6 of Article 7 of the Lease;
and
(vii) The aggregate of the proportionate shares for all tenants at the
Facility shall never equal a number greater than 100 and Curtiss shall not
receive more than 100% of its costs, plus any applicable surcharge, in
respect of computations pursuant to Section 7.6 of Article 7 or Articles 9
or 18 hereof.
The provisions of this paragraph shall survive the expiration or earlier
termination of this Lease.
3. The Landlord represents and warrants that neither it nor any of its officers,
employees or agents has acted so as to render Tenant liable for any brokerage
commissions in connection with this transaction. Landlord agrees to indemnify,
defend and hold Tenant, its officers, shareholders, directors, employees and
agents harmless from and against any Claims or demands for a brokerage, finder
or other commission or demands for a brokerage, finder or other commission or
fee arising out of Landlord's actions, including, without limitation, any
conversations or negotiations had by Landlord with any broker or finder. The
Tenant represents and warrants that neither it nor any of its officers,
employees or agents has dealt with any broker or finder in connection with this
transaction other than the broker set forth in Article 23 of this Lease. Tenant
agrees to indemnify, defend and hold Landlord, its officers, shareholders,
directors, employees and agents harmless from and against any Claims or demands
for a brokerage, finder or other commission or demands for a brokerage, finder
or other commission or fee arising out of a breach by Tenant of its
representation hereunder, including, without limitation, any conversations or
negotiations had by Tenant with any other broker or finder.
4. At any time and from time to time upon not less than fifteen (15) days' prior
notice by Tenant, Landlord shall execute, acknowledge and deliver to Tenant a
statement of Landlord (or if Landlord is a corporation, an appropriate officer
of Landlord) certifying (i) that this Lease is unmodified and in full force
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and effect (or it there have been modifications, that the same is in full force
and effect as modified and stating the modifications), (ii) the dates to which
the rent and additional rent have been paid in advance, if any, (iii) whether or
not Tenant is in default in the keeping, observance or performance of any
covenant, agreement, term, provision or condition contained in this Lease and,
if so, specifying each default of which the signer may have knowledge, and (iv)
as to any other matter reasonably requested by Tenant, it being intended that
the statement may be relied upon by Tenant and third-parties.
5. Without limiting or waiving any other rights Tenant may have, all rents shall
appropriately abate during any period during which the Premises or any portion
thereof cannot be used for the purposes contemplated by this Lease by reason of
(i) any act or negligence on the part of Landlord or Landlord's agents,
employees, contractors or representatives, or (ii) Landlord's failure to timely
fulfill its obligations under Section 7.3 of the Lease.
6. If Landlord shall default in the observance or performance of any term or
covenant on Landlord's part to be observed or performed hereunder, in addition
to Tenant's other rights and remedies hereunder, at law and in equity, Tenant
may, upon ten (10) days' prior written notice, perform the same for the account
of Landlord. If Tenant makes any expenditures or incurs any obligation for the
payment of money in connection therewith, including, without limitation,
attorneys' fees, or makes any expenditures or incurs any obligation in
instituting, prosecuting or defending any action or proceeding hereunder, such
sums or obligations incurred, with interest at the statutory rate, shall be
deemed due from Landlord to Tenant and shall be paid by Landlord to Tenant upon
demand. Tenant shall, however, not be entitled to cause repairs to be made to
the roof unless performed in accordance with the applicable roof warranties.
Tenant accepts all resulting liability for its failure to do so.
7. Landlord shall indemnify and hold Tenant harmless from and against any and
all Claims arising out of: (i) any negligent act or omission on the part of
Landlord or any of its employees, contractors, agents or representatives; and
(ii) any failure on the part of Landlord to perform or comply with any of the
covenants, agreements, terms, provisions, conditions or limitations contained in
this Lease on its part to be performed. Tenant shall indemnify and hold Landlord
harmless from and against any and all Claims arising out of: (i) any negligent
act or omission on the part of Tenant or any of its employees, contractors,
agents or representatives; and (ii) any failure on the part of Tenant to perform
or comply with any of the covenants, agreements, terms, provisions, conditions
or
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limitations contained in this Lease on its part to be performed. The provisions
of this paragraph 7 shall survive the expiration or earlier termination or this
Lease.
8. Wherever in this Lease, Landlord's consent or approval is required, Landlord
covenants not to unreasonably withhold, delay or condition such consent or
approval. In addition, Landlord covenants to act reasonably with respect to all
action requiring Landlord's approval, consent, discretion or judgment.
Landlord's failure to grant or withhold its consent within ten (10) days of
receipt of Tenant's written request therefor shall constitute Landlord's consent
and approval.
9. Within 10 days of a request by Tenant, Curtiss shall deliver to Tenant a
landlord's waiver in the form required by any equipment lessor and purchase
money lender of Tenant for the lease or purchase of items of equipment.
10. All sums payable by Tenant pursuant to Articles 3, 7.6, 9 and 18 of this
Lease shall be appropriately prorated for any partial payment period falling
within the term of this Lease.
11. (a) Tenant shall cause to be included in each of its insurance policies
insuring Tenant's property and business interest in the Premises against loss,
damage or destruction by fire or other casualty (i) a waiver of the insurer's
right of subrogation against Curtiss, and (ii) an express agreement that such
policy shall not be invalidated if the assured waives the right of recovery
against any party responsible for a casualty covered by the policy before the
casualty. If such waiver or permission shall not be, or shall cease to be,
obtainable without additional charge or at all, Tenant shall so notify Curtiss
promptly after learning thereof. In such case, if Curtiss shall so elect and
shall pay the insurer's additional charge therefor, such waiver shall be
included in the policy. Each such policy shall name Curtiss as an additional
assured and shall contain, if obtainable, agreements by the insurer that the
policy will not be cancelled without at least thirty days' prior notice to both
assureds and that the act or omission of Tenant will not invalidate the policy
as to Curtiss. Tenant hereby releases Curtiss with respect to any claim
(including a claim for negligence and water damage) which Tenant might otherwise
have against Curtiss for loss, damage or destruction with respect and to the
extent to which Tenant is required to be insured under a policy or policies
containing a waiver of subrogation or naming Curtiss as an additional assured,
as provided in this Article, whether or not the loss, damage or destruction is
due to the carelessness or negligence of Curtiss, its servants, agents or
employees. If a covered loss shall occur under such policy or policies and by
reason of the insurer's waiver of its right of
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subrogation against Curtiss the premium payable for such policy or policies
shall increase, then Tenant shall so notify Curtiss promptly after learning
thereof. In such case, if Curtiss shall so elect and shall pay the additional
premium therefor, such waiver of subrogation shall continue to be included in
the policy or policies.
(b) Curtiss shall cause to be included in each of its insurance policies
insuring the Premises and the Building against loss, damage or destruction by
fire or other casualty (i) a waiver of the insurer's right of subrogation
against Tenant, and (ii) an express agreement that such policy shall not be
invalidated if the assured waives the right of recovery against any party
responsible for a casualty covered by the policy before the casualty. If such
waiver or permission shall not be, or shall cease to be, obtainable without
additional charge or at all, Curtiss shall so notify Tenant promptly after
learning thereof. In such case, if Tenant shall so elect and shall pay the
insurer's additional charge therefor, such waiver shall be included in the
policy. Each such policy shall name Tenant as an additional assured and shall
contain agreements by the insurer that the policy will not be cancelled without
at least thirty days' prior notice to both assureds by certified mail, return
receipt requested, and that the act or omission of Curtiss will not invalidate
the policy as to Tenant. Curtiss hereby releases Tenant with respect to any
claim (including a claim for negligence) which Curtiss might otherwise have
against Tenant for loss, damage or destruction with respect and to the extent to
which Curtiss is required to be insured under a policy or policies containing a
waiver of subrogation or naming Tenant as an additional assured as provided in
this Article, whether or not the loss, damage or destruction is due to the
carelessness or negligence of Tenant, its servants, agents or employees. If a
covered loss shall occur under such policy or policies and by reason of the
insurer's waiver of its right of subrogation against Tenant the premiums payable
for such policy or policies shall increase, then Curtiss shall so notify Tenant
promptly after learning thereof. In such case, if Tenant shall so elect and
shall pay the additional premium therefor, such waiver of subrogation shall
continue to be included in the policy or policies.
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12. A default by Tenant beyond applicable notice and cure periods under that
certain loan agreement between the parties dated even date herewith shall be a
default by Tenant under this Lease.
13. Any delays incurred by Tenant in the removal of the woodblock flooring or in
the installation of the concrete flooring in any of the building areas other
than as a result of Landlord's acts or omissions shall not extend any of the
dates set forth in the Lease for the payment of rent, utilities, taxes,
insurance, common area charges or of any other obligation or entitle Tenant to
any abatement of rent or to terminate this Lease.
14. Provided that the requirements are no more onerous than those imposed by the
National Fire Protection Association, Inc., Tenant agrees to comply with the
fire prevention requirements of Curtiss' property insurance carrier and with the
Borough of Wood-Ridge and Tenant's failure to do so shall not permit Tenant to
waive or terminate any of its obligations under this Lease.
Landlord:
Curtiss Wright Flight
Systems/Shelby, Inc.
By: /s/ David Lody
----------------------------
Tenant:
American Tissue Corporation
By: /s/ Nourollah Elghanayan
----------------------------
Pres.
6
LOAN AGREEMENT
Agreement, made as of the 15th day of December, 1995, by and between
Curtiss-Wright Flight Systems/Shelby, Inc., an Ohio Corporation, with an office
at 1200 Wall Street West, Lyndhurst, New Jersey 07071 (hereinafter called
"Curtiss") and American Tissue Corporation, a New York corporation, with offices
at 35 Engle Street, Hicksville, New York 11801 (hereinafter called "American
Tissue").
W I T N E S S E T H:
Whereas, on or about December 15, 1995, Curtiss and American Tissue entered into
a written lease agreement ("lease"), pursuant to which American Tissue leased
from Curtiss certain premises situated in Curtiss' Wood-Ridge Business Complex
("Premises") on the terms and conditions set forth in the lease;
Whereas, certain renovations are to be performed at the Premises consisting of
the removal of all existing woodblock flooring at the Premises and the
replacement thereof with a concrete flooring;
Whereas, Curtiss shall cause certain portions of the flooring work to be
performed at its sole cost and expense, consisting of the discarding and
disposal of all woodblocks, and American Tissue will cause the balance of the
flooring work to be performed by contractors selected by it; and
Whereas, Curtiss has agreed to pay $300,000.00 of the cost of the work being
caused to be performed by American Tissue, less the actual cost incurred by
Curtiss in respect of the work to be performed by Curtiss as herein set forth up
to a maximum of $84,700.00 ("Curtiss' Cost"), and has agreed to make a loan to
American Tissue in an amount not to exceed $920,000.00 in connection with the
work to be performed on behalf of American Tissue, to be repaid by American
Tissue to Curtiss subject to and in accordance with the terms and provisions of
this agreement.
Now, therefore , in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as, follows:
1. Curtiss hereby consents to the performance on behalf of American Tissue of
the renovation at the Premises consisting of the taking-up of all existing
woodblock flooring in each of the building areas of the Premises and the
installation therein of concrete flooring, such work to be performed by American
Tissue's contractor ("Contractor") in accordance with the applicable BOCA,
construction codes then in effect. Notwithstanding anything to the contrary
contained herein or in the lease, American Tissue shall not be required to cause
the removal of such concrete flooring or the restoration of the woodblock
flooring at the end of the term of the lease or earlier termination thereof.
<PAGE>
2. Upon receipt of written notice from American Tissue or the contractor that
the existing woodblock flooring at each building area of the Premises has been
taken-up, Curtiss shall forthwith (i) supply and cause to be delivered to each
such building an adequate number of bins or other appropriate containers for the
deposit of such woodblocks, which bins and/or containers shall be removed from
the Premises as and when same are filled, and (ii) cart, discard and dispose of
such woodblocks in accordance with all applicable federal, state and local laws,
orders, rules and regulations, including, without limitation, all applicable
environmental and health laws, rules, orders and regulations, all such work to
be performed in a good and workerlike manner. Curtiss shall be fully liable for,
and shall indemnify and hold American Tissue harmless from and against, any and
all obligations, claims, losses, liabilities, demands, damages, penalties,
judgments, costs and expenses, including, without limitation, attorneys' fees,
court costs and disbursements, arising out of, relating to or in connection with
the performance of Curtiss' work hereunder. American Tissue shall be fully
liable for, and shall indemnify and hold Curtiss harmless from and against, any
and all obligations, claims, losses, liabilities, demands, damages, penalties,
judgments, costs and expenses, including, without limitation, attorneys' fees,
court costs and disbursements, arising out of, relating to or in connection with
the performance of American Tissue's work hereunder.
3. Curtiss shall reimburse American Tissue, within ten (10) days following
Curtiss' receipt of American Tissue's Contractor's paid invoices, up to the sum
of $300,000.00 less Curtiss' Cost. In addition, Curtiss shall loan to American
Tissue, within ten (10) days following Curtiss' receipt of American Tissue's
Contractor's paid invoices, up to $920,000.00 for the cost of the removal of the
woodblock flooring and the installation of the new concrete flooring.
4. American Tissue shall repay Curtiss in one hundred and twenty (120) monthly
payments as hereinafter set forth, the aggregate sums actually loaned by Curtiss
to American Tissue in accordance with the provisions of the last sentence of
paragraph 3 above, together with interest thereon from the later of (i) August
1, 1996 or (ii) one month following the delivery of the last building area to
American Tissue pursuant to the lease at the rate of eight (8%) percent per
annum (the "Loan"). Subject to the terms hereof, the Loan shall be payable in
one hundred twenty (120) equal, consecutive monthly installments of Principal
and interest, payable on the first day of each month commencing thirty (30) days
following the later of (i) August 1, 1996 or (ii) one month following the
delivery of the last building area to American Tissue pursuant to the lease.
Payments made more than ten (10) days after the due date thereof shall be
subject to a late payment penalty of interest at the rate of four (4) percent
per annum payable from and after the eleventh day following the due date thereof
until such payment is made.
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5. Simultaneously with the execution hereof, American Tissue shall deliver to
Curtiss' counsel a promissory note in the form annexed hereto as Exhibit "A"
(the "Note") evidencing the Loan. The Note shall be held in escrow by Curtiss,
counsel pending the full and proper completion of the work whereupon the Note
shall be (a) appropriately completed by inserting (i) as the principal sum due,
the aggregate amount actually loaned by Curtiss in accordance with the
provisions hereof, and (ii) the amount of the monthly installments and the dates
for the payment of same, determined in accordance with the provisions of
paragraph 4 hereof, (b) released from escrow, and (c) delivered to Curtiss.
6. American Tissue shall have the right at any time to prepay the Loan, in whole
or in part, without the payment of any premium, charge or penalty. Partial
prepayments shall be applied in inverse order of maturity.
7. Upon the occurrence of any of the following events, all obligations hereunder
owing by American Tissue to Curtiss shall become forthwith due and payable on
demand of Curtiss without presentment, demand for payment, notice of dishonor,
protest, or notice of protest of any kind, all of which are hereby expressly
waived by American Tissue:
(i) A default by American Tissue in the payment, when due, of any part of
the principal or interest, which default remains uncured following ten
(10) days' written notice from Curtiss to American Tissue.
(ii) The insolvency or bankruptcy of American Tissue, or the making
by-American Tissue of an assignment for the benefit of creditors, or
the consent of American Tissue to the appointment of a trustee or a
receiver or other officer of a court to take possession of all of
American Tissue's assets or the appointment of a trustee or receiver
or other officer of a court to take possession of all of American
Tissue's assets, without its consent, where no discharge is effected
within 90 days.
8. Simultaneously with the execution hereof, Curtiss shall receive an opinion
from counsel to American Tissue that (i) American Tissue has taken all necessary
corporate action to authorize the execution, delivery and performance of this
agreement; and (ii) this agreement is a valid and binding legal obligation of
American Tissue subject to applicable bankruptcy, reorganization and similar
laws in effect from time to time, except as the enforceability may be limited by
(a) applicable laws, rules and/or regulations relating to creditors' rights
generally, (b) bankruptcy, reorganization, insolvency, moratorium or other
similar laws, and/or (c) the application of equitable principles. In addition,
Curtiss shall receive LaSalle National Bank's consent to this loan transaction.
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9. (a) Neither the failure nor any delay on the part of either party to
exercise any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right, power or privilege preclude any other or further exercise
thereof, or the exercise of any other right, power or privilege.
(b) This agreement shall be binding upon and inure to the benefit of
American Tissue and Curtiss and their respective successors and
assigns.
(c) This agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
(d) In the event suit is instituted to enforce the terms of this
agreement, American Tissue hereby submits to the jurisdiction of the
courts of the State of New Jersey. American Tissue further agrees that
it shall reimburse Curtiss for its reasonable attorney's fees
necessarily paid by Curtiss in the enforcement of this agreement.
In witness whereof the parties have caused this agreement to be executed by
their duly authorized officers.
AMERICAN TISSUE CORPORATION
By: /s/ N. Elghanayan
---------------------------
President
CURTISS-WRIGHT FLIGHT SYSTEMS/
SHELBY, Inc.
By: /s/ David Lasky
---------------------------
Chairman
ESCROW PROVISIONS AGREED TO:
/s/ Stephen R. Bosin
- -----------------------------
Stephen R. Bosin, Esq.
4
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of this 1st day of November, 1997, by and
between BERLIN MILLS RAILWAY, INC., a New Hampshire corporation (hereinafter
referred to as "Lessor"), on the one hand, and ST. LAWRENCE & ATLANTIC RAILROAD
COMPANY, a Delaware corporation ("Lessee"), on the other hand (the "Lease
Agreement").
RECITALS
A. Lessor owns certain rail lines, all as generally shown on the maps
attached hereto as Exhibit 1. The foregoing rail lines are referred to
collectively hereinafter as the "Lease Lines;" and
B. Lessor desires to lease to Lessee and Lessee desires to lease from
Lessor, the Leased Property, including the Lease Lines, in accordance with and
subject to the terms and conditions set forth hereinafter; and
C. Lessor is a wholly-owned subsidiary of Crown Paper Co. dba Crown Vantage
("Crown Vantage"), and Crown Vantage and Lessee intend to enter into a certain
Service Agreement to be dated as of November 1, 1997 as Shipper and Operator,
respectively (the "Service Agreement"); and
D. Lessor and Lessee have, as of the date hereof, entered into a certain
Purchase and Sale Agreement as Seller and Buyer, respectively, by which certain
locomotives and other railroad assets are to be transferred to Lessee
contemporaneous with the Effective Date, as hereinafter defined (the "Purchase
and Sale Agreement"); and
E. It is a condition to this Lease Agreement that the Service Agreement
come into, and continue in, full force and effect, and it is a further condition
to this Lease Agreement that in the event the Service Agreement is canceled,
expires or otherwise terminates, this Lease Agreement shall ipso facto cease and
determine.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS
1.1 Defined Terms. As used in this Lease Agreement, the following terms
shall have the following meanings:
"Affiliate" - With respect to any person, any other person which directly
or indirectly controls, is controlled by or is under common control with such
person.
"Casualty Loss" - As defined in Section 11.1.
<PAGE>
"Charge" - As defined in Section 15.1.
"Contracts" - All Easements and all other contracts, written agreements or
leases to which the Lease Lines are subject, but not the Shipper Contracts.
"Easements" - Pipe, wire, utility and similar agreements or licenses, and
public and private road crossing agreements or arrangements, to which the Lease
Lines are subject.
"Effective Date" - As defined in Section 3.1.
"Emons" - Emons Transportation Group, Inc., a Delaware corporation and an
Affiliate of Lessee.
"Encumbrance" - With respect to any portion of the Leased Property, any
Contract, mortgage, pledge, lien, claim, security interest, title retention,
Easement, license, or other encumbrance or restriction of any kind.
"Environmental Laws" - All applicable federal, state, municipal and local
laws, statutes, ordinances, rules, by-laws, guidelines, treaties and
regulations, and all applicable directives, rules, standards, requirements,
policies, orders, judgments, injunctions, or decrees which have the force of law
or which are capable of having the force of law, in each case relating to or
addressing the environment.
"Expenses" - Any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel and other professionals).
"Expropriation Proceeding" - As defined in Section 10.1(a).
"Governmental Authority" - Any agency, board, bureau, executive, court,
commission, department, tribunal, instrumentality or administration of the
United States, the State of New Hampshire, or any local or other governmental
body in a state, county, territory or possession of the United States.
"Governmental Permits" - All licenses, permits, approvals, consents,
certificates, waivers, exemptions, orders and other authorizations from any and
all Governmental Authorities.
"Initial Term" - As defined in Section 3.1.
"Lease Agreement" - This Lease Agreement (including all Exhibits and
Schedules attached hereto) as the same may be amended or supplemented in
accordance with the terms hereof
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<PAGE>
"Leased Property" - As defined in Section 2.1.
"Lease Lines" - As defined in Recital A.
"Lessee Event of Default" - As defined in Section 16.1.
"Lessor Event of Default" - As defined in Section 16.2.
"Losses" - Any and all losses, costs, obligations, liabilities, settlement
payments, awards, judgments, fines, penalties, damages, expenses, deficiencies
or other charges.
"Obligations" - With respect to any Contract, lease or written agreement,
all responsibilities, penalties and duties of a specified party under such
Contract, lease or written agreement.
"Renewal Term" - As defined in Section 3.2.
"Rental Fee" - As defined in Section 4.1.
"Shipper Contracts" - All contracts, agreements, commitments, arrangements
or understandings between Lessor and any receiver, shipper or third party
relating to the movement of traffic over the Lease Lines.
"Termination Date" - The date on which this Lease terminates, whether
pursuant to its terms or pursuant to the exercise of either party's rights to
terminate the Lease under the conditions specified herein.
1.2 Other Definitional Provisions. Each definition in this Lease Agreement
includes the singular and the plural, and references in this Lease Agreement to
the neuter gender include the masculine and feminine where appropriate.
References herein to any agreement or contract mean such agreement or contract
as amended. References to a business day mean a day other than Saturday, Sunday
or a legal holiday in Concord, New Hampshire. As used in this Lease Agreement,
the word "including" means "without limitation," and the words "herein,"
"hereof' and "hereunder" refer to this Lease Agreement as a whole. Unless the
context otherwise requires, references herein to Articles, Sections, Exhibits
and Schedules mean the Articles and Sections of, and Exhibits and Schedules
attached to, this Lease Agreement. Unless otherwise expressly stated, all dollar
amounts stated herein are in United States currency.
2. GRANT OF A LEASE
2.1 Description of Leased Property. The property subject to this Lease
Agreement consists of the Lease Lines and any and all improvements thereto or
fixtures thereon existing on the Effective Date and specifically consists of
roadbed, crossings, bridge, bridge abutments,
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<PAGE>
culverts, engine shop, railroad yard, railroad storage area located on the Lease
Lines (hereinafter collectively referred to as the "Leased Property"). Excluded
from the Leased Property are any and all railroad rolling stock, locomotives,
automobiles, trucks, automotive equipment, machinery, supplies marked with any
logo or letterhead of Lessor, computer terminals and printers and related
hardware, computer software, photocopiers and telecopiers, radios, employees'
hand tools, and any other personal property of Lessor or its employees, and the
property known as the "Cascade Bridge."
2.2 Grant of a Lease. Subject to the terms and conditions set forth in this
Lease Agreement, Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Leased Property. Lessor hereby represents to Lessee that this Lease
Agreement grants Lessee sufficient interests in the Lease Lines and the Leased
Property for Lessee to conduct freight railroad operations on the Lease Lines
and the Leased Property substantially equivalent to those conducted by Lessor
prior to commencement of the Initial Term of the Lease Agreement.
2.3 Permitted Uses of Leased Property.
(a) Lessee shall be entitled to use the Leased Property for the purpose of
conducting freight railroad operations thereon, including the right to originate
and/or terminate freight traffic on the Lease Lines, and for purposes of
switching, storage of cars and equipment, and the making or breaking up of
trains. Lessee shall be entitled to all revenues derived from its provision of
freight railroad services on the Lease Lines. Lessee may conduct (i) freight
railroad train building, train moving, car storage and any hazardous activity
for third parties and (ii) intermodal transportation services on the Leased
Property only pursuant to separate written agreement to be negotiated with
Lessor in good faith, providing compensation for Lessor and Lessee and
containing appropriate or customary terms and conditions as the parties may
mutually agree.
(b) Lessee shall not interfere with Lessor's compliance with any of
Lessor's Obligations under the Contracts. Lessor represents that it has no
Contracts which could have a material adverse effect on the conduct of rail
operations on the Lease Lines as those lines are currently operated by Lessor.
2.4 Restrictions On Use of Leased Property. Lessee shall not under any
circumstances, mine, take, extract, remove or market any coal, oil, petroleum,
gas or any and all other ores or minerals of every kind, nature or description
in or underlying the surface of the Leased Property, or any portion thereof, or
cause or permit any other person or entity to do so. Except with the prior
written consent of Lessor, which consent may be reasonably withheld by Lessor in
its sole discretion, Lessee shall not:
(a) make, install, conduct, perform or cause any improvements, upgrades,
new construction or refurbishments on the Leased Property, except that no
consent shall be required to make, install, conduct, perform or cause any of the
improvements, upgrades or refurbishments on the Leased Property required by the
terms of Sections 7 and 8 of this Lease Agreement; or
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<PAGE>
(b) conduct any passenger or commuter railroad operations on the Lease
Lines; or
(c) cause or knowingly suffer the creation of any Encumbrance on the Leased
Property or any portion thereof; provided that Lessor shall not unreasonably
withhold consent to the creation of any Encumbrance on the Leased Property in
favor of a government agency in connection with government agency funding for
capital improvements to the Leased Property made in whole or in part to assist
Lessee in meeting its obligations under Section 7.1(a).
2.5 Other Licenses, Encumbrances, Reservations. Lessee shall also lease the
Leased Property subject to:
(a) Any existing exceptions, reservations, restrictions and rights of
record;
(b) Any and all Easements, licenses or Encumbrances on or affecting the
Leased Property as of the Effective Date;
(c) The Contracts;
(d) Existing and future building, zoning, subdivision and other applicable
federal, state, municipal and local laws, ordinances and regulations;
(e) All encroachments or any other state of facts which might be revealed
from an accurate survey, title search or personal inspection of the Leased
Property;
(f) Any and all existing ways, alleys, party walls, privileges, rights,
appurtenances and easements, howsoever created; and
(g) Any and all other restrictions, defects, reservations and liens, of any
type or nature whatsoever, to which the Leased Property is subject or by which
it is affected as of the Effective Date.
2.6 Lessor's Right of Entry. Lessor hereby reserves the right to cross,
install, relocate, maintain and repair pipes, poles, lines and other structures
on, under, over or across the Leased Property, provided that the exercise of
such rights shall not unreasonably impair the ability of Lessee to conduct
freight railroad operations on the Lease Lines.
3. TERM AND TERMINATION
3.1 Initial Term. This Lease Agreement shall commence on November 1, 1997
(the "Effective Date"), and shall terminate on October 31, 2007 (the "Initial
Term"), unless sooner terminated as hereinafter provided, or renewed pursuant to
Section 3.2.
3.2 Renewal Term. Upon expiration of the Initial Term, this Lease Agreement
shall continue for a subsequent term of five (5) years (the "Renewal Term"),
provided that it shall not have been terminated by either party prior to the
expiration of the Initial Term, pursuant to the
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<PAGE>
terms and provisions of this Lease Agreement (including Section 3.3 and Section
16.3).
3.3 Termination
(a) Lessee or Lessor may, at its sole option, terminate this Lease
Agreement, for any reason or no reason, effective upon expiration of the Initial
Term, by giving written notice of termination not less than one hundred eighty
(180) days prior to any such expiration.
(b) Lessee may, at its sole option, terminate this Lease Agreement, after
having given written notice of such termination to Lessor, in accordance with
the provisions of Section 21.8.
(c) (i) On or at any time after the second anniversary date of the
Effective Date, Lessor may, at its sole option, terminate this Lease Agreement
if Lessor sells or otherwise transfers its Berlin or Cascade Mills, effective
one hundred eighty (180) days after having given written notice of such
termination to Lessee. Upon any such termination, Lessor shall pay Lessee for
capital improvements under Section 8.3(b).
(ii) On or at any time after the fifth anniversary date of the
Effective Date, Lessor or Lessee may, at its sole option, terminate this
Lease Agreement, for any reason or no reason, effective one hundred eighty
(180) days after having given written notice of such termination to the
other party. Upon any such termination by Lessor, Lessor shall pay Lessee
for capital improvements under Section 8.3(b).
(d) During the Renewal Term, Lessor or Lessee may, at its sole option,
terminate this Lease Agreement at any time, for any reason or no reason,
effective one hundred eighty (180) days after having given written notice of
such termination to the other party. Upon any such termination, Lessor shall
have no obligation to pay Lessee for capital improvements under Section 8.3(b)
or otherwise.
(e) Prior to any termination of this Lease Agreement by Lessee having any
force or effect, Lessee shall obtain any and all Government Permits required to
effect termination of this Lease Agreement or the abandonment by Lessee of, and
discontinuance of Lessee's freight railroad operations on, the Lease Lines. If
required for any termination of this Lease Agreement by Lessor or when
reasonably requested by Lessor, Lessee shall promptly seek to obtain any and all
Government Permits required to effect the termination of this Lease Agreement or
the abandonment by Lessee of, and discontinuance of Lessee's freight railroad
operations on, the Lease Lines.
(f) On the Termination Date, Lessee shall vacate and peaceably surrender to
Lessor the Leased Property, and Lessee shall remove from the Leased Property all
personal property of Lessee located thereon, all at Lessee's sole risk, cost,
and expense.
(g) Termination of this Lease Agreement, for any reason, shall not relieve
or
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release any party from any obligation assumed, or from any liability which may
have arisen or been incurred by such party, under the terms of this Lease
Agreement prior to such termination.
4. RENTAL
4.1 Annual Rental.
(a) For the term of this Lease Agreement Lessee shall pay Lessor for the
leasehold interest herein granted monthly rent of Eight Thousand Three Hundred
Thirty-Three Dollars ($8,333) (the "Rental Fee") which shall be due and payable
on the fifteenth day of each month for that month, commencing November 15, 1997,
with such first payment also to include payment of the pro rata portion, if any,
of the first month of the Initial Term. The Rental Fee shall be subject to
adjustment according to the formula provided in Section 4.1 of the Service
Agreement, with "C" in such formula deemed to refer to the Rental Fee and
"Adjusted Charge" deemed to refer to the adjusted Rental Fee for purposes
hereof, which provision is hereby incorporated herein by this reference and
made a part hereof.
(b) Acceptance by Lessor of the monthly Rental Fee paid by Lessee pursuant
to this Section 4.1 shall not constitute, nor shall it be construed as, a waiver
by Lessor of any other provision of this Lease Agreement or any breach thereof
by Lessee.
4.2 Additional Consideration. As additional consideration for the rights
and interests granted herein, Lessee hereby agrees to perform in accordance with
their terms all other Obligations, covenants, liabilities and duties imposed on
Lessee pursuant to the terms of this Lease Agreement.
5. TAXES, ASSESSMENTS AND UTILITIES
5.1 Taxes.
(a) Except as otherwise required by this Section 5.1, Lessor shall bear and
pay all property and ad valorem taxes, assessments, and levies (both general and
special), and all other like charges, general and special, ordinary and
extraordinary, of whatever name, nature and kind, that may be imposed, levied,
assessed or charged against the Leased Property (but only to the extent
applicable to the Leased Property), or any portion thereof, including any and
all improvements or fixtures existing thereon as of the Effective Date of this
Lease Agreement or built or made thereon during the term of this Lease
Agreement.
(b) Lessee shall bear and pay directly to taxing authorities any and all
taxes, assessments (both general and special), license fees, levies and all
other charges, general and special, ordinary and extraordinary, that may be
imposed, levied, assessed or charged in connection with Lessee's conduct of
railroad operations or business on the Leased Property or any portion thereof.
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(c) Lessor and Lessee each shall have the right to contest, object,
protest, or appeal to any Governmental Authority as to any tax, license fee,
special or general assessment, or other charge levied on such party by any
taxing or similar authority. Lessor shall provide promptly to Lessee notice of
any tax, fee, assessment or similar charge that it (or its Affiliates) may
receive as owner of the Leased Property, and for which Lessee is responsible
pursuant to the terms of this Lease Agreement.
5.2 Utilities. Except for water, sewer, electricity and steam utilities in
the engine shop, for which Lessor shall be solely and fully responsible to
provide, Lessee shall initiate, contract for and obtain, in its name, any and
all utility services required on the Leased Property during the term of this
Lease Agreement, including steam, electricity, telephone, water and sewer
connections and services, and Lessee shall bear and pay all charges for those
services as they become due during the term of this Lease Agreement.
5.3 Operating Expenses. Lessee shall be solely responsible for all costs,
Expenses, charges, obligations and liabilities, of any nature and kind, relating
to or arising from Lessee's use, occupancy, interest in, maintenance of or
operations on the Leased Property during the term of this Lease Agreement.
6. CONDITION OF LEASED PROPERTY
6.1 Condition at Commencement of Lease. LESSEE CONFIRMS THAT IT HAS
INSPECTED THE LEASE LINES AND THE LEASED PROPERTY, INCLUDING ALL IMPROVEMENTS
THERETO AND FIXTURES THEREON. EXCEPT AS SET FORTH IN THIS LEASE AGREEMENT: (I)
LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE DESIGN
OR CONDITION OF THE LEASE LINES OR THE LEASED PROPERTY, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OR QUALITY OF THE MATERIALS OR WORKMANSHIP OF
THE LEASE LINES OR LEASED PROPERTY, (II) LESSOR SHALL NOT BE LIABLE TO LESSEE
FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT)
WITH RESPECT TO THE DESIGN, CONDITION, QUALITY, SAFETY, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF THE LEASE LINES OR THE LEASED PROPERTY,
AND (III) ON THE EFFECTIVE DATE, LESSEE SHALL TAKE THE LEASE LINES AND LEASED
PROPERTY IN "AS-IS, WHERE-IS" AND "WITH-ALL-FAULTS" CONDITION, AND SUBJECT TO
ALL LIMITATIONS ON LESSOR'S RIGHT, TITLE AND INTEREST THEREIN AND THERETO.
6.2 No Notice of Defect. Lessor represents that, as of the Effective Date,
Lessor has no knowledge of any pending or threatened litigation, penalty
proceeding or fines under any law or regulation from any Governmental Authority
with respect to any of the Leased Property.
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7. MAINTENANCE OF THE LEASED PROPERTY
7.1 Duty to Maintain Lease Lines.
(a) Except as otherwise provided in this Section 7.1 and except as provided
in Section 11, Lessee shall perform, or cause to be performed, at its sole cost
and expense, any and all work required to maintain and repair (which includes
capitalized maintenance) the Lease Lines all to at least substantially the same
physical condition as the Leased Property was in as of the Effective Date.
Lessee shall surrender the Lease Lines and the Leased Property upon any
termination of the Lease Agreement in at least substantially the same physical
condition as the Leased Property was in as of the Effective Date.
Notwithstanding the foregoing, to the extent permitted by 49 C.F.R. 213.4,
Lessee reserves the right to, at any time prior to termination of the Lease
Agreement, designate the Lease Lines (or any portion thereof) as excepted track
if, in its sole judgment, such track does not meet FRA Class 1 standards.
(b) Promptly after the Effective Date, Lessee agrees to either (i) acquire
and install an in-line scale to be located off the Leased Property to be used,
inter alia, to weigh Crown Vantage's rail traffic or (ii) repair the scale
located on the Leased Property. If Lessee elects to acquire and install a new
in-line scale, Lessee shall own and maintain (at Lessee's expense) the scale in
good operating condition and repair throughout the term of this Lease Agreement;
if Lessee elects to repair the scale located on the Leased Property, then the
scale shall be part of the Leased Property and Lessee shall maintain (at
Lessee's expense) the scale in good operating condition and repair throughout
the term of this Lease Agreement. If Lessee elects to acquire and install a new
in-line scale, neither party shall have any responsibility or obligation to the
other hereunder to maintain and repair the scale located on the Leased Property.
(c) Neither party shall have any responsibility or obligation to the other
hereunder to maintain and repair the Cascade Bridge located on Lessor's
property.
(d) Lessee shall be responsible for removal of snow from the Lease Lines,
provided that Lessor shall be responsible for the removal of the piles of snow
created by Lessee in clearing the Lease Lines.
7.2 Inspection of Leased Property.
(a) Lessor and Lessee agree to conduct a joint inspection of the Leased
Property not less than five (5) business days prior to the Effective Date for
the purpose of establishing the condition of the Leased Property.
(b) Lessor may require an annual inspection of the Leased Property to
determine Lessee's compliance with its obligations under Section 7.1. Each such
inspection shall be conducted jointly with Lessee. In the event such an
inspection discloses any defect from the standards established by Section 7.1
Lessee shall correct such defect within a reasonable time period specified by
Lessor following such inspection.
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(c) Lessee shall make available, upon reasonable notice, for Lessor's
inspection at Lessee's offices during normal business hours all records
pertaining to the maintenance and repair of the Leased Property.
8. CAPITAL IMPROVEMENTS
8.1 Capital Improvements By Lessee. From time to time, Lessee may, with the
prior written consent of Lessor, make such capital improvements to the Leased
Property as Lessee may deem reasonably appropriate. Lessee shall retain for its
own account scrap materials removed or replaced in the course of making such
capital improvements. Lessee may, with the prior written consent of Lessor,
remove and not replace any assets included in the Leased Property which Lessee
deems are no longer used or useful in the operation of the Lease Lines. All such
capital improvements shall be made under Lessee's direction, control and
management and at Lessee's sole cost and expense, subject to Lessor's approval
of designs and schedules.
8.2 Capital Improvements By Lessor. Lessor may, from time to time, make
such capital improvements on, over or about the Leased Property as Lessor may
deem appropriate in its discretion; provided, however, that Lessor shall have no
obligation to make any such capital improvements to the Leased Property at any
time during the term of this Lease Agreement; provided, further, that such
capital improvements shall be made in a manner so as to not unreasonably impair
the ability of Lessee to conduct freight railroad operations on the Lease Lines.
8.3 Disposition of Capital Improvements Upon Termination.
(a) Upon termination of this Lease Agreement by Lessor or Lessee for any
reason, any and all capital improvements made by Lessee to the track or
right-of-way constituting the Leased Property during the Initial Term or any
Renewal Term shall become the sole property of Lessor and, except as set forth
in this Section 8.3(b), Lessor shall have no obligation to pay Lessee
compensation therefor.
(b) Upon termination of this Lease Agreement (i) by Lessee under Section
3.3(b), 10.1(a), 11.1 or 16.3 or (ii) by Lessor under Section 3.3(c) or 11.1.
Lessor shall compensate Lessee for any and all capital improvements made by
Lessee to the track or right-of-way constituting the Leased Property in an
amount substantially equivalent to the depreciated value of such capital
improvements, less the then outstanding balance of any indebtedness secured by
the Leased Property, or any portion thereof, which Lessee has permitted,
knowingly suffered or caused. Upon payment of such amount by Lessor, Lessee
shall have no claim for, and no right to seek, damages from Lessor by reason of
or arising from such termination, to the extent such claims are for incidental,
consequential, special, indirect, exemplary or punitive damages or loss of
profits or cost of capital, related to this Lease Agreement.
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9. COVENANTS
9.1 Covenants of Lessor.
(a) Lessor covenants that, subject to (i) Lessor's exercise of any and all
exceptions, reservations, rights, remedies, privileges, and interests reserved
to Lessor under this Lease Agreement, and (ii) Section 3.3 and Section 17.1
hereof, so long as Lessee shall faithfully perform all of its agreements, terms,
covenants, and obligations under this Lease Agreement, Lessor shall not
interfere with or disturb Lessee's use or peaceful enjoyment of the Leased
Property for the term hereby granted.
(b) Lessor represents that Lessor has full power and authority to enter
into this Lease Agreement and grant to Lessee the rights conveyed hereunder.
Except for the foregoing sentence and for Lessee's representation in Section
2.2, Lessee hereby acknowledges and agrees that Lessor makes no representation,
warranty or covenant regarding the quality of title currently held by Lessor to
the real property included in the Leased Property.
9.2 Covenants of Lessee. Lessee covenants that, subject to (i) Lessee's
exercise of any and all rights and remedies accorded to it under this Lease
Agreement, and (ii) Section 17.1 hereof, Lessee shall faithfully perform all of
its agreements, terms, covenants and obligations under this Lease Agreement.
Lessee further covenants that it will not cause or knowingly suffer any
interference with Lessor's exercise of any and all exceptions, reservations,
rights, remedies, privileges, and interests reserved to Lessor under this Lease
Agreement.
10. EXPROPRIATION
10.1 Expropriation of Leased Property.
(a) If, during the term of this Lease Agreement, a proceeding is instituted
by any Governmental Authority or other lawful entity for the condemnation,
expropriation or seizure of the Leased Property or any portion thereof for any
public or quasi-public purpose (an "Expropriation Proceeding"), and such
Expropriation Proceeding results in the taking of the whole or such portion of
the Leased Property which materially interferes with Lessee's ability to conduct
railroad operations on the Lease Lines as then conducted by Lessee, then Lessee
shall have the right, upon written notice to Lessor, to terminate this Lease
Agreement in its entirety, and the term hereof shall terminate and expire on the
date title to the Leased Property vests in the condemning authority.
(b) If an Expropriation Proceeding results in the taking of less than all
of the Leased Property and does not materially interfere with Lessee's ability
to conduct railroad operations on the Lease Lines as then conducted by Lessee,
then this Lease Agreement shall terminate only as to the portion of the Leased
Property so taken, and shall continue in full force and effect as to the part of
the Leased Property remaining, without any reduction, abatement, or effect upon
any sum or charge to be paid by the Lessee under the provisions of this Lease
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Agreement.
(c) If the use of the whole or any portion of the Leased Property shall be
taken, on a temporary basis, at any time during the term of this Lease Agreement
for any public or quasi-public purpose, this Lease Agreement shall continue for
the balance of its term following such temporary taking. In such case, Lessee
shall not be obligated to pay any sums and charges otherwise payable by Lessee
under the provisions of this Lease Agreement for the period covered by such
temporary taking. For purposes of this Section 10.1(c), such a temporary taking
shall mean the use or occupation of all or a portion of the Leased Property not
exceeding ninety (90) consecutive days. In the event that such taking shall
exceed such ninety (90) day period, and such taking materially interferes with
Lessee's ability to conduct railroad operations on the Lease Lines as then
conducted by Lessee, then Lessee may elect to treat such taking in accordance
with the provisions of Sections 10.1(a), (b) and (d) hereof. The provisions of
this Section 10.1(c) shall not apply to any temporary use or taking of the
Leased Property, or any portion thereof, involving or incident to the exercise
of any exception, reservation, right, or privilege reserved to Lessor by the
terms of this Lease Agreement.
(d) Lessor shall be entitled to any and all funds paid or payable by any
Governmental Authority or other entity as compensation for the expropriation or
temporary use of the Leased Property or any portion thereof, and upon written
request of Lessor, Lessee shall assign, without warranty, any and all of
Lessee's claims and rights against the condemning authority for loss of Lessee's
business or for the value of Lessee's leasehold estate as a result of such
expropriation of the Leased Property, or any portion thereof; provided, however,
that nothing contained herein shall be construed to preclude Lessee from
prosecuting a separate claim directly against the condemning authority for loss
of its business or for the value of its leasehold estate as a result of
temporary use of the Leased Property by a Governmental Authority and Lessee
shall be entitled to any and all funds paid or payable by any Governmental
Authority or other entity as compensation for the temporary use of such
leasehold estate or any portion thereof.
(e) Each party shall provide prompt notice to the other party of any
Expropriation Proceeding, or threatened Expropriation Proceeding, involving the
Leased Property. Each party shall be entitled to participate in any such
proceeding, at its own expense, and to consult with the other party, its
attorneys and experts.
11. CASUALTY LOSSES
11.1 Damage To Or Destruction of Leased Property. Lessor shall have no
obligation to repair, replace refurbish or rebuild the Leased Property. Lessor
may, at its sole option and absolute discretion, repair, replace, refurbish or
rebuild the Leased Property in the event that (i) Lessor materially damages or
destroys the Leased Property, or a portion thereof, or (ii) the Leased Property
is materially damaged or destroyed by flood, fire, earthquake or any other Act
of God, whether foreseeable or not foreseeable (any such event, individually or
collectively, a "Casualty Loss"). If Lessor has not begun to repair, replace,
refurbish or rebuild the parts of the Leased Property affected by such Casualty
Loss within thirty (30) days after the occurrence
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thereof and if such damage or destruction materially interferes with Lessee's
ability to conduct railroad operations on Leased Lines, Lessor or Lessee may, at
its sole option, terminate this Lease Agreement, effective ninety (90) days
after having given written notice of such termination to the other party. In the
event Lessor undertakes repair, replacement, refurbishment or rebuilding, during
such time the Lease Lines or any material portion thereof are not capable of use
by Lessee in its railroad operations as conducted prior to such Casualty Loss,
Lessee and Lessor shall not be obligated to perform their obligations under this
Lease Agreement attributable to the period that the Lease Lines or portion
thereof are not useable.
12. INSURANCE
12.1 Required Insurance Coverage. Lessee, at its own cost or expense, will
procure and maintain in effect at all times during the term of this Lease
Agreement, standard railroad liability policy or policies of insurance (with
FELA coverage). Such policy or policies shall name Lessor and Crown Vantage as
additional insureds, and, except for gross negligence and willful misconduct,
shall waive subrogation against Lessor and Crown Vantage (and its and their
directors, officers, employees and agents). Such policy or policies shall be
primary and not excess to or contributory with any other applicable insurance or
self-insurance of Lessor or Crown Vantage, and shall provide liability coverage
in any one occurrence in the amount of not less than Five Million Dollars
($5,000,000), with a maximum deductible of Two hundred Fifty Thousand Dollars
($250,000). If Lessor purchases a workers' compensation policy or policies to
cover its New Hampshire exposures, such policy or policies shall waive
subrogation against Lessor and Crown Vantage.
13. LIABILITY
13.1 Release and Indemnity.
(a) It is hereby understood and agreed that, except as otherwise provided
elsewhere herein, Lessor shall not be held liable for or on account of any loss
of and/or liability for loss of, damage to or destruction of any property
whatsoever, or injury to or death of any person whomsoever, in each case
relating to, resulting from or arising out of Lessee's use, occupancy, interest
in, maintenance of or operations on the Leased Property (excluding any such loss
and/or liability caused by or related to any loading or unloading performed by
employees of Lessor or Crown Vantage).
(b) Lessee hereby releases Lessor, its officers, directors, agents, and
employees from, and agrees forever to protect, indemnify, defend, and hold
harmless Lessor its officers, agents, and employees, from and against, any and
all claims, actions, costs, damages, losses, and Expenses, in any manner (i)
caused by, arising out of, or connected with the representations Lessee makes or
the obligations Lessee assumes under this Lease Agreement or (ii) arising during
the term of this Lease Agreement or caused in connection with or related to
Lessee's use or occupancy of the Leased Property, except to the extent that any
such claim, action, cost, damage, loss or Expense arises out of any default by
Lessor of this Lease Agreement or the negligence or other fault of Lessor (other
than to the extent due to Lessor's passive
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negligence or to the extent due to Lessee's failure to perform any of its
obligations under this Lease Agreement), including any claims, actions, costs,
damages, losses, and Expenses, in any manner caused by, arising out of, or
connected with environmental contamination or breach of Environmental Laws
during the Initial or Renewal Term.
(c) Lessor hereby releases Lessee, its officers, directors, agents, and
employees from, and agrees forever to protect, indemnify, defend, and hold
harmless Lessee its officers, agents, and employees, from and against, any and
all claims, actions, costs, damages, losses, and Expenses in any manner caused
by, arising out of, or connected with the representations Lessor makes or the
obligations Lessor assumes or retains under this Lease Agreement, including all
claims and liabilities arising out of Lessor's operation of the Lease Lines
prior to the Effective Date and any claims, actions, costs, damages, losses, and
Expenses, in any manner caused by, arising out of, or connected with
environmental contamination or breach of Environmental Laws before and after the
term of this Lease Agreement.
14. COMPLIANCE WITH LAWS
14.1 Lessee's Obligation To Comply With Laws. Lessee hereby covenants and
agrees that, throughout the term of this Lease Agreement, Lessee will promptly
comply, at its sole cost and expense, with all statutes, laws, ordinances,
orders, decisions, rules, regulations, and requirements of all Governmental
Authorities now or hereafter existing which may be applicable to Lessee's use or
occupancy of, interest in or operations on the Leased Property.
14.2 Lessee's Right To Contest. Lessee shall have the right to contest by
appropriate legal proceedings, at its sole cost and expense, the validity of any
law, ordinance, order, decision, rule, regulation, or requirement of a nature
referred to in Section 14.1 and compliance with which is the obligation of
Lessee hereunder. Lessee may postpone compliance therewith until the final
determination of any such proceeding; provided that all such proceedings shall
be prosecuted with due diligence and dispatch on the part of Lessee; and
provided further that Lessee shall forever protect, indemnify, defend, and hold
harmless Lessor, its officers and directors from and against any and all
liability, cost, and Expense arising out of or connected with any such contest
by Lessee. In connection with any such contest, objection or protest, Lessee
may, where necessary in Lessee's reasonable judgment, implead Lessor (or its
Affiliates) as owner of the Leased Property. Lessor shall provide Lessee notice
of any alleged violation of any law, ordinance, order, decision, rule,
regulation, or requirement of a nature referred to in Section 14.1 that it (or
its Affiliates) may receive as owner of the Leased Property during the term of
this Lease Agreement.
15. LIENS AND CHARGES
15.1 Charges Against The Leased Property.
(a) Lessee shall not, at any time during the term of this Lease Agreement,
create, knowingly suffer, or otherwise permit any lien, claim, mortgage, or
charge of any nature whatsoever, including any mechanic's, materialmen's,
supplier's or similar lien or charge, but
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excepting any inchoate lien or charge which has not ripened (hereinafter
collectively referred to as a "Charge") to be asserted or claimed against the
Leased Property or any portion thereof, for any reason; provided however, that
the provisions of this Section 15.1 shall not apply to a Charge created (i) by
Lessor or (ii) by a person (other than Lessee) claiming any interest in the
Leased Property by, through or under Lessor, provided however, that the
provisions of this Section 15.1 shall not apply with respect to rail, ties and
track materials purchased for capital improvements and installed on the Lease
Lines under a federal or state loan or grant program, if Lessee or its Affiliate
is the recipient and the program requires the recipient to permit the grantor a
lien on the rail, ties and track materials so installed.
(b) If any Charge (other than those excepted from Section 15.1(a)) shall at
any time be asserted against the Leased Property, Lessee shall cause such Charge
to be discharged of record within ninety (90) days after the date of filing of
same. If Lessee fails to discharge such Charge within such period, then, in
addition to any other rights or remedies available to Lessor, Lessor may, but
shall not be obligated to, discharge such Charge by paying the amount claimed to
be due, without inquiry by Lessor into the validity of such Charge. Any amount
paid by Lessor in procuring the discharge of a Charge pursuant to this Section
15.1, and all costs and Expenses incurred by Lessor in connection therewith,
together with interest thereon at the rate of eight percent (8%) per annum from
the date of payment by Lessor, shall be paid by Lessee to Lessor within thirty
(30) days of Lessor's submission to Lessee of a bill therefor.
(c) Lessee shall have the right to contest any Charge asserted against the
Leased Property; provided, that, within sixty (60) days after any such Charge is
filed or attaches, Lessee shall give written notice to Lessor of Lessee's
intention to contest such Charge, and such notice shall specify the amount of
the Charge to be contested. In the event that Lessee contests any Charge
hereunder, Lessor may not pay, remove, or otherwise proceed to discharge such
Charge pursuant to Section 15.1; provided, that all such legal proceedings shall
be prosecuted with due diligence and dispatch on the part of Lessee.
15.2 Adverse Possession. Lessee shall not knowingly permit the Leased
Property or any portion thereof to be used by any third party without
restriction or in such manner as might reasonably tend to (i) impair Lessor's
title to all or any part of the Leased Property, or (ii) make possible any claim
by such party or the public of adverse usage, adverse possession or implied
dedication of the Leased Property or any portion thereof. The foregoing shall
not be construed to restrict public access to the Leased Property in the normal
course of Lessee's railroad operations.
16. DEFAULT; RIGHTS AND REMEDIES
16.1 Events of Default by Lessee. Any of the following events, if occurring
during the term of this Lease Agreement, shall constitute an event of default by
Lessee (a "Lessee Event of Default"):
(a) any default or breach of Lessee's obligation to pay the Rental Fee or
any other amount payable by Lessee to Lessor hereunder, in accordance with the
terms of this Lease Agreement, and Lessee's continuance in such default or
breach for a period of five (5) business
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days after Lessor shall have first sent written notice to Lessee of the default
or breach so occurring;
(b) any default or breach of Lessee's obligation to maintain the Leased
Property in accordance with Section 7 hereof, and Lessee's continuance in such
default or breach without good faith progress towards cure of such default or
breach for a period of sixty (60) days (or such longer period in the event such
default or breach is not capable of being cured within sixty (60) days) after
Lessor shall have first sent written notice to Lessee of Lessee's failure to
correct the defects communicated by Lessor to Lessee under Section 7.2 hereof;
or
(c) any default or breach of Lessee's covenants and obligations under any
other provision of this Lease Agreement, and Lessee's continuance in such
default or breach for a period of thirty (30) days after Lessor shall have first
sent written notice to Lessee of the default or breach so occurring;
(d) the voluntary or involuntary filing of any petition or similar
pleading, or the commencement of any proceeding, by or against Lessee or Emons
under any federal or state bankruptcy, insolvency, reorganization, arrangement
of debt, readjustment of debt or receivership law or statute, whether now or
hereafter in existence, or the assignment of all or a substantial portion of
Lessee's or Emons' property for the benefit of creditors, or the appointment of
a receiver, trustee, or liquidator for all or a substantial portion of Lessee's
or Emons' property; provided, that such bankruptcy or insolvency proceedings or
such assignments for the benefit of creditors or such appointment of a receiver,
trustee, or liquidator is not discharged, vacated, dismissed, or otherwise
terminated within sixty (60) days after the filing of same or a valid appeal
therefrom shall not be pending.
16.2 Events of Default by Lessor. Any of the following events, if occurring
during the term of this Lease Agreement, shall constitute an event of default by
Lessor (a "Lessor Event of Default"):
(a) any default or breach of Lessor's obligation to pay any amount payable
by Lessor to Lessee hereunder, in accordance with the terms of this Lease
Agreement, and Lessor's continuance in such default or breach for a period of
five (5) business days after Lessee shall have first sent written notice to
Lessor of the default or breach so occurring;
(b) any default or breach of Lessor's covenants and obligations under any
other provision of this Lease Agreement, and Lessor's continuance in such
default or breach for a period of thirty (30) days after Lessee shall have first
sent written notice to Lessor of the default or breach so occurring; or
(c) the voluntary or involuntary filing of any petition or similar
pleading, or the commencement of any proceeding, by or against Lessor under any
federal or state bankruptcy, insolvency, reorganization, arrangement of debt,
readjustment of debt or receivership law or statute, whether now or hereafter in
existence, or the assignment of all or a substantial portion of Lessor's
property for the benefit of creditors, or the appointment of a
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receiver, trustee, or liquidator for all or a substantial portion of Lessor's
property; provided, that such bankruptcy or insolvency proceedings or such
assignments for the benefit of creditors or such appointment of a receiver,
trustee, or liquidator is not discharged, vacated, dismissed, or otherwise
terminated within sixty (60) days after the filing of same or a valid appeal
therefrom shall not be pending.
16.3 Non-Defaulting Party's Remedies Upon An Event of Default. Upon the
occurrence of any Lessee or Lessor Event of Default specified in Section 16.1 or
Section 16.2 respectively, the non-defaulting party may, at its sole discretion,
exercise one or more of the following remedies:
(a) The non-defaulting party shall have the right, within sixty (60) days
thereafter, at its sole option and upon thirty (30) days written notice to the
defaulting party, to terminate this Lease Agreement. In the event of termination
pursuant to this Section 16.3(a), this Lease Agreement shall terminate as of the
Termination Date specified in such notice. Termination of this Lease Agreement
pursuant to this Section 16.3(a) shall not be deemed to affect in any way any
rights, claims or causes of action (including any claim for money damages) which
either party may have against the other party on account of any default or
breach of this Lease Agreement prior to termination.
(b) The non-defaulting party shall afford the defaulting party a period of
fifteen (15) days to cure the Event of Default, or such longer period as may be
reasonable if despite due diligence cure cannot be completed within such period;
provided that the defaulting party shall protect, defend, indemnify, and hold
harmless the non-defaulting party from and against any liability, Charge, cost,
or Expense arising from such Event of Default during the afforded cure period.
(c) The non-defaulting party shall have the right to exercise any and all
rights or remedies provided to it in law or equity on account of the Event of
Default, including injunctive relief. The defaulting party expressly
acknowledges that the nature and purpose of this Lease Agreement are such that,
in the event of a default or breach of any covenant hereunder, damages may not
be an adequate remedy, and equitable relief, such as an injunction, mandatory or
otherwise, may be necessary.
(d) Except to the extent inconsistent with the remedies specified in this
Section 16.3, each right and remedy provided for in this Lease Agreement shall
be cumulative and shall be in addition to every other right or remedy provided
for in this Lease Agreement or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by either
party of any one or more of the rights or remedies provided in this Lease
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by such party of
any or all other rights or remedies provided for in this Lease Agreement or now
or hereafter existing at law or in equity or by statute or otherwise.
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17. FORCE MAJEURE
17.1 Force Majeure. Whenever a period of time is provided in this Lease
Agreement for either party to do or perform any act or thing (including Lessee's
payment of rent), such party shall not be liable or responsible for any delays
due to acts of God, war, court orders, nuclear incidents, riots, public
disorder, criminal acts of other entities, or other such causes beyond the
reasonable control of such party; and in any such event, such time period shall
be extended for the amount of time such party is so delayed; provided that this
Section 17.1 shall not be construed to affect the responsibilities of such party
hereunder to so perform such act or thing once such delays have been removed.
Any party invoking force majeure pursuant to this Section 17.1 shall provide
written notice to the other party, setting forth the facts or circumstances
giving rise to the applicability of this Section 17.1.
18. TIME OF THE ESSENCE
18.1 Acknowledgment. It is understood and agreed by Lessor and Lessee that
the prompt and timely performance of all obligations and covenants under this
Lease Agreement, including the obligation to make prompt and timely payment of
any and all amounts of any nature payable by either party as required by the
terms and provisions hereof, is of the essence of this Lease Agreement.
19. RECORDATION OF LEASE
19.1 Recordation by Lessee. Lessee may cause a memorandum of this Lease
Agreement, in a form mutually agreeable to the parties hereto, to be recorded in
the land register of any county in which the Leased Property is located. In the
event that the description of the Leased Property contained in this Lease
Agreement is deemed inadequate for recordation purposes by any Governmental
Authority, then Lessor shall, if so requested by Lessee, execute and deliver
such confirmatory leases with such description as Lessee may require for such
recordation purposes. Upon the termination of this Lease Agreement with respect
to all or any portion of the Leased Property, Lessee agrees to execute and
deliver to Lessor an appropriate instrument or instruments, in recordable form,
evidencing the termination and cancellation of this Lease Agreement.
20. INDEMNIFICATION PROCEDURES
20.1 Notice of Claims. If Lessee or Lessor (either such party referred to
herein as the "Indemnified Party") seeks indemnification hereunder, such
Indemnified Party shall give to the party obligated to provide indemnification
(the "Indemnitor") a notice (a "Claim Notice") describing in reasonable detail
the facts giving rise to any claim for indemnification hereunder and shall
include in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim, and a reference to the provision of
this Agreement or any other agreement, document or instrument executed hereunder
or in connection herewith upon which such claim is based; provided, that a Claim
Notice in respect of any legal action by or against a
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<PAGE>
third person as to which indemnification will be sought shall be given promptly
after the action or suit is commenced; provided further that failure to give
such notice shall not relieve the Indemnitor of its obligations hereunder except
to the extent it shall have been prejudiced by such failure.
20.2 Control of Defense. The Indemnitor shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise or settlement
of any third person claim, action or suit against such Indemnified Party. The
Indemnified Party shall cooperate in connection therewith and shall furnish such
records, information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested by the
Indemnitor in connection therewith; provided, that the Indemnified Party may
participate, through counsel chosen by it and at its own expense, in the defense
of any such claim, action or suit as to which the Indemnitor has so elected to
conduct and control the defense thereof. The Indemnitor shall not, without the
written consent of the Indemnified Party (which written consent shall not be
unreasonably withheld), pay, compromise or settle any such claim, action or
suit. No such consent shall be required if, fourteen (14) days following a
written request from the Indemnitor, the Indemnified Party shall fail to
acknowledge and agree in writing that, if such claim, action or suit shall be
adversely determined, such Indemnified Party has an obligation to provide
indemnification hereunder to such Indemnitor. Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay, settle or compromise any such
claim, action or suit without such consent; provided that in such event the
Indemnified Party shall waive any right to indemnity therefor hereunder unless
the Indemnified Party shall have sought the consent of the Indemnitor to such
payment, settlement or compromise and such consent is unreasonably withheld, in
which event no claim for indemnity therefor hereunder shall be waived.
21. MISCELLANEOUS
21.1 Governmental Permits. Lessee shall, at its sole cost and expense, make
all such notices, applications or filings, and obtain all such Governmental
Permits, as may be required in connection with this Lease Agreement and the
transaction contemplated hereby.
21.2 Additional Actions and Documents. Following the Effective Date, and
without further consideration, Lessor and/or Lessee, as appropriate, will
promptly execute and deliver such further instruments and take such other
actions as the other party may reasonably request in order to convey, assign and
transfer to Lessee all of the rights, title and interest in the Leased Property
contemplated by this Lease Agreement.
21.3 Payment Addresses. All payments due Lessor under this Lease Agreement
shall be made payable to Crown Vantage, 650 Main Street, Berlin, New Hampshire
03570-2489, to the attention of the person Lessor shall direct by written notice
to Lessee. All payments due Lessee under this Lease Agreement shall be made to
St. Lawrence & Atlantic Railroad Company, 96 South George Street York,
Pennsylvania 17401, to the attention of Scott Ziegler, Vice President - Finance
or to such other person as Lessee may direct by written notice to Lessor.
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21.4 Brokers. Each party represents and warrants to the other party that
such party has not incurred any liability to any broker, finder or agent for any
brokerage fees or commissions or finder's fees or commissions with respect to
the transactions contemplated by this Lease Agreement which will be a direct or
indirect obligation of the other party hereto. Each party agrees to indemnify,
defend and hold harmless the other party from and against any and all claims
asserted against such other party for any such fees or commissions claimed by
any persons purporting to act or to have acted for or on behalf of the
indemnifying party.
21.5 Expenses. Any sales tax, use tax, goods and services tax, real
property transfer or gains tax, documentary stamp tax, or similar taxes, duties
or charges relating to the transfer of the Leased Property to Lessee, and all
fees in connection with the recordation of this Lease Agreement, shall be for
the account of and be payable by Lessee. Except as set forth in this Section
21.5 or as otherwise expressly provided in this Lease Agreement, each party
shall pay its own expenses incident to the preparation and negotiation of this
Lease Agreement, the consummation of the transactions contemplated hereby, and
its compliance with all its agreements, covenants and obligations contained
herein or therein, including all taxes, all legal and accounting fees and
disbursements and all costs of obtaining necessary consents.
21.6 Waiver. Any term or provision of this Lease Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. The failure of any party hereto to enforce at
any time any provision of this Lease Agreement shall not be construed to be a
waiver of such provision, nor to affect in any way the validity of this Lease
Agreement or any part hereof or the right of any party thereafter to enforce
each and every such provision. No waiver of any breach of this Lease Agreement
shall be held to constitute a waiver of any other or subsequent breach.
21.7 Successors and Assigns. This Lease Agreement shall be binding upon,
and inure to the benefit of, the respective successors and permitted assigns of
the parties.
21.8 Assignment. Neither party may assign or otherwise transfer this Lease
Agreement, or any rights or obligations hereunder or delegate its performance
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld; provided that either party may assign this
Lease Agreement to an Affiliate upon giving written notice to the other party.
In the event of a sale of all of the stock or assets of Lessor or Crown Vantage
or in the event Crown Vantage transfers or sells either of the plants served by
the Lease Lines or Lessor transfers or sells the Lease Lines or the Leased
Property, Lessee shall be entitled to review the operations or operating plan of
any such successor entity to Lessor or Crown Vantage, and if the operations or
operating plan vary materially from the operations of Lessor or Crown Vantage as
of the Effective Date, Lessee and Crown Vantage or its successor and Lessor or
its successor shall negotiate in good faith an amendment to this Lease Agreement
to account for the altered operations of such successor entity. In the event the
parties cannot agree within a reasonable time upon an amendment acceptable to
Lessee, in the exercise of its sole and absolute discretion, Lessee shall be
entitled to terminate this Lease Agreement upon one hundred eighty (180) days
written notice to Lessor and its successor.
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21.9 Notices. All notices, requests or demands required or permitted by
this Lease Agreement: (i) shall be in writing; (ii) shall be deemed to have been
given, forwarded, made or delivered: (x) if delivered in person or by overnight
courier service, when received, and (y) if sent by registered or certified mail
return receipt requested, on the earlier of the date of receipt or the fifth day
after it is mailed; and (iii) shall be addressed as follows:
(i) If to Lessor to it at:
Crown Vantage
650 Main Street
Berlin, New Hampshire 03570-2489
Attention: Mr. David A. Nelson, Senior Vice President
(ii) If to Lessee, to it at:
St. Lawrence & Atlantic Railroad Company
416 Lewiston Junction Road
P.0. Box 1025
Auburn, ME 04211-5857
Attention: Mr. Matthew Jacobson, Vice President
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
21.10 Confidentiality. Each party agrees that it will treat in confidence
this Lease Agreement and all documents, materials and other information which it
shall have obtained from the other parties during the course of the negotiations
leading to the consummation of the transactions contemplated hereby, and the
preparation of this Lease Agreement. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information which (i) such party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party; (ii) is known to
the public and did not become so known through any violation of a legal
obligation; (iii) became known to the public through no fault of such party;
(iv) is later lawfully acquired by such party from other sources; (v) such party
determines, based on the advice of counsel, is legally required to be disclosed
to another party; (vi) is required to be disclosed to the public under federal
securities laws and regulations or regulations of the National Association of
Securities Dealers; or (vii) is disclosed in connection with preserving or
enforcing such party's rights.
21.11 Entire Agreement. This Lease Agreement and the Exhibits and Schedules
referred to herein contain the entire understanding of the parties with respect
to the subject matter contained herein or therein and supersede all prior oral
or written agreements and understandings
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between the parties with respect to such subject matter. The parties hereto, by
mutual agreement in writing, may amend, modify and supplement this Lease
Agreement.
21.12 Headings. Article, Section, and Exhibit headings contained in this
Lease Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Lease Agreement for any purpose and shall not in any
way define or affect the meaning, construction or scope of any of the provisions
hereof.
21.13 Limitation on Benefits. Nothing herein is intended to be for the
benefit of any person or entity other than the parties hereto and their
successors and permitted assigns. It is the explicit intention of the parties
hereto that no person or entity other than the parties hereto and their
successors and permitted assigns is or shall be entitled to bring any action to
enforce any provision of this Lease Agreement against any of the parties hereto,
and the assumptions, indemnities, covenants, undertakings and agreements set
forth in this Lease Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors and
permitted assigns.
21.14 Governing Law. This Lease Agreement shall be governed by and
construed in accordance with the laws of the State of New Hampshire without
regard to the conflicts of laws principles thereof.
21.15 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Lease Agreement, and this Lease Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
21.16 Counterparts. This Lease Agreement may be executed in two or more
counterparts all of which shall collectively constitute this Lease Agreement.
21.17 Information Releases. No press release or public announcement with
respect to the transaction contemplated herein shall be made by either party
without prior written approval of the other party, which approval shall not be
unreasonably withheld, except as may be necessary, in the opinion of counsel for
such party, to meet the requirements of any applicable law, regulation or
ordinance, to comply with any request of any stock exchange on which the
securities of such party may be listed or to enable such party to perform its
obligations hereunder. It is expressly understood that this Lease Agreement, its
contents and the provision of switching services may be disclosed by either
party in connection with obtaining governmental approvals or any application for
any permit, license, exemption or certification in connection with the provision
of switching services.
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21.18 Execution. If Lessee or Lessor execute this Lease Agreement by agent
or representative, such agent or representative by his act of signing this Lease
Agreement individually warrants and represents to the parties, and Lessee and
Lessor represent and warrant respectively to each other, that he/she is
authorized to execute, acknowledge and deliver this Lease Agreement on behalf of
Lessee or Lessor, as the case may be, and thereby to bind the respective party
to the same.
21.19 Jurisdiction and Venue. Each party irrevocably stipulates that any
claim or dispute concerning this Lease Agreement shall be submitted for decision
by courts located within the State of New Hampshire, including the United States
District Court sitting in Concord, New Hampshire (by reason of diversity of
citizenship and where venue is proper, except if the amount in controversy is
less than the statutory limit), which each party hereto irrevocably stipulates
shall have exclusive jurisdiction and venue. Each party irrevocably stipulates
that any process issued with respect to any action filed in such court may be
served by certified mail, return receipt requested or as a notice under Section
21.9 hereof
21.20 Interpretation. This Lease Agreement shall be interpreted as to its
fair meaning and not strictly for or against any drafter of any provision of
this Lease Agreement.
21.21 Independent Entities. For all purposes under this Lease Agreement,
Lessor and Crown Vantage are separate and independent from each other, and
neither Lessor nor Crown Vantage shall be liable for the acts or omissions of
the other, whether under this Lease Agreement, the Service Agreement or
otherwise and whether arising under contract, tort, strict liability, indemnity
or otherwise and whether as principal, surety or guarantor, it being expressly
understood that Lessee disclaims, waives, renounces and releases (i) Lessor from
any liability or obligation under the Service Agreement and (ii) Crown Vantage
from any liability or obligation under this Lease Agreement.
21.22 Damages. EXCEPT AS MAY BE OTHERWISE EXPRESSLY PROVIDED HEREUNDER,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL,
SPECIAL OR INDIRECT DAMAGES OR FOR EXEMPLARY OR PUNITIVE DAMAGES ARISING OUT OF
ANY ACT OR OMISSION HEREUNDER OR OTHERWISE WITH RESPECT TO THE TRANSACTION
CONTEMPLATED HEREIN, WHETHER ATTRIBUTABLE TO ANY CLAIM FOR BREACH OF CONTRACT,
TORT OR OTHER CAUSE OF ACTION.
22. SERVICE AGREEMENT
22.1 Upon the cancellation, expiration or termination of the Service
Agreement pursuant to the provisions thereof, this Lease Agreement shall ipso
facto cease and determine.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Agreement to be duly executed on its behalf, as of the day and year first above
written.
ST. LAWRENCE & ATLANTIC RAILROAD
COMPANY
By: /s/ RICHARD GROSSMAN
----------------------------------
Title: Chairman and President
-------------------------------
CROWN PAPER CO. dba CROWN VANTAGE
By: /s/ JAY A. WASHBURN
----------------------------------
Title: Secretary and Treasurer
-------------------------------
SERVICE AGREEMENT
THIS SERVICE AGREEMENT, made as of this 1st day of November, 1997, by and
between CROWN PAPER CO. dba CROWN VANTAGE, a Virginia corporation (hereinafter
referred to as "Shipper"), on the one hand, and ST. LAWRENCE & ATLANTIC RAILROAD
COMPANY, a Delaware corporation ("Operator"), on the other hand (the "Service
Agreement").
RECITALS
A. Operator and Berlin Mills Railway, Inc. ("BMS"), a wholly-owned
subsidiary of Shipper, intend to enter into a certain Lease Agreement to be
dated as of November 1, 1997 as Lessee and Lessor, respectively (the "Lease
Agreement"); and
B. It is a condition to this Service Agreement that the Lease Agreement
come into, and continue in, full force and effect, and it is a further condition
to this Service Agreement that in the event the Lease Agreement is canceled,
expires or otherwise terminates, this Service Agreement shall ipso facto cease
and determine.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and set forth in the Lease Agreement, the parties hereto
hereby agree as follows:
1. DEFINITIONS
1.1 Defined Terms. All capitalized terms used herein that are defined in
the Lease Agreement shall have the meanings set forth therein. In addition, all
capitalized terms defined herein shall have the meanings set forth herein.
2. SERVICES TO BE PROVIDED TO SHIPPER
2.1 Switching Services. Operator agrees to provide Shipper with switching
services as reasonably requested by Shipper from time to time, subject to legal
and safety constraints and Operator's work and shift rules, at its pulp and
paper mills located in Berlin and Gorham, New Hampshire. The switching services
will be provided with one train crew operating seven days per week for a maximum
of twelve hours per day. The switching services shall include setting out cars;
moving cars; switching cars; loaded and empty car storage; weighing cars; door
opening on cars; wedging doors on pulp cars; car cleaning (with Shipper
responsible for dumpsters and landfill disposal at its sole cost) and removing
snow from car roofs; and minor car repairs.
2.2 Payment. As payment for the switching services under Section 2.1,
Shipper agrees to pay Operator the sum of Seven Hundred Twenty Thousand Dollars
($720,000) per calendar year (prorated for any partial year that the Lease
Agreement is in effect), in payments of Sixty
<PAGE>
Thousand Dollars ($60,000) each calendar month (prorated for any partial month),
payment to be made on the fifteenth (15th) day of the month for that month's
switching services.
2.3 Additional Services. In the event additional switching services are
requested by Shipper in excess of those set forth in Section 2.1 ("Additional
Switching Services"), the charge for Additional Switching Services shall be
Seven Hundred Seventy Dollars ($770) for up to eight hours of Additional
Switching Services, and One Hundred Fifty Dollars ($150) per hour thereafter, up
to the crew's hours of service maximum of twelve hours.
2.4 Weighing of Shipper Cars. The weighing of cars for Shipper at the new
scale to be installed on Operator's property or on the repaired scale on the
Leased Property shall be without additional charge to Shipper.
3. DEMURRAGE
3.1 Shipper agrees to pay to Operator a dollar amount equal to all per diem
and mileage charges payable by Operator on account of cars placed by Operator at
Shipper's facilities for the use of Shipper. Such amounts will be billed monthly
by Operator to Shipper and shall be in addition to amounts payable for switching
services. Any car hire reclaim allowed Operator by linehaul carriers will be
deducted from the foregoing monthly billing amount in any month in which such
reclaim is received by Operator. Any rail cars marked with St. Lawrence &
Atlantic Railroad Company's reporting marks (SLR) and used in service between
Shipper's Berlin and Cascade plants shall be free of any such demurrage charges
and free of per diem and mileage charges. Operator will add to, and Shipper will
pay, an additional 10% of the total monthly per diem and mileage charges (before
deduction of reclaim) to cover Operator's administrative costs and processing of
car hire payables and reclaim. Payment shall be made within fifteen (15) days of
the invoice date.
4. INFLATION AND OPERATING COST ADJUSTMENTS
4.1 The switching rate and other charges set forth in Section 2 shall be
adjusted annually effective as of July 1 of each year during the term of this
Service Agreement, beginning July 1, 1998, by the percentage change in the AAR
Railroad Inflation Index (materials, prices, wage rates and supplements
combined, including fuel-East excluding the productivity adjustment factor) (the
"Designated Index"). The method of adjusting the charges shall be to calculate
the percent of increase or decrease in the most recent available Designated
Index as of the time of such adjustment as related to the Designated Index upon
which the immediately preceding adjustment was based. Thus, assuming "A" to be
the Designated Index for the second quarter of 1997, "B" to be the Designated
Index for the second quarter of 1998, "C" to be the charge to be adjusted and
"D" to be the percent of increase or decrease, the adjusted charge applicable
from and after July 1, 1998, would be determined by the following formula:
B-A
--- =D
A
2
<PAGE>
(D x C) + C = Adjusted Charge
If the AAR or any successor organization discontinues publication of the
Designated Index, an appropriate substitute for determining the annual
percentage increase or decrease of the charge shall be negotiated by the
parties.
4.2 It shall be the joint responsibility of Operator and Shipper to pursue
and evaluate cost reduction opportunities. Where cost reduction opportunities
create savings for Operator, the parties will reduce the payment for switching
services. Where cost reduction opportunities create savings for Shipper, the
parties will increase the payment for switching services. In either case, it is
the intention of the parties to share the savings. The parties will meet and
confer once per quarter for this evaluation process.
4.3 It is the mutual expectation of the parties that the switching rate and
other charges set forth in Section 2 shall provide, on an annual basis, a
competitive cost advantage for Shipper and a reasonable return for Operator. The
parties shall meet and confer in the event that either party wishes to
renegotiate said switching rate and other charges in order to reestablish said
mutual goals on a prospective basis.
5. TERM AND TERMINATION
5.1 This Service Agreement shall be conterminous with the Lease Agreement.
Upon the cancellation, expiration or termination of the Lease Agreement pursuant
to the provisions thereof, this Service Agreement shall ipso facto cease and
determine.
5.2 If a party's performance under the Lease Agreement is excused or
suspended, that party's performance under this Service Agreement shall be
suspended for the same time period.
6. MISCELLANEOUS
6.1 Payment Addresses. All payments due the Shipper under this Service
Agreement shall be made to Crown Vantage, 650 Main Street, Berlin, New Hampshire
03570-2489, to the attention of the person Shipper may direct by written notice
to Operator. All payments due the Operator under this Service Agreement shall be
made to St. Lawrence & Atlantic Railroad Company, 96 South George Street, York,
Pennsylvania 17401, to the attention of Scott Ziegler, Vice President - Finance
or to such other person as Operator may direct by written notice to Shipper.
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<PAGE>
7. FORCE MAJEURE
7.1 Force Majeure. Whenever a period of time is provided in this Service
Agreement for either party to do or perform any act or thing, said party shall
not be liable or responsible for any delays due to acts of God, war, court
orders, nuclear incidents, riots, public disorder, criminal acts of other
entities, or other such causes beyond the reasonable control of said party; and
in any such event, said time period shall be extended for the amount of time
said party is so delayed; provided that this Section 7.1 shall not be construed
to affect the responsibilities of said party hereunder to so perform such act or
thing once such delays have been removed. Any party invoking force majeure
pursuant to this Section 7.1 shall provide written notice to the other party,
setting forth the facts or circumstances giving rise to the applicability of
this Section 7.1.
7.2 Abatement. In the event of a Force Majeure or in the event of a
Casualty Loss as provided in Section 11 of the Lease Agreement, during such time
that the Lease Lines (as defined in the Lease Agreement) or any material portion
thereof are not capable of use for the purposes described in this Service
Agreement, Operator shall not be obligated to provide switching services under
Section 2.1 and Shipper shall not be obligated to make payment under Section
2.2, prorated for such time on the basis of a thirty (30) day month.
8. DEFAULT
8.1 Section 16 of the Lease Agreement is incorporated herein by this
reference and is hereby made a part hereof, except that for purposes of this
Service Agreement, references therein to "Lessor", "Lessee", "Lease Agreement"
and "Leased Property" (including "Lease Lines") shall be deemed to refer herein,
respectively, to "Shipper", "Operator", "Service Agreement" and "switching
services", and all references to Sections, subsections or paragraphs in the
Lease Agreement shall be deemed to refer herein to appropriate Sections,
subsections or paragraphs of this Service Agreement.
9. INSURANCE and LIABILITY/INDEMNITY
9.1 Sections 12 and 13 of the Lease Agreement are incorporated herein by
this reference and are hereby made a part hereof, except that for purposes of
this Service Agreement, references therein to "Lessor", "Lessee", "Lease
Agreement" and "Leased Property" (including "Lease Lines") shall be deemed to
refer herein, respectively, to "Shipper", "Operator", "Service Agreement" and
"switching services". and all references to Sections, subsections or paragraphs
in the Lease Agreement shall be deemed to refer herein to appropriate Sections,
subsections or paragraphs of this Service Agreement.
10. ADDITIONAL PROVISIONS
10.1 In connection with the transaction contemplated herein, the parties
may need to exchange business and/or technical information that any party may
regard as confidential and proprietary. The term "confidential information"
means all business and technical information
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<PAGE>
provided to any party by the other, via documents that are prominently marked
"Confidential Information" or similar indication of the confidential and
proprietary nature of the document, or via oral disclosures, demonstrations,
plant visits or the like that are confirmed in writing within thirty days
thereafter as being or having been confidential and proprietary, except for
information that: (i) was in the party's possession before receipt from any
party; (ii) is or becomes generally available to the public, by publication or
otherwise, through no fault of any party; (iii) is or becomes available to any
party, without restriction, from a third party who is legally entitled to
provide such information; or (iv) was or is independently developed by any party
without recourse to any confidential information. For a period of four years
from the termination date of this Service Agreement, neither party will, without
the prior written approval of the other party, use any confidential information
obtained from the other party for any purpose other than the provision of
switching services, or except as required by law, disclose any information
obtained from the other party to a third party (including any lenders and
prospective lenders for either party) other than employees or consultants of
affiliated companies who have agreed in writing to keep such information
confidential as contemplated by this Section and who need the information to
assist any party in the transaction contemplated herein.
10.2 Any notice or other communication in connection with this Service
Agreement shall be deemed given when received (or upon attempted delivery if
delivery is not accepted). Such notices shall be in writing and delivered by
hand or sent either (i) by registered or certified mail (return receipt
requested) with the United States Postal Service or (ii) by Federal Express,
UPS, DHL or other similar overnight carrier furnishing evidence of receipt to
the sender, at the address set forth in the opening Section hereof Either party
may change the address at which notices are to be received by notice given as
set forth in this Section.
10.3 If Operator or Shipper execute this Service Agreement by agent or
representative, such agent or representative by his act of signing this Service
Agreement individually warrants and represents to the parties, and Operator and
Shipper represent and warrant respectively to each other, that he/she is
authorized to execute, acknowledge and deliver this Service Agreement on behalf
of Operator or Shipper, as the case may be, and thereby to bind the respective
party to the same.
10.4 Neither party may assign its rights or obligations hereunder without
the prior written consent of the other party, which consent shall not be
unreasonably withheld. Subject to the preceding sentence, this Service Agreement
shall be binding upon, and shall inure to the benefit of, the parties and their
respective successors and assigns.
10.5 If any provision of this Service Agreement or the application thereof
to any person or circumstance shall at any time or to any extent be deemed
invalid or unenforceable, the remainder of the Service Agreement and the
application of such provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected except to the
extent that such application would materially deprive one of the parties of the
benefits of the Agreement.
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<PAGE>
10.6 No delay or omission on the part of either party in exercising its
rights under this Service Agreement shall constitute a waiver of such right or
any other right under this Service Agreement. No waiver of any such right on one
occasion shall be construed as a waiver of it on any other occasion.
10.7 This Service Agreement shall be governed by and construed in
accordance with the laws of New Hampshire without regard to conflicts or choice
of laws. Each party irrevocably stipulates that any claim or dispute concerning
this Service Agreement shall be submitted for decision by courts located within
the State of New Hampshire, including the United States District Court sitting
in Concord, New Hampshire (by reason of diversity of citizenship and where venue
is proper, except if the amount in controversy is less than the statutory
limit), which each party hereto irrevocably stipulates shall have exclusive
jurisdiction and venue. Each party irrevocably stipulates that any process
issued with respect to any action filed in such court may be served by certified
mail, return receipt requested or as a notice under Section 10.2 hereof
1O.8 This Service Agreement, together with the attachments hereto and
incorporations herein, sets forth the entire agreement relating to the provision
of switching services by Operator for Shipper, supersedes all prior oral or
written offers, negotiations, agreements, understandings and courses of dealing
between the parties relating to the subject matter hereof and is subject to no
understandings, conditions or representations other than those expressly stated
herein. The Box Car Lease Agreement dated July 14, 1993, as amended on October
19, 1993, between Operator and Shipper's predecessor-in-interest is hereby
merged into this Service Agreement and has no further force or effect upon
execution hereof No waiver of any provision of this Service Agreement or of any
breach or default hereunder shall be held or considered to be a waiver of any
other provision or of any other breach or default. No agreement or understanding
pursuant to or contemplated by this Service Agreement and no consent to, change
in or modification of any provision of this Service Agreement shall be effective
unless contained in a writing which is signed by the party against whom
enforcement is sought.
10.9 The headings contained in this Service Agreement are for reference and
convenience only and in no way define or limit the scope and contents of this
Service Agreement or in any way affect its provisions. This Service Agreement
shall be interpreted as to its fair meaning and not strictly for or against any
drafter of any provision of this Service Agreement.
l0.10 For all purposes under this Service Agreement, BMS and Crown Vantage
are separate and independent from each other, and neither BMS nor Crown Vantage
shall be liable for the acts or omissions of the other, whether under this
Service Agreement, the Lease Agreement or otherwise and whether arising under
contract, tort, strict liability, indemnity or otherwise and whether as
principal, surety or guarantor, it being expressly understood that Operator
disclaims, waives, renounces and releases (i) Shipper from any liability or
obligation under the Lease Agreement and (ii) BMS from any liability or
obligation under this Service Agreement.
10.11 EXCEPT AS MAY BE OTHERWISE EXPRESSLY PROVIDED HEREUNDER, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER FOR
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INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OR FOR EXEMPLARY OR
PUNITIVE DAMAGES ARISING OUT OF ANY ACT OR OMISSION HEREUNDER OR OTHERWISE WITH
RESPECT TO THE TRANSACTION CONTEMPLATED HEREIN, WHETHER ATTRIBUTABLE TO ANY
CLAIM FOR BREACH OF CONTRACT, TORT OR OTHER CAUSE OF ACTION.
IN WITNESS WHEREOF, each of the parties hereto has caused this Service
Agreement to be duly executed on its behalf, as of the day and year first above
written.
ST. LAWRENCE & ATLANTIC RAILROAD
COMPANY
By: /s/ RICHARD GROSSMAN
----------------------------------
Title: Chairman and President
-------------------------------
CROWN PAPER CO. dba CROWN VANTAGE
By: /s/ JAY A. WASHBURN
----------------------------------
Title: Secretary and Treasurer
-------------------------------
7
Loan No. _____________ Dated: October 27, 1998
$800,000.00
NOTE
SECURED BY MORTGAGE
FOR VALUE RECEIVED, GRAND LLC, a New York limited liability company (the
Borrower), having its principal office and place of business at of 135 Engineers
Road, Hauppauge, New York 11788, promises to pay to the order of SECURITY MUTUAL
LIFE INSURANCE COMPANY OF NEW YORK, a New York corporation (Lender) at 80-84
Exchange Street, Binghamton, New York 13901 (P.O. Box 1625, Binghamton, New York
13902), or at such other place or to such other party or parties as Lender or
any successor in interest may from time to time designate in writing, the
principal sum of EIGHT HUNDRED THOUSAND and 00/100 DOLLARS ($800,000.00), or so
much thereof as shall hereafter be advanced by the Lender, together with
interest on the outstanding principal balances at the rate of seven and one-half
percent (7.50%) per annum (based on a year of twelve 30-day months) computed
from the date of disbursement of loan proceeds until fully paid.
Payments shall be made in an installment of interest only on November 1,
1998 and thereafter, except as hereafter provided, in consecutive monthly
installments principal and interest in the amount of $6,444.75 each commencing
December 1, 1998 and continuing on the first day of each month thereafter. The
entire balance of principal and interest, if not otherwise paid, to be due and
payable November 1, 2008, in a single balloon payment.
Each monthly payment shall be applied first to the payment of accrued
interest and the balance in reduction of principal, except as hereinafter
provided.
Prepayment of this Note may not be made during the first five (5) years of
the term of the loan. On any installment date on or after the fifth anniversary
of the date of the loan and on sixty (60) days' written notice, the makers shall
have the privilege of paying the balance of the principal indebtedness and
interest on payment of a prepayment charge on the amount of principal so paid
equal to five percent (5%) thereof less one percent (1%) for each full year
which shall have expired after the fifth anniversary date of the loan.
Prepayment charges shall be payable irrespective of whether the prepayment is
voluntary, involuntary, or by acceleration by the holder of this Note of the
principal amount of the loan. No prepayment charges shall be payable as a result
of insurance proceeds or condemnation awards paid to Lender. If the prepayment
occurs as a result of the acceleration by the holder hereof of the principal
amount of this Note before the permitted prepayment date the prepayment charge
shall be five percent (5%) or the maximum amount otherwise allowable by law,
whichever is less. Additionally, the Borrower shall have the
<PAGE>
privilege of paying the principal indebtedness and interest within ninety (90)
days prior to the Maturity Date, without penalty.
In the event of the acceleration of maturity caused by (i) a default under
any of the terms of this Note; (ii) a default under any of the terms of the
Mortgage securing this Note, or any other document executed in connection with
this Note; (iii) the transfer or conveyance of the Property without the prior
written consent of Lender; or (iv) the hypothecation or encumbrance of the
Property without the prior written consent of Lender, the resulting acceleration
of the outstanding principal balance, shall be deemed a voluntary prepayment of
this Note, and shall be subject to the prepayment premium, except that the
premium shall be five percent (5%).
This indebtedness (referred to herein as the "Note") is secured by a
mortgage (the "Mortgage"), of even date herewith which includes provisions
permitting the acceleration of the Note upon the happening of an event of
default, which Mortgage describes the property located at 418 & 420 Hudson River
Road, Halfmoon, New York (the "Property').
At Lenders option payments may be applied first to late charges, costs of
collection or enforcement, the repayment of any additional advances made by
Lender, with interest thereon, and then to interest which is due and payable
under this Note and then to principal. If an event of default has occurred and
is continuing, such payments may be applied to sums due hereunder or any other
security document in any order and combination that Lender, in its sole
discretion, may determine.
Upon Borrowers (i) failure to pay any installment on its due date; (ii)
breach of any covenant or condition of this Note; or (iii) failure to perform
any of the covenants or conditions set forth in the Mortgage or any other
document executed in connection with this loan, at its election Lender may
accelerate payment of the outstanding principal balance of this Note with
accrued interest thereon (the "Accelerated Indebtedness"), and the Accelerated
Indebtedness shall become immediately due and payable in its entirety together
with the applicable prepayment premium set forth above. In addition, the
Property shall become immediately subject to trustee's sale, foreclosure
proceedings and to any other right of collection as provided by the Mortgage or
by the laws of the State of New York.
If, without Lenders prior written consent, Borrower (i) transfers, sells or
disposes of all or any portion of the Property or any legal or equitable
interest therein in any manner, voluntarily or involuntarily, or (ii)
hypothecates or encumbers the Property, Lender shall have the right to
accelerate payment of the outstanding principal balance of this Note and the
Accelerated Indebtedness shall become immediately due and payable in its
entirety together with the applicable prepayment premium.
In its sole discretion, which may be withheld for any reason or no reason
whatsoever, the background and qualifications of the Borrower being material
inducements to Lender's decision to
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make the loan evidenced by this Note, Lender shall have the right but not the
obligation with or without release of the transferor to consent to any of the
above transfers or encumbrances. Any such transfer or encumbrance shall be
subject to the Mortgage (or to any other security document hereafter securing
this Note), and any transferee shall be required to assume all obligations
thereunder and under this Note and shall agree in writing to be bound by all
provisions contained therein and herein. Said transferee shall also agree to be
bound by assumption documentation satisfactory to Lender, including, without
limitation, an agreement modifying this Note so as to provide for an increase in
the rate of interest of this loan. Further, if such a transfer occurs, Borrower
agrees to pay Lender, on demand, a transfer fee not greater than one percent
(1%) of the outstanding principal balance in consideration of its consent to
such transfer.
During any period that this note shall be in default for more than thirty
(30 days), it shall bear interest at the rate of twenty percent (20%), or at the
maximum rate of interest allowable by law, whichever is less. Failure to
exercise any option to accelerate the payment of this Note shall not constitute
a waiver of the right to accelerate payment upon a continuing default hereunder
or upon the occurrence of any subsequent event of default.
Borrower and Lender agree that it is difficult to fix actual damages for
failure to make payments when due; therefore, the Borrower agrees to pay a "late
charge" of ten percent (10%) of each payment of interest and principal under
this Note which is more than ten (10) days in arrears, to cover the
administrative costs related to collecting and accounting for such late
payments. It is expressly agreed that late charges shall accrue for each month
for which Borrower shall fail to make payment when due, notwithstanding
acceleration of the indebtedness, until the principal and interest of the loan
is paid in full, or deemed paid by operation of law.
If Borrower fails to perform the covenants and agreements contained in this
Note, or if Lender commences or otherwise becomes a party in any legal
proceeding arising from or relating to the collection of the Note or to the
Property described in, or the lien created by the Mortgage, or otherwise to
protect that lien and/or the value of the collateral (including but not limited
to proceedings in bankruptcy or reorganization and including but not limited to
application for relief from the automatic stay in bankruptcy proceedings) and
whether at the trial or appellate level, Borrower shall pay, irrespective of
whether Lender ultimately prevails, all Lender's costs, charges and expenses
including attorneys' fees, title searches, appraisal fees incurred or paid at
any time by the Lender (including, but not limited to, costs and expenses,
including attorneys' fees, incurred in respect of forbearance, "workout" or
other such accommodations to Borrower) and said costs, charges and expenses
shall be immediately due and payable and shall be secured by the Mortgage.
The rights and remedies of Lender under this Note and under the Mortgage
shall be cumulative and concurrent, and may be pursued singly, successively or
jointly. No single or partial exercise of any power hereunder or under the
Mortgage shall preclude other or further exercise thereof or the exercise of any
other power. Lender hereof shall at all times have the right to proceed against
any portion of the security in such order and in such manner as Lender may
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<PAGE>
deem fit, without waiving any rights with respect to any other security. No
delay or omission on the part of Lender in exercising any right hereunder or
under the Mortgage or other agreement shall operate as a waiver of such right or
of any other right under this Note.
All agreements between Borrower and Lender are expressly limited so that in
no event, whether by reason of advancement of the proceeds acceleration of
maturity of the unpaid principal balance or otherwise, shall interest paid to
Lender for the money advanced hereunder exceed the highest lawful rate
permissible under applicable usury laws. If under any circumstances, fulfillment
of any provision of this Note or of the Mortgage or any other agreement referred
to herein should exceed the limit prescribed by law, then the interest
obligation shall be reduced to the maximum limit allowed, and if under any
circumstances the Lender shall ever receive as interest an amount which would
exceed the highest lawful rate, the excess interest shall be applied to the
reduction of the unpaid principal balance due hereunder and not to the payment
of interest. This provision shall control every provision of all related
agreements between Borrower and Lender.
This Note may from time to time be extended or renewed, with or without
notice to the undersigned and any related right may be waived, exchanged,
surrendered or otherwise dealt with, all without affecting the liability of the
undersigned.
Borrower, and all endorsers, guarantors, sureties, accommodation parties
and other parties liable or to become liable for all or for any part of this
indebtedness, expressly waive presentment, protest, notice of protest, demand
and dishonor and nonpayment of this Note and all other notices of any kind, and
expressly agree that this Note, or any payment thereunder, may be extended from
time to time without in any way affecting the liability hereunder.
Any notice given by Lender to Borrower shall be deemed sufficient if in
writing and sent by certified mail, return receipt requested, or by recognized
overnight delivery service, and addressed to Borrower's address as set forth
above, unless Lender is notified of a different address in writing.
Upon payment of all sums due Lender under the Note and Mortgage by
Borrower, Lender will execute a non-recourse assignment of mortgage to
Borrower's new lender.
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<PAGE>
If any paragraph, clause or provision of this Note is construed or
interpreted by a court of competent jurisdiction to be void, invalid or
unenforceable, such decision shall affect only those paragraphs, clauses or
provisions so construed or interpreted and shall not affect the remaining
paragraphs, clauses and provisions of this Note.
GRAND LLC,
a New York limited liability company
By /s/ MEHDI GABAYZADEH
-------------------------------------
Mehdi Gabayzadeh
By /s/ NOUROLLAH ELGHANAYAN
-------------------------------------
Nourollah Elghanayan
STATE OF NEW YORK )
) SS.:
COUNTY OF Suffolk )
On the 27th day of October, 1998, before me personally came MEHDI
GABAYZADEH and NOUROLLAH ELGHANAYAN, to me known to be the individuals who
executed the foregoing instrument, and who, being duly sworn by me, did depose
and say that they are members of GRAND LLC, a New York limited liability
company, and that they have authority to sign the same, and acknowledged that
they executed the same as the act and deed of said limited liability company.
/s/ ROBERT JOSEPH KNOPF
----------------------------------------
Notary Public
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30,2000
5
<PAGE>
Record and Return to:
Lawrence C. Anderson, Esq.
Hinman, Howard & Kattell, LLP
P.O. Box 5250
Binghamton, NY 13902-5250
MORTGAGE
THIS MORTGAGE (herein "Mortgage") is made this 27 day of October, 1998,
between the Mortgagor, GRAND LLC., whose address is 135 Engineers Road,
Hauppauge, New York 11788 (herein "Borrower"), and the Mortgagee, SECURITY
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a New York corporation with its
principal place of business at 80-84 Exchange Street, Binghamton, New York 13901
(P.O. Box 1625, Binghamton, New York 13902) (herein "Lender").
WHEREAS, Borrower is indebted to Lender in the principal sum of
$800,000.00, which indebtedness is evidenced by Borrower's note dated the same
date as this Mortgage (herein "Note").
TO SECURE TO LENDER (a) the repayment of the indebtedness evidenced by the
Note with interest thereon, and all renewals, extensions and modifications
thereof; (b) the payment of all other sums, with interest thereon, advanced in
accordance herewith to protect the security of this Mortgage; and (c) the
performance of the covenants and agreements of Borrower herein contained,
Borrower does hereby mortgage, grant, convey and assign to Lender the following
property described on the annexed Schedule "A".
TOGETHER with all buildings, improvements, and tenements now or hereafter
erected on the property, and all heretofore or hereafter vacated alleys and
streets abutting the property, and all easements, rights, appurtenances, rents,
royalties, mineral, oil and gas rights and profits, water, water rights, and
water stock appurtenant to the property, and all fixtures, machinery, equipment,
engines, boilers, incinerators, building materials, appliances and goods of
every nature whatsoever now or hereafter located in, or on, or used, or intended
to be used in connection with the property, including, but not limited to, those
for the purpose of supplying or distributing heating, cooling, electricity, gas,
water, air and light; and all elevators, and related machinery and equipment,
fire prevention and extinguishing apparatus, security and access control
apparatus and plumbing; all of which, including replacements and additions
thereto, shall be deemed to be and remain a part of the real property covered by
this Mortgage; and all of the foregoing, together with said property are herein
referred to as the "Property".
It is stipulated that the maximum indebtedness secured by this mortgage at
execution, or which under any contingency may be secured thereby at any time in
the future, shall be the principal amount hereof as stated, together with
accrued interest thereon.
<PAGE>
Borrower covenants that Borrower is lawfully seized of the estate
hereby conveyed and has the right to mortgage, grant, convey and assign the
Property, that the Property is unencumbered, and that Borrower will warrant and
defend generally the title to the Property against all claims and demands,
subject to any easements and restrictions listed in a schedule of exceptions to
coverage in any title insurance policy insuring Lender's interest in the
Property.
Borrower and Lender covenant and agree as follows:
1. Payment of Principal and Interest. Borrower shall promptly pay when due
the principal of and interest on the indebtedness evidenced by the Note, any
prepayment and late charges provided in the Note and all other sums secured by
this Mortgage.
2. Funds for Taxes, Insurance and Other Charges. Subject to applicable law
and at the demand of Lender, Borrower shall pay to Lender with each monthly
installment of principal or interest payable under the Note (or on another day
designated in writing by Lender), until the Note is paid in full, a sum (herein
"Funds") equal to one-twelfth of (a) the yearly taxes and assessments which may
be levied on the Property, and (b) the yearly premium installments for fire and
other hazard insurance, rent loss insurance and such other insurance covering
the Property as Lender may require pursuant to paragraph 5 hereof, all as
reasonably estimated initially and from time to time by Lender on the basis of
assessments and bills and reasonable estimates thereof. Any waiver by Lender of
a requirement that Borrower pay such Funds may be revoked by Lender, in Lender's
sole discretion, at any time upon notice in writing to Borrower. Lender may
require Borrower to pay to Lender, in advance, such other Funds for other taxes,
charges, premiums, assessments and impositions in connection with Borrower or
the Property which Lender shall reasonably deem necessary to protect Lender's
interests (herein "Other Impositions"). Unless otherwise provided by applicable
law, Lender may require Funds for Other Impositions to be paid by Borrower in a
lump sum or in periodic installments, at Lender's option.
The Funds shall be held by Lender in a non-interest bearing account. Lender
shall apply the Funds to pay said rates, rents, taxes, assessments, insurance
premiums and Other Impositions so long as Borrower is not, in breach of any
covenant or agreement of Borrower in this Mortgage.
If at any time the amount of the Funds held by Lender shall be less than
the amount deemed necessary by Lender to pay taxes, assessments, insurance
premiums and Other Impositions, as they fall due, Borrower shall pay to Lender
any amount necessary to make up the deficiency within thirty days after notice
from Lender to Borrower requesting payment thereof.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Mortgage, Lender may apply, in any amount and in any order as Lender shall
determine in Lender's sole discretion, any Funds held by Lender at the time of
application (i) to pay rates, rents, taxes, assessments, insurance premiums and
Other Impositions which are now or will hereafter become
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<PAGE>
due, or (ii) as a credit against sums secured by this Mortgage. Upon payment in
full of all sums secured by this Mortgage, Lender shall promptly refund to
Borrower any Funds held by Lender.
Notwithstanding the foregoing, the requirements of this paragraph shall be
waived so long as the property tenant, American Tissue Corporation, is obligated
pursuant to its lease to pay taxes, insurance or other impositions, as the case
may be, and shall timely pay the same before any late fees or charges shall
accrue, and provided, further, that American Tissue Corporation remains in good
standing under the lease, and is not in material default under any provision of
the lease. This waiver is further conditioned upon the following: that Borrower
has not defaulted in the observance of the terms and conditions of the Note,
this Mortgage or any other agreement given to Lender in connection with this
Mortgage, and, additionally submits to Lender, within forty-five (45) days of
the date due without late fees or charges, receipts evidencing payment of taxes,
insurance premiums and other impositions, as the case may be.
3. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender from Borrower under the Note or this Mortgage shall
be applied by Lender in the following order of priority: (i) amount payable to
Lender by Borrower under paragraph 2 hereof; (ii) interest payable on the Note;
(iii) principal of the Note; (iv) interest payable on advances made pursuant to
paragraph 8 hereof; (v) principal of advances made pursuant to paragraph 8
hereof; and (vi) any other sums secured by this Mortgage in such order as
Lender, at Lender's option, may determine; provided, however, that Lender may,
at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior
to interest on and principal of the Note, but such application shall not
otherwise affect the order of priority of application specified in this
paragraph 3.
4. Charges; Liens. Borrower shall pay all water and sewer rates, rents,
taxes, assessments, premiums, and Other Impositions attributable to the Property
at Lender's option in the manner provided under paragraph 2 hereof or, if not
paid in such manner, by Borrower making payment, when due, directly to the payee
thereof, or in such other manner as Lender may designate in writing. Borrower
shall promptly furnish to Lender all notices of amounts due under this paragraph
4, and in the event Borrower shall make payment directly, Borrower shall
promptly furnish to Lender receipts evidencing such payments. Borrower shall
promptly discharge any lien which has, or may have, priority over or equality
with, the lien of this Mortgage, and Borrower shall pay, when due, the claims of
all persons supplying labor or materials to or in connection with the Property.
Without Lender's prior written permission, Borrower shall not allow any lien
inferior to this Mortgage to be perfected against the Property.
5. Hazard Insurance. Borrower shall keep the improvements now existing or
hereafter erected on the Property insured, by carriers at all times satisfactory
to Lender, against loss by fire, hazards included within the term "extended
coverage", flood, rent loss and such other hazards, casualties, liabilities and
contingencies as Lender shall require and in such amounts and for such periods
as Lender shall require. All premiums on insurance policies shall be paid, at
Lender's
3
<PAGE>
option, in the manner provided under paragraph 2 hereof, or by Borrower making
payment, when due, directly to the carrier, or in such other manner as Lender
may designate in writing.
All insurance policies and renewals thereof shall be in a form acceptable
to Lender and shall include a standard mortgage clause in favor of and in form
acceptable to Lender. Lender shall have the right to hold the policies, and
Borrower shall promptly furnish to Lender all renewal notices and all receipts
of paid premiums. At least thirty days prior to the expiration date of a policy,
Borrower shall deliver to Lender a renewal policy in form satisfactory to
Lender.
In the event of loss, Borrower shall give immediate written notice to the
insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender
as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise
any claim under insurance policies, to appear in and prosecute any action
arising from such insurance policies, to collect and receive insurance proceeds,
and to deduct therefrom Lender's expenses incurred in the collection of such
proceeds; provided however, that nothing contained in this paragraph 5 shall
require Lender to incur any expense or take any action hereunder. Insurance
proceeds shall be applied by Lender to the payment of the sums secured by this
Mortgage, whether or not then due, in the order of application set forth in
paragraph 3 hereof.
If the Property is sold pursuant to paragraph 26 hereof or if Lender
acquires title to the Property, Lender shall have all of the right, title and
interest of Borrower in and to any insurance policies and unearned premiums
thereon and in and to the proceeds resulting from any damage to the Property
prior to such sale or acquisition.
6. Preservation and Maintenance of Property. Borrower (a) shall not commit
waste or permit impairment or deterioration of the Property, (b) shall not
abandon the Property, (c) shall restore or repair promptly and in a good and
workmanlike manner all or any part of the Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing, in
the event of any damage, injury or loss thereto, whether or not insurance
proceeds are available to cover in whole or in part the costs of such
restoration or repair, (d) shall keep the Property, including improvements,
fixtures, equipment, machinery and appliances thereon in good repair and shall
replace fixtures, equipment, machinery and appliances on the Property when
necessary to keep such items in good repair, (e) shall comply with all laws,
ordinances, regulations and requirements of any governmental body applicable to
the Property, (f) shall generally operate and maintain the Property in a manner
to ensure maximum rentals, and (g) shall give notice in writing to Lender of
and, unless otherwise directed in writing by Lender, appear in and defend any
action or proceeding purporting to affect the Property, the security of this
Mortgage or the rights or powers of Lender. Neither Borrower nor any tenant or
other person shall remove, demolish or alter any improvement now existing or
hereafter erected on the Property or any fixture, equipment, machinery or
appliance in or on the Property except when incident to the replacement of
fixtures, equipment, machinery and appliances with items of like kind.
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<PAGE>
7. Use of Property and Right of Lender to Inspect. Unless required by law
or unless Lender has otherwise agreed in writing, Borrower shall not allow
changes in the use for which all or any part of the Property was intended at the
time this Mortgage was executed. Borrower shall not initiate or acquiesce in a
change in the zoning classification of the Property without Lender's prior
written consent.
Lender may make or cause to be made reasonable entries upon and inspections
of the Property, upon reasonable notice to Borrower, for purposes including,
without limitation, obtaining future engineering and/or environmental studies,
appraising the Property and securing bids to perform repairs to the Property. In
furtherance of this right and of the rights granted pursuant to paragraph 9,
Lender shall have and is hereby granted an irrevocable license coupled with an
interest for such purposes. Lender and its representatives shall use their best
efforts to not interfere with the operation of the Property and Borrower's
business thereon during any such inspection.
8. Protection of Lender's Security. If Borrower fails to perform the
covenants and agreements contained in this Mortgage, or if any action or
proceeding is commenced which affects the Property or title thereto or the
interest of Lender therein, including, but not limited to, eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, in the event of forbearance, "workout" or other such
accommodations to Borrower, then Lender at Lender's option may make such
appearances, whether at the trial or appellate level, disburse such sums and
take such action as Lender deems necessary, in its sole discretion, to protect
Lender's interest, including, but not limited to, (i) disbursement of attorney's
fees, (ii) entry upon the Property to make repairs, and (iii) procurement of
satisfactory insurance as provided in paragraph 5 hereof.
Any amounts disbursed by Lender pursuant to this paragraph 8, with interest
thereon, shall become additional indebtedness of Borrower secured by this
Mortgage. Unless Borrower and Lender agree to other terms of payment, such
amounts shall be immediately due and payable and shall bear interest from the
date of disbursement at the rate stated in the Note unless collection from
Borrower of interest at such rate would be contrary to applicable law, in which
event such amounts shall bear interest at the highest rate which may be
collected from Borrower under applicable law. Borrower hereby covenants and
agrees that Lender shall be subrogated to the lien of any mortgage or other lien
discharged, in whole or in part, by the indebtedness secured hereby. Nothing
contained in this paragraph 8 shall require Lender to incur any expense or take
any action hereunder.
9. Hazardous Substances. Borrower represents and warrants that, to the best
of Borrower's knowledge, after due inquiry and investigation, the Property is
not now and has never been used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce, process or in any manner deal
with, Hazardous Substances, and that no Hazardous Substances have ever been
installed, placed, spilled, disposed of or in any manner dealt with on
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the Property, and that no owner of the Property or any tenant, subtenant,
occupant, prior tenant, prior subtenant, prior occupant or person (collectively,
"Occupant") has failed to comply with all applicable federal, state and local
governmental laws, regulations, ordinances, administrative and judicial orders
relating to the generating, recycling, re-use, sale, storage, handling,
transport, release and disposal of any Hazardous Substances, or has received any
notice or advice from any governmental agency or any Occupant with regard to
Hazardous Substances on, from or affecting the Property. Borrower covenants that
the Property shall be kept free of Hazardous Substances (other than reasonable
quantities of substances customarily located in or about the Property in
connection with the maintenance and operation of the Property, such as cleaning
materials), and shall not be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce, process or in any manner deal
with, Hazardous Substances, and Borrower shall not cause or permit, as a result
of any intentional or unintentional act or omission on the part of Borrower or
any Occupant, the installation or placement of Hazardous Substances in or on the
Property or a release of Hazardous Substances onto the Property or onto any
other property or suffer the presence of Hazardous Substances on the Property.
Borrower shall comply with, and ensure compliance by all Occupants with, all
applicable federal, state and local laws, ordinances, rules or regulations, with
respect to Hazardous Substances, and shall keep the Property free and clear of
any liens imposed pursuant to such laws, ordinances, rules or regulations. In
the event that Borrower receives any notice or advice from any governmental
agency, or any Occupant with regard to Hazardous Substances on, from or
affecting the Property, Borrower shall immediately notify Lender. Borrower shall
conduct and complete all investigations, studies, sampling, and testing, and all
remedial, removal, and other actions necessary to clean up and remove all
Hazardous Substances, on, from or affecting the Property in accordance with all
applicable federal, state, and local laws, ordinances, rules, regulations, and
policies. The term "Hazardous Substances" as used in this Mortgage shall
include, without limitation, gasoline, petroleum products, explosives, radon
gas, radioactive materials, hazardous or toxic materials, hazardous or toxic
wastes, hazardous or toxic substances, polychlorinated biphenyls or related or
similar materials, asbestos or any material containing asbestos, or any other
substance or material as may be defined or designated as hazardous or toxic by
any Federal, state or local environmental law, ordinance, rule, or regulation
presently in effect or that may be promulgated in the future, and as such
statutes, regulations and ordinances may be amended from time to time,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et
seq.), the Hazardous Substances Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 et seq.). the Federal Water Pollution Control Act (33
U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et
seq.) and in the regulations adopted and publications promulgated pursuant
thereto. The obligations and liabilities of Borrower under this paragraph shall
survive the foreclosure of this Mortgage or the delivery of a deed in lieu of
foreclosure, and shall continue to be binding upon Borrower notwithstanding any
contrary language contained in this Mortgage or any other document, specifically
including without limitation any document which otherwise relieves Borrower from
personal liability under the note secured by this Mortgage, this Mortgage or any
other document.
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10. Books and Records/Financial Statements/Financial Covenants. Borrower
shall keep and maintain at all times at Borrower's address stated above, or such
other place as Lender may approve in writing, complete and accurate books of
account and records adequate to reflect correctly the results of the operation
of the Property, copies of all written contracts, leases and other instruments
which affect the Property and copies of current financial statements of
Borrower's business, statements in respect of which Borrower provided to Lender
in connection with application for this mortgage loan. Such books, records,
contracts, leases and other instruments shall be subject to examination and
inspection at any reasonable time by Lender. Borrower and any permitted
subsequent owner of the Property, as the case may be, shall furnish to Lender,
within ninety days after the end of each fiscal year of Borrower: (a) an income
and expense statement covering the operation of the Property for such period,
prepared and certified by Borrower's accountant; (b) a rent schedule for the
Property, certified by Borrower, showing the name of each tenant, and for each
tenant, the space occupied, the lease expiration date, the rent payable and the
rent paid; (c) a balance sheet or, for an individual borrower, a personal
financial statement (which shall include a statement of contingent liabilities
and maturity date(s) thereof) and federal tax return for Borrower and any
subsequent permitted property owner, and (d) personal financial statement (which
shall include a statement of contingent liabilities and maturity dates thereof)
and federal tax return for each partner of Borrower and each guarantor of the
loan.
11. Condemnation. Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, whether direct or
indirect, of the Property, or part thereof, and Borrower shall appear in and
prosecute any such action or proceeding unless otherwise directed by Lender in
writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for
Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name,
any action or proceeding relating to any condemnation or other taking of the
Property, whether direct or indirect, and to settle or compromise any claim in
connection with such condemnation or other taking. The proceeds of any award,
payment or claim for damages, direct or consequential, in connection with any
condemnation or other taking, whether direct or indirect, of the Property, or
part thereof, or for conveyances in lieu of condemnation, are hereby assigned to
and shall be paid to Lender.
Borrower authorizes Lender to apply such awards, payments, proceeds or
damages, after the deduction of Lender's expenses incurred in the collection of
such amounts, at Lender's option, to payment of the sums secured by this
Mortgage, whether or not then due, in the order of application set forth in
paragraph 3 hereof, or to restoration or repair of the Property, with the
balance, if any, to Borrower. Unless Borrower and Lender otherwise agree in
writing, any application of proceeds to principal shall not extend or postpone
the due date of the monthly installments referred to in paragraphs 1 and 2
hereof or change the amount of such installments. Borrower agrees to execute
such further evidence of assignment of any awards, proceeds, damages or claims
arising in connection with such condemnation or taking as Lender may require.
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12. Borrower and Lien Not Released. From time to time, Lender may, at
Lender's option, without giving notice or obtaining the consent of Borrower,
Borrowers successors or assigns or of any junior lienholder or guarantors,
without liability on Lender's part and notwithstanding Borrower's breach of any
covenant or agreement of Borrower in this Mortgage, extend the time for payment
of said indebtedness or any part thereof, reduce the payments thereon, release
anyone liable on any of said indebtedness, accept a renewal note or notes
therefor, modify the terms and time of payment of said indebtedness, release
from the lien of this Mortgage any part of the Property, take or release other
or additional security, reconvey any part of the Property, consent to any map or
plan of the Property, consent to the granting of any easement, join in any
extension or subordination agreement, and agree in writing with Borrower to
modify the rate of interest or period of amortization of the Note or change the
amount of the monthly installments payable thereunder. Any actions taken by
Lender pursuant to the terms of this paragraph 12 shall not affect the
obligation of Borrower or Borrower's successors or assigns to pay the sums
secured by this Mortgage and to observe the covenants of Borrower contained
herein, shall not affect the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness secured hereby, and shall not
affect the lien or priority of lien hereof on the Property. Borrower shall pay
Lender a reasonable service charge, together with such title insurance premiums
and attorney's fees as may be incurred at Lender's option, for any such action
if taken at Borrower's request.
13. Forbearance By Lender Not A Waiver. Any forbearance by Lender in
exercising any right or remedy hereunder, or otherwise afforded by applicable
law, shall not be a waiver of or preclude the exercise of any right or remedy.
The acceptance by Lender of payment of any sum secured by this Mortgage after
the due date of such payment shall not be a waiver of Lender's right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment. The procurement of insurance or the
payment of taxes or other liens or charges by Lender shall not be a waiver of
Lender's right to accelerate the maturity of the indebtedness secured by this
Mortgage, nor shall Lender receipt of any awards, proceeds or damages under
paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in
payment of sums secured by this Mortgage.
14. Estoppel Certificate. Borrower shall within ten days of a written
request from Lender furnish Lender with a written statement, duly acknowledged,
setting forth the sums secured by this Mortgage and any right of set-off,
counterclaim or other defense which exists against such sums and the obligations
of this Mortgage.
15. Uniform Commercial Code Security Agreement. This Mortgage is intended
to be a security agreement pursuant to the Uniform Commercial Code for any of
the items specified above as part of the Property which, under applicable law,
may be subject to a security interest pursuant to the Uniform Commercial Code,
and Borrower hereby grants Lender a security interest in said items. Borrower
agrees that Lender may file this Mortgage, or a reproduction thereof, in the
real estate records or other appropriate index, as a financing statement for any
of
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the items specified above as part of the Property. Any reproduction of this
Mortgage or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Borrower agrees to execute and
deliver to Lender upon Lender's request, and Borrower authorizes Lender to
execute and file, any financing statements, as well as extensions, renewals and
amendments thereof, and reproductions of this Mortgage in such form as Lender
may require to perfect a security interest with respect to said items. Borrower
shall pay all costs of filing such financing statements and any extensions,
renewals, amendments and releases thereof, and shall pay all reasonable costs
and expenses of any record searches for financing statements Lender may
reasonably require. Without the prior written consent of Lender, Borrower shall
not create or suffer to be created pursuant to the Uniform Commercial Code any
other security interest in said items, including replacements and additions
thereto. Upon Borrower's breach of any covenant or agreement of Borrower
contained in this Mortgage, including the covenants to pay when due all sums
secured by this Mortgage, Lender shall have the remedies of a secured party
under the Uniform Commercial Code and, at Lender's option, may also invoke the
remedies provided in paragraph 26 of this Mortgage as to such items. In
exercising any of said remedies, Lender may proceed against the items of real
property and any items of personal property specified above as part of the
Property separately or together and in any order whatsoever, without in any way
affecting the availability of Lender's remedies under the Uniform Commercial
Code or of the remedies provided in paragraph 26 of this Mortgage.
16. Leases of the Property. Borrower shall comply with and observe
Borrower's obligations as landlord under all leases of the Property or any part
thereof. Borrower, at Lender's request, shall furnish Lender with executed
copies of all leases now existing or hereafter made of all or any part of the
Property, and all leases now or hereafter entered into will be in form and
substance subject to the approval of Lender. All leases of the Property shall
specifically provide that such leases are subordinate to this Mortgage; that the
tenant attorns to Lender, such attornment to be effective upon Lender's
acquisition of title to the Property; that the tenant agrees to execute such
further evidences of attornment as Lender may from time to time request, that
the attornment of the tenant shall not be terminated by foreclosure; and that
Lender may, at Lender's option, accept or reject such attornments. Borrower
shall not, without Lender's written consent, execute, modify, surrender or
terminate, either orally or in writing, any lease now existing or hereafter made
of all or any part of the Property, permit an assignment or sublease of such a
lease without Lender's written consent, or request or consent to the
subordination of any lease of all or any part of the Property to any lien
subordinate to this Mortgage. If Borrower becomes aware that any tenant proposes
to do, or is doing, any act or thing which may give rise to any right of set-off
against rent, Borrower shall (i) take such steps as shall be reasonably
calculated to prevent the accrual of any right to a set-off against rent, (ii)
notify Lender thereof and of the amount of said set-offs, and (iii) within ten
days after such accrual, reimburse the tenant who shall have acquired such right
to set-off or take such other steps as shall effectively discharge such set-off
and as shall assure that rents thereafter due shall continue to be payable
without set-off or deduction.
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Upon Lender's request, Borrower shall assign to Lender, by written
instrument satisfactory to Lender, all leases now existing or hereafter made of
all or any part of the Property and all security deposits made by tenants in
connection with such leases of the Property.
17. Remedies Cumulative. Each remedy provided in this Mortgage is distinct
and cumulative to all other rights or remedies under this Mortgage or afforded
by law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.
18. Acceleration in Case of Borrowers Insolvency. If Borrower (including if
Borrower should be a general or limited partnership any general partner thereof)
shall voluntarily file a petition under the Federal Bankruptcy Code, as such
Code may from time to time be amended, or under any similar or successor Federal
statute relating to bankruptcy, insolvency, arrangements or reorganizations, or
under any state bankruptcy or insolvency act, or file an answer in an
involuntary proceeding admitting insolvency or inability to pay debts, or if
Borrower shall fail to obtain a dismissal, vacation or stay of involuntary
proceedings brought for the reorganization, dissolution or liquidation of
Borrower, or if a trustee or receiver shall be appointed for Borrower or
Borrower's property, or if the Property shall become subject to the jurisdiction
of a Federal bankruptcy court or similar state court, or if Borrower shall make
an assignment for the benefit of Borrower's creditors, or if there is an
attachment, execution or other judicial seizure of any portion of Borrower's
assets and such seizure is not discharged within ten days, then Lender may, at
Lender's option, declare all of the sums secured by this Mortgage to be
immediately due and payable without prior notice to Borrower, and Lender may
invoke any remedies permitted by paragraph 26 of this Mortgage. Any attorney's
fees and other expenses incurred by Lender in connection with Borrower's
bankruptcy or any of the other aforesaid events shall be additional indebtedness
of Borrower secured by this Mortgage pursuant to paragraph 8 hereof.
19. Transfers of the Property or Beneficial Interests in Borrower;
Assumption. On sale or transfer of (i) all or any part of the Property, or any
legal or equitable interest therein, whether voluntary or involuntary, or (ii)
beneficial interests in Borrower (if Borrower is not a natural person or persons
but is a corporation, partnership, trust or other legal entity), Lender may, at
Lender's option, declare all of the sums secured by this Mortgage to be
immediately due and payable, and Lender may invoke any remedies permitted by
paragraph 26 of this Mortgage. Notwithstanding the foregoing, (i) Borrower may
transfer the Property to affiliated or related entities of Borrower, (ii)
interests in Borrower may be transferred to an entity controlled by a majority
of the members of the Borrower or (iii) the Property or interests in Borrower
may be transferred to spouses, children, grandchildren and trusts for the
benefit of each of the foregoing for the purposes of estate planning, without
triggering the due on sale clause herein and without the prior consent of the
Lender. Borrower shall, however, provide Lender with written notice of any such
transfers.
20. Notice. Except for any notice required under applicable law to be given
in another manner, (a) any notice to Borrower provided for in this Mortgage or
in the Note shall be given by
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mailing such notice by certified mail or by recognized overnight delivery
service addressed to Borrower at Borrower's address stated above or at such
other address as Borrower may designate by notice to Lender as provided herein,
with a copy to Nicholas J. Kaiser, Esq., Mandel & Resnik, P.C., 220 East 42nd
Street, New York, New York 10017; and (b) any notice to Lender shall be given by
certified mail, return receipt requested, or by recognized overnight delivery
service, to Lender's address stated herein or to such other address as Lender
may designate by notice to Borrower as provided herein. Any notice provided for
in this Mortgage or in the Note shall be deemed to have been given to Borrower
or Lender when given in the manner designated herein.
21. Successors and Assigns Bound; Joint and Several Liability; Agents;
Captions. The covenants and agreements herein contained shall bind, and the
rights hereunder shall inure to, the respective successors and assigns of Lender
and Borrower, subject to the provisions of paragraph 19 hereof. All covenants
and agreements of Borrower shall be joint and several. In exercising any rights
hereunder or taking any actions provided for herein, Lender may act through its
employees, agents or independent contractors as authorized by Lender. The
captions and headings of the paragraphs of this Mortgage are for convenience
only and are not to be used to interpret or define the provisions hereof.
22. Governing Law; Severability. This Mortgage shall be governed by the law
of the State of New York. In the event that any provision of this Mortgage or
the Note conflicts with applicable law, such conflict shall not affect other
provisions of this Mortgage or the Note which can be given effect without the
conflicting provisions, and to this end the provisions of this Mortgage and the
Note are declared to be severable. In the event that any applicable law limiting
the amount of interest or other charges permitted to be collected from Borrower
is interpreted so that any charge provided for in this Mortgage or in the Note,
whether considered separately or together with other charges levied in
connection with this Mortgage and the Note, violates such law, and Borrower is
entitled to the benefit of such law, such charge is hereby reduced to the extent
necessary to eliminate such violation. The amounts, if any, previously paid to
Lender in excess of the amounts payable to Lender pursuant to such charges as
reduced shall be applied by Lender to reduce the principal of the indebtedness
evidenced by the Note. For the purpose of determining whether any applicable law
limiting the amount of interest or other charges permitted to be collected from
Borrower has been violated, all indebtedness which is secured by this Mortgage
or evidenced by the Note and which constitutes interest, as well as all other
charges levied in connection with such indebtedness which constitute interest,
shall be deemed to be allocated and spread over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be effected in such a manner that the rate of interest computed thereby is
uniform throughout the stated term of the Note.
23. Waiver of Statute of Limitations. Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Mortgage or to any action brought to enforce the Note or any other
obligation secured by this Mortgage.
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24. Waiver of Marshalling. Notwithstanding the existence of any other
security interests in the Property held by Lender or by any other party, Lender
shall have the right to determine the order in which any or all of the Property
shall be subjected to the remedies provided herein. Lender shall have the right
to determine the order in which any or all portions of the indebtedness secured
hereby are satisfied from the proceeds realized upon the exercise of the
remedies provided herein. Borrower, any party who consents to this Mortgage and
any party who now or hereafter acquires a security interest in the Property and
who has actual or constructive notice hereof hereby waives any and all right to
require the marshalling of assets in connection with the exercise of the
remedies permitted by applicable law or provided herein.
25. Assignment of Rents; Appointment of Receiver; Lender in Possession. As
part of the consideration for the indebtedness evidenced by the Note, Borrower
hereby absolutely and unconditionally assigns and transfers to Lender all the
rents and revenues of the Property, including those now due, past due, or to
become due by virtue of any lease or other agreement for the occupancy or use of
all or any part of the Property, regardless of to whom the rents and revenues of
the Property are payable. Lender or any receiver appointed pursuant to this
paragraph shall be entitled to occupational rent from an owner/occupant and may
on non-payment of rent evict the owner. Borrower hereby authorizes Lender or
Lender's agents to collect the aforesaid rents and revenues and hereby directs
each tenant of the Property to pay such rents to Lender or Lender's agents;
provided, however, that prior to written notice given by Lender to Borrower of
the breach by Borrower of any covenant or agreement of Borrower in this
Mortgage, Borrower shall collect and receive all rents and revenues of the
Property as trustee for the benefit of Lender and Borrower, to apply the rents
and revenues so collected to the sums secured by this Mortgage in the order
provided in paragraph 3 hereof with the balance, so long as no such breach has
occurred, to the account of Borrower, it being intended by Borrower and Lender
that this assignment of rents constitutes an absolute assignment and not an
assignment for additional security only. Upon delivery of written notice by
Lender to Borrower of the breach by Borrower of any covenant or agreement of
Borrower in this Mortgage, and without the necessity of Lender entering upon and
taking and maintaining full control of the Property in person, by agent or by a
court-appointed receiver, Lender shall immediately be entitled to possession of
all rents and revenues of the Property as specified in this paragraph 25 as the
same become due and payable, including but not limited to rents then due and
unpaid, and all such rents shall immediately upon delivery of such notice be
held by Borrower as trustee for the benefit of Lender only; provided, however,
that the written notice by Lender to Borrower of the breach by Borrower shall
contain a statement that Lender exercises its rights to such rents. Borrower
agrees that commencing upon delivery of such written notice of Borrower's breach
by Lender to Borrower, each tenant of the Property shall make such rents payable
to and pay such rents to Lender or Lender's agents on Lender's written demand to
each tenant therefor, delivered to each tenant personally, by mail or by
delivering such demand to each rental unit, without any liability on the part of
said tenant to inquire further as to the existence of a default by Borrower.
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Borrower hereby covenants that Borrower has not executed any prior
assignment of said rents, that Borrower has not performed, and will not perform
any acts, or has not executed and will not execute, any instrument which would
prevent Lender from exercising its rights under this paragraph 25, and that at
the time of execution of this Mortgage there has been no anticipation or
prepayment of any of the rents of the Property for more than one month prior to
the due dates of such rents. Borrower covenants that Borrower will not hereafter
collect or accept payment of any rents of the Property more than one month prior
to the due dates of such rents. Borrower further covenants that Borrower will
execute and deliver to Lender such further assignments of rents and revenues of
the Property as Lender may from time to time request.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Mortgage, Lender may in person, by agent or by a court-appointed receiver,
regardless of the adequacy of Lender's security, enter upon and take and
maintain full control of the Property in order to perform all acts necessary and
appropriate for the operation and maintenance thereof including, but not limited
to, the execution, cancellation or modification of leases, the collection of all
rents and revenues of the Property, the making of repairs to the Property and
the execution or termination of contracts providing for the management or
maintenance of the Property, all on such terms as are deemed best to protect the
security of this Mortgage. In the event Lender elects to seek the appointment of
a receiver for the Property upon Borrower's breach of any covenant or agreement
of Borrower in this Mortgage, Borrower hereby expressly consents to the
appointment of such receiver. Lender or the receiver shall be entitled to
receive a reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of written notice
by Lender to Borrower of the breach by Borrower of any covenant or agreement of
Borrower in this Mortgage shall be applied first to the costs, if any, of taking
control of and managing the Property and collecting the rents, including, but
not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds;
costs of repairs to the Property, premiums on insurance policies, taxes,
assessments and other charges on the Property, and the costs of discharging any
obligation or liability of Borrower as lessor or landlord of the Property and
then to the sums secured by this Mortgage. Lender or the receiver shall have
access to the books and records used in the operation and maintenance of the
Property and shall be liable to account only for those rents actually received.
Lender shall not be liable to Borrower, anyone claiming under or through
Borrower or anyone having an interest in the Property by reason of anything done
or left undone by Lender under this paragraph 25.
If the rents of the Property are not sufficient to meet the costs, if any,
of taking control of and managing the Property and collecting the rents, any
funds expended by Lender for such purposes shall become indebtedness of Borrower
to Lender secured by this Mortgage pursuant to paragraph 8 hereof. Unless Lender
and Borrower agree in writing to other terms of payment, such amounts shall be
payable upon notice from Lender to Borrower requesting payment thereof and shall
bear interest from the date of disbursement at the rate stated in the Note
unless payment
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of interest at such rate would be contrary to applicable law, in which event
such amounts shall bear interest at the highest rate which may be collected from
Borrower under applicable law.
Any entering upon and taking and maintaining of control of the Property by
Lender or the receiver and any application of rents as provided herein shall not
cure or waive any default hereunder or invalidate any other right or remedy of
Lender under applicable law or provided herein. This assignment of rents of the
Property shall terminate at such time as this Mortgage ceases to secure
indebtedness held by Lender.
26. Acceleration; Remedies. Upon Borrower's breach of any covenant or
agreement of Borrower contained in this Mortgage, including, but not limited to,
the covenants to pay when due any sums secured by this Mortgage, the Note or any
other document executed in connection herewith, or after default in failing to
cure within ten days after notice and demand anything which may in any way
impair the lien of this mortgage or the value of the mortgaged premises, or
weaken or diminish the security intended to be given by and under this mortgage,
Lender at Lender's option, may declare all of the sums secured by this Mortgage
to be immediately due and payable without further demand, may foreclose this
Mortgage by judicial proceeding, shall be entitled to the appointment of a
receiver, without notice, and may invoke any other remedies permitted by
applicable law or provided herein. Lender may, at Lender's option, also
foreclose this Mortgage for any portion of the sums secured hereby which is then
due and payable, subject to the continuing lien of this Mortgage of the balance
of the Mortgage debt then due. Lender shall be entitled to collect in pursuing
such remedies all costs and expenses allowed by applicable law including
reasonable attorneys' fees. The rights of Lender herein specified shall be in
addition to Lender's rights under Section 254 of the Real Property Law.
27. Release. Upon payment of all sums secured by this Mortgage, Lender
shall discharge this Mortgage. Borrower shall pay Lender's reasonable costs
incurred in discharging this Mortgage. Upon payment of all sums due Lender under
the Note and Mortgage by Borrower, Lender will execute a non-recourse assignment
of mortgage to Borrower's new lender.
28. Lien Law. Borrower will receive advances hereunder subject to the trust
fund provisions of Section 13 of the Lien Law.
29. Late Payment. If any payment required to be made by Borrower in this
Mortgage or the Note is not made before the tenth day of the month in which it
becomes due, Borrower shall pay to Lender with such payment an additional charge
equal to 10% of the payment due.
30. Subsequent Liens. In the event a mortgage or other lien, secondary and
subordinate to the lien of this Mortgage, is placed upon the Property without
the written consent of Lender, Lender may at Lender's option declare all of the
sums secured by this Mortgage to be due and payable and Lender may invoke any
remedy permitted by paragraph 26 of this Mortgage.
14
<PAGE>
31. Future Construction. If Borrower desires to obtain financing for the
construction of one or more buildings which are not contiguous to the currently
existing improvements at 418 -420 Hudson River Road, Lender shall have the right
to present a construction and long-term financing proposal for such new
improvements to Borrower before Borrower obtains same from another lender. If
Borrower does not accept Lender's financing proposal and obtains such financing
from another lender, Lender shall release the lien of its mortgage on the parcel
of real property where the new improvements are to be constructed provided that
such release will not have a material adverse effect on Lender's security for
repayment and as long as the loan-to-value ratio on the remaining parcel does
not exceed 75%.
IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused the
same to be executed by its representatives thereunto duly authorized.
GRAND LLC,
a New York limited liability company
By /s/ MEHDI GABAYZADEH
-------------------------------------
Mehdi Gabayzadeh
By /s/ NOUROLLAH ELGHANAYAN
-------------------------------------
Nourollah Elghanayan
STATE OF NEW YORK )
) SS.:
COUNTY OF Suffolk )
On the 27th day of October, 1998, before me personally came MEHDI
GABAYZADEH and NOUROLLAH ELGHANAYAN, to me known to be the individuals who
executed the foregoing instrument, and who, being duly sworn by me, did depose
and say that they are members of GRAND LLC, a New York limited liability
company, and that they have authority to sign the same, and acknowledged that
they executed the same as the act and deed of said limited liability company.
/s/ ROBERT JOSEPH KNOPF
----------------------------------------
Notary Public
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30,2000
BANK UNITED DUPLICATE
CONSOLIDATED ORIGINAL
MORTGAGE NOTE
-------------
$743,225.00 Melville, New York
As of December 29, 1997
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of
BANK UNITED its successors and/or assigns (hereinafter called the "Bank"), at
its offices at 3200 Southwest Freeway, Houston, Texas 77027, or such other place
as Bank may designate in writing,
SEVEN HUNDRED FORTY-THREE THOUSAND TWO HUNDRED TWENTY-FIVE AND 00/100
($743,225.00) DOLLARS
together with the unpaid balance of $2,106,775.00 represented by note assigned
to Bank by assignment dated December 23, 1997 as follows:
Demand Note of American Tissue Corporation ("ATC") to LaSalle National Bank
dated December 23, 1997 replacing Note of ATC to Republic National Bank of
New York ("Republic") dated March 7, 1990 in the original sum of $3,500,000
which note was amended to reflect that a portion of the indebtedness
evidenced by such Note is the indebtedness assigned by Republic to LaSalle
National Bank in the principal sum of $2,886,314.11; and
consolidated herewith to form a single obligation of TWO MILLION EIGHT HUNDRED
FIFTY THOUSAND AND 00/100 ($2,850,000) DOLLARS with interest as hereinafter
provided.
The rate of interest on this loan is 7.75% per annum which shall continue
in effect from the date hereof to Maturity (as hereafter defined). The monthly
payment of principal and interest shall be $23,397.03 and shall commence
February 1, 1998 and continue on the same day of each and every month thereafter
to Maturity.
The term of this loan shall be ten (10) years with principal amortization
based on a loan maturing over a twenty (20) year term which began on the date
hereof.
The Maturity of this loan is January 1, 2008, when the entire remaining
unpaid balance of principal and any unpaid interest shall be fully due and
payable.
Monthly payments shall be applied first to the payment of interest as
aforesaid and the balance toward reduction of principal. Interest on any past
due amount, whether at Maturity or by acceleration, shall be paid until the full
principal balance is actually paid at a rate of
<PAGE>
two percent per annum in excess of the above stated interest rate. In no event,
however, shall the interest on this loan be higher than the highest rate of
interest permitted under applicable New York or Federal Law.
The obligation to pay interest and principal on this Note as aforesaid is
sometimes referred to hereafter collectively as "Obligation".
Borrower may prepay this Note in whole or in part on any monthly
installment date after December 31, 2002 upon payment of a prepayment premium of
5% of the amount prepaid which premium shall reduce to 4% on December 31, 2003,
to 3% on December 31, 2004, to 2% on December 31, 2005 and to 1% on December 31,
2006.
Notwithstanding the foregoing, Borrower may prepay this Note, in whole or
in part, on any monthly installment date during the last three months of the
term of the loan without premium. If at any time during the term of this loan
Bank shall require a reduction in the loan amount, such reduction shall not be
subject to any prepayment premium.
This Note is secured by a Mortgage on premises located at 3 Duplainville
Road, Saratoga Springs, New York known and designated as Section 178 Block 1 Lot
40 on the Saratoga County Tax Map.
The Bank, in its sole discretion, may accept partial payments of interest
and/or principal. If accepted: (1) such payments shall first be applied to
interest as aforesaid, and the balance, if any, toward reduction of principal;
and (2) acceptance of such partial payment or payments shall not constitute a
waiver of default of any provisions of this Note, the mortgage securing it, or
any of the documents executed in connection herewith, nor shall such acceptance
effect a modification of this Note nor operate to create any estoppel against
the holder hereof.
The Bank may, at its option, or upon or at any time after default in the
prompt payment of Obligation or of any other liability of the undersigned,
whether due by acceleration as hereinabove provided or otherwise, proceed to
enforce payment of the same and exercise any of, or all of the rights and
remedies afforded the Bank by applicable law or any document executed in
connection with Obligation or otherwise.
The undersigned agrees that whenever an attorney is used to enforce,
declare or adjudicate any rights or obligations under this note or collect any
amounts due thereunder or with respect to any security securing the same,
whether by suit or by any other means whatsoever, the undersigned shall be
obligated in addition to pay the Bank's reasonable attorneys' fees, costs and
disbursements.
The rights and remedies provided for in this Note, any security agreement,
any guaranty of payment of liabilities, the Mortgage, the assignment of leases,
or other instruments or agreements executed by the undersigned or any guarantors
pertaining to either
-2-
<PAGE>
this Note or any guaranty securing this Note. or in any other document or
agreement executed in connection with this Note, are cumulative and not
exclusive, and the Bank or any subsequent holder of the Note may proceed against
undersigned, any guarantors, of the Note or any other guaranty, or may proceed
against any other person or entity, or with respect to any pledged property, all
in pursuance of any remedy afforded the Bank or any subsequent holder of the
Note, either by statute, contractually, or otherwise, at any time, in any order,
either simultaneously or otherwise until the Note and all amounts due thereunder
are fully paid and satisfied. It is understood and agreed that the undersigned,
and the guarantors and each of them, remain and are at all times jointly and
severally liable for the Note and all amounts due thereunder (except as
guarantors' liability is limited pursuant to the guaranty) until the Note and
all amounts due thereunder are fully paid and satisfied, regardless of any
recoveries from sale or disposition of collateral or pendency of proceedings or
completion of proceedings to accomplish the same.
The undersigned waives presentation, protest, demand for payment, notice of
default or non-payment to the undersigned, or any other party liable for or upon
any of said Obligations. The Bank and the undersigned, in any litigation
(whether or not arising out of or relating to the Note or said collateral
security for the repayment thereof) in which Bank and any of them shall be
adverse parties, waive trial by jury and the undersigned, in addition, waive the
right to interpose any defense based upon any Statute of Limitations or any
claim of laches and any set-off or counter claim of any nature or description.
If the undersigned is a partnership, the agreement herein contained
shall remain in force and applicable, notwithstanding any changes in the
individuals composing the partnership, and the term "undersigned", as used
herein, shall include any alternate or successor partnerships, but any
predecessor partnership and their partners shall not thereby be released from
any liability. If this Note is signed by more than one party, the terms
"undersigned", as used herein, shall mean the "undersigned and each of them" and
each undertaking herein contained shall be their joint and several undertaking,
provided, however, that in the phrases "of the undersigned", "by the
undersigned", "against the undersigned", "for the undersigned", "to the
undersigned", and "on the undersigned", the term "undersigned" shall mean the
"undersigned or any of them."
The Bank may release, exchange, sell or surrender any of the mortgaged or
pledged property belonging to any of the undersigned parties hereto or any
guarantors of this Note and it may renew, extend, modify, accelerate,
compromise, settle or release any of the liabilities of any of them and may make
additional advances or extensions of credit to any of them or release or fail to
set off any deposit account or credit of any of them or grant other indulgences
to any of them, all from time to time, before or after maturity hereof, with or
without further notice to or assent from, and without in any way affecting or
releasing the liability of, any of the other parties hereto.
If the time for payment of this Note shall be extended by any law relating
to obligations payable on Sunday or holidays, such extended time shall be
included in the
-3-
<PAGE>
computation of interest or discount.
Any provision hereof which may prove unenforceable under any law shall not
affect the validity of any other provision hereof.
No provision of this note (or any documents executed in connection
therewith) may be terminated, changed or waived orally, all such modifications
shall be in writing and duly executed by the party against whom enforcement is
sought.
This Note may be executed in counterparts each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument. The partially executed signature page of any counterpart of this
Note may be attached to any other partially executed counterpart of this note
without impairing the legal effect of the signature(s) on such signature page.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
DUPLICATE SARATOGA REALTY LLC
ORIGINAL By: /s/
--------------------------------
Nourollah Elghanayan, Manager
STATE OF NEW YORK )
: ss:
COUNTY OF SUFFOLK )
On this 24th day of December, 1997, before me personally came NOUROLLAH
ELGHANAYAN, to me known to be one of the managers of the limited liability
company of SARATOGA REALTY LLC, which executed the foregoing instrument and he
duly acknowledged to me that he is authorized to execute said instrument and
that he executed the same as the act and deed of said limited liability company
by order of the members thereof and for the uses and purposes therein mentioned.
/s/
--------------------------------
Notary Public
A. ROBERT STUDLEY
Notary Public, State of New York
No. 01ST4505126
Qualified in Nassau County
Commission Expires December 31, 1997
-4-
<PAGE>
================================================================================
CONSOLIDATED MORTGAGE
---------------------
Date: As of December 29, 1997
Mortgagor: SARATOGA REALTY LLC, a New York limited liability
company
Address: 135 Engineers Road
Hauppauge, New York 11788
Mortgagee: BANK UNITED
Address: 3200 Southwest Freeway
Houston, Texas 77027
Consolidated
Mortgage Amount: $ 2,850,000
Location of 3 Duplainville Road (County Road 44),
Premises: Saratoga Springs, Saratoga County, New York
Section - 178
Block - 1
Lot - 40
================================================================================
Record and return to: PAYNE, WOOD & LITTLEJOHN
290 BROAD HOLLOW ROAD
MELVILLE NY 11747
ATTN: Alan C. Polacek, Esq.
The mortgage covers property not to be improved by one or more structures
containing in the aggregate not more than six residential dwelling units, each
having their own separate cooking facilities.
<PAGE>
RECITAL
The Mortgagor is the owner of the Premises described in Schedule A hereto.
The Mortgagor has substantial improvements on the Premises and, simultaneously
with the execution of this Mortgage has borrowed the sum of SEVEN HUNDRED
FORTY-THREE THOUSAND TWO HUNDRED TWENTY-FIVE AND 00/100 ($743,225.00) DOLLARS
which sum is consolidated with the unpaid sum of $2,106,775.00 on a certain note
and mortgage dated March 7, 1990 and assigned to Mortgagee by assignment dated
on or about the date hereof and to form a single lien of TWO MILLION EIGHT
HUNDRED FIFTY THOUSAND AND 00/100 ($2,850,000.00) DOLLARS (hereafter the
"Mortgage Amount"). The Mortgagor has executed and delivered to Mortgagee a
consolidated note for $2,850,000.00 dated the date hereof. The said note,
together with any modifications or amendments thereto are hereinafter
collectively referred to as the "Note".
CERTAIN DEFINITIONS
The Mortgagor and the Mortgagee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified, such definitions to be applicable equally to the singular and the
plural forms of such terms:
"Chattels" means all fixtures, articles of personal property now or
hereafter owned by the Mortgagor and attached to or used in connection with said
Premises, including but not limited to all partitions, furnaces, boilers, oil
burners, radiators and piping, coal stokers, plumbing and bathroom fixtures,
refrigeration, air conditioning and sprinkler systems, or other fire prevention
or extinguishing apparatus and materials, wash-tubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, kitchen cabinets, incinerators, plants and shrubbery, and all other
equipment and machinery, appliances, fittings and fixtures of every kind in or
used in the operation of the buildings standing on said Premises, all of which
the Mortgagor represents that he owns, together with any and all replacements
thereof and additions thereto.
"Default Rate" means at a rate equal to five percenturn (5%) per annum in
excess of the current Note Rate as described in the Note, but in no event higher
than the maximum rate allowed by applicable law.
"Documents" means the Note (as hereafter defined), Assignment of Leases,
Rents and Profits of even date between Mortgagor and Mortgagee, this Mortgage,
and all other documents further evidencing and/or securing the loan evidenced by
the Note and this Mortgage.
"Events of Default" means the events and circumstances described as such in
Section 2.01 hereof.
"Guarantor" means any person or entity which has guaranteed to Mortgagee
the prompt
-2-
<PAGE>
and full payment of the sums due Mortgagee under the Note and Documents.
"Improvements" means all improvements, structures or buildings, and
replacements and alterations thereof, erected or to be erected or now or
hereafter located upon the Premises including all plant equipment, apparatus,
machinery and fixtures of every kind and nature whatsoever owned by Mortgagor
forming part of said improvements, structures or buildings.
"Mortgage" means this consolidated mortgage.
"Mortgage Amount" means TWO MILLION EIGHT HUNDRED FIFTY THOUSAND AND 00/100
($2,850,000.00) DOLLARS.
"Mortgagor" means Saratoga Realty LLC, a New York limited liability
company.
"Mortgagee" means Bank United its successors and/or assigns.
"Note" means the consolidated note of even date from Mortgagor to
Mortgagee.
"Note Rate" means the rate of interest payable under the Note from time to
time during the term thereof.
"Premises" means the Premises described in Schedule A including all of the
easements, rights, privileges and appurtenances thereunto belonging or in
anyway appertaining, and all of the estate, right, title, interest, claim or
demand whatsoever of the Mortgagor therein and in and to the strips and gores,
streets, and ways adjacent thereto, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
All terms of this Mortgage which are not defined above have the meaning set
forth in this Mortgage or the Documents.
CONSOLIDATION CLAUSE
This Mortgage is hereby consolidated with the following note and mortgage:
Mortgage made by American Tissue Corporation, to Republic National Bank of
New York ("Republic") dated March 7, 1990 in the amount of S3,500,000 recorded
March 9, 1990 in Liber 1368 mp 350, which Mortgage (and its accompanying Note)
was amended to reflect that a portion of the indebtedness evidenced by such
Mortgage is the indebtedness assigned by Republic to LaSalle National Bank in
the principal sum of S2,886,314.11 by amended and restated mortgage dated April
19, 1995 recorded April 21, 1995 in Liber 1900 mp 122 and was assigned to
LaSalle National Bank by assignment dated April 17, 1995 recorded April 21, 1995
in Liber 101 mp 760. This mortgage was assigned to Mortgagee by LaSalle National
Bank by assignment dated December___, 1997 in the unpaid principal sum of
$2,106,775.00. All of the above recordings were made in the Office of the Clerk
of Saratoga County.
-3-
<PAGE>
Which above mortgage is hereby consolidated with this Mortgage to form one
mortgage obligation of TWO MILLION EIGHT HUNDRED FIFTY THOUSAND AND 00/100
($2,850,000.00) DOLLARS with the same intent and with like effect as if one
first mortgage covering the Premises had been duly made, executed and delivered
by Mortgagor to Mortgagee containing the terms and conditions herein contained
it being understood and agreed that the terms and conditions contained herein
completely and entirely supersede the terms and conditions in the prior assigned
mortgage as to the whole consolidated sum of $2,850,000.00.
SPREADER
Inasmuch as the assigned mortgage may not cover the entirety of Premises,
and the Mortgagor and Mortgagee desire to spread the lien of the assigned
mortgage to the entirety of the Premises, Mortgagor and Mortgagee hereby
mutually covenant and agree that the lien of the assigned mortgage consolidated
herewith be and the same hereby is spread over the entirety of the Premises not
already covered by assigned mortgage in the same manner and to the same effect
as though each mortgage consolidated herewith had originally covered all of the
land defined as Premises and set forth herein as Schedule "A."
GRANTING CLAUSE
NOW THEREFORE, the Mortgagor, in order to secure the payment of both the
Mortgage Amount and the interest, default interest, late charges, advances,
reimbursements, commitment fees and any other sums payable under the Note, this
Mortgage and the Documents and the performance and observance of all the
provisions hereof and of the Note and the Documents, hereby gives, grants,
bargains, sells, warrants, aliens, demises, releases, conveys, assigns,
transfers, mortgages, hypothecates, deposits, pledges, sets over and confirms
unto the Mortgagee, with mortgage covenants, all its estate, right, title and
interest in, to and under any and all of the following described property (the
"Mortgaged Property") whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels in which a security agreement pursuant to the Uniform
Commercial Code is granted to Mortgagee;
(iv) all proceeds of the conversion, voluntary or involuntary, of any of
the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards and any unearned premiums accrued,
accruing or to accrue under any and all insurance policies now or hereafter
obtained by the Mortgagor and real estate tax and assessment refunds and credits
at any time accruing to the benefit of the Mortgagor or the
-4-
<PAGE>
Mortgaged Property, even if relating to taxes and assessments payable for a
period or periods prior to the date hereof;
(v) all leases of the Premises or any part thereof now or hereafter entered
into and all right, title and interest of the Mortgagor thereunder; and
including, without limitation, the Mortgagor's right, if any, to cash or
securities deposited thereunder whether or not same was deposited to secure
performance by the lessees of their obligations thereunder, including, further,
the right upon the happening of an Event of Default, to receive and collect the
rents and other charges thereunder (all of which leases are assigned to the
Mortgagee as further security hereunder pursuant to a separate Assignment of
Rents, Leases and Profits of even date intended to be recorded immediately
following the recordation of this Mortgage, and which is incorporated herein by
reference);
(vi) all utility or municipal deposits made by or on behalf of Mortgagor or
made in connection with the Premises;
(vii) all plans, drawings, specifications, site plans, subdivision maps,
sketches, samples, contracts and agreements, however characterized from time to
time prepared for use in connection with the development of the Premises and the
construction of the improvements;
(viii) all contracts, agreements and understandings now or hereafter
entered into, relating to or involving the performance of any work, rendering of
any services, and supply of any materials or the conduct of operations in and
the management of the Premises including, without limitation, construction
contracts, architect agreements, management agreements, options and other
agreements, however characterized, affecting the Premises and/or the
Improvements or the public improvements required to be installed under the terms
of governmental approvals relating to the subdivision and/or approved site plan
in which the Premises are a part;
(ix) any and all permits, certificates, approvals and authorizations,
however characterized, issued or in any way furnished whether necessary or not,
for the operation and use of the Premises and/or the Improvements and/or
Chattels including, without limitation, building permits, environmental
certificates, certificates of operation, certificates of occupancy and/or
completion, licenses, warranties and guarantees; and
(x) all Contracts of Sale for portions of the Premises including, without
limitation, deposits made by Purchasers thereunder; and
TO HAVE AND TO HOLD unto the Mortgagee, its successors and assigns forever.
-5-
<PAGE>
ARTICLE I
PARTICULAR COVENANTS, WARRANTIES AND
REPRESENTATIONS OF THE MORTGAGOR
The Mortgagor covenants, warrants, represents and agrees as follows:
Section 1.01. The Mortgagor warrants that it has a good and marketable
title to an indefeasible fee estate in the Premises subject in all cases to no
lien, charge or encumbrance except such as are listed as exceptions to title in
the title policy insuring the lien of this Mortgage. The Mortgagor further
warrants that it will own the Chattels free and clear of liens and claims; and
that this Mortgage is and will remain a valid and enforceable first lien on the
Mortgaged Property, subject only to the exceptions set forth above. The
Mortgagor has full power and lawful authority to mortgage the Mortgaged Property
in the manner and form herein done or intended hereafter to be done. The
Mortgagor will preserve such title, and will forever warrant and defend the
validity and priority of the lien hereof against the claims of all persons and
parties whomsoever. The Mortgagor is a limited liability company organized under
the laws of the State of New York with full power and authority to conduct the
business in which it is engaged, own its property and consummate the
transactions contemplated hereby.
Section 1.02. The Mortgagor will, at the cost of the Mortgagor, and without
expense to the Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as the Mortgagee shall from time to time
reasonably require, for the better assuring, conveying, assigning, transferring
and confirming unto the Mortgagee the property and rights hereby conveyed,
mortgaged or assigned or intended now or hereafter so to be, or which the
Mortgagor may be or may hereafter become bound to convey, mortgage or assign to
the Mortgagee or for carrying out the intention or facilitating the performance
of the terms of this Mortgage, and for filing, registering or recording this
Mortgage and, on demand, will execute and deliver, and hereby authorizes the
Mortgagee to execute in the name of the Mortgagor to the extent it may lawfully
do so, in the event of the failure or refusal of the Mortgagor so to do, one or
more financing statements, chattel mortgages or comparable security instruments,
and renewals thereof to evidence more effectively the lien hereof upon the
Chattels.
Section 1.03. (a) The Mortgagor forthwith upon the execution and delivery
of this Mortgage, and thereafter from time to time, will cause this Mortgage,
and any security instrument creating a lien or evidencing the lien hereof upon
the Chattels and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully to protect the lien hereof
upon, and the interest of the Mortgagee in, the Mortgaged Property.
(b) The Mortgagor will pay all filing, registration, imposts, taxes and
recording fees, and all expenses incident to the execution and acknowledgment of
this Mortgage, any mortgage
-6-
<PAGE>
supplemental hereto, any security instrument with respect to the Chattels, and
any instrument of further assurance, and all federal, state, county and
municipal stamp taxes and other taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution, delivery and recording of
the Note, this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Chattels or any instrument of further assurance.
Section 1.04. The Mortgagor will pay when due the principal and interest
and all other sums to become due in respect of the Note at the time and place
and in the manner specified in the Note according to the true intent and meaning
thereof and without offset or counterclaim, all in any coin or currency of the
United States of America which at the time of such payment shall be legal tender
for the payment of public and private debts.
Section 1.05. The Mortgagor will, so long as it is owner of any part of the
Mortgaged Property, do all things necessary to preserve and keep in full force
and effect its franchises, rights and privileges under the laws of the State of
New York and will comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental authority or court and applicable to the
Mortgagor or to the Mortgaged Property or arty part thereof.
Section 1.06. All rights, title and interest of the Mortgagor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, the Mortgaged Property, hereafter
acquired by, or released to, the Mortgagor or constructed, assembled or placed
by the Mortgagor on the Premises, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, conveyance, assignment or other act by the
Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by the Mortgagor and
specifically described in the granting clause hereof, but at any and all times
the Mortgagor will execute and deliver to the Mortgagee any and all such further
assurances, mortgages, conveyances or assignments thereof as the Mortgagee may
reasonably require for the purpose of expressly and specifically subjecting the
same to the lien of this Mortgage.
Section 1.07. (a) Except as to real estate taxes which must be paid before
the date on which any interest or penalty becomes due on such tax, the
Mortgagor, from time to time when the same shall become due and payable, but
without the benefit of any grace period therefor whether or not a penalty or
interest charge would be imposed in such grace period, will pay and discharge
all taxes of every kind and nature (including real and personal property taxes
and income, franchise, withholding, profits and gross receipts taxes), all
general and special assessments, levies, permits, inspection and license fees,
all water and sewer rents and charges, and all other public charges whether of a
like or different nature, imposed upon or assessed against it or the Mortgaged
Property or any part thereof or upon the revenues, rents, issues, income and
profits of the Mortgaged Property or arising in respect of the occupancy, use or
possession thereof. The Mortgagor will deliver to the Mortgagee receipts
evidencing the payment of all such taxes, assessments, levies, fees, rents and
other public charges imposed upon or assessed against it or the Mortgaged
Property or the revenues, rents, issues, income or profits
-7-
<PAGE>
thereof within thirty (30) days from the date due. Mortgagor will in addition
reimburse Mortgagee for the expense incurred in connection with a tax service
contract to be entered between Mortgagee and the tax service company as pertains
to this property. Such fee shall be paid at closing. The Mortgagee may, at its
option, to be exercised, by thirty (30) days written notice to the Mortgagor at
any time after an Event of Default, require the deposit by the Mortgagor, at the
time of each payment of an installment of interest or principal under the Note,
of an additional amount sufficient to discharge the obligations under this
subsection (a). The determination of the amount so payable and of the fractional
part thereof to be deposited with the Mortgagee, so that the aggregate of such
deposit shall be sufficient for this purpose, shall be made by the Mortgagee in
its sole discretion. Such amounts shall be held by the Mortgagee without
interest and applied to the payment of the obligations in respect to which such
amounts were deposited or, at the option of the Mortgagee, to the payment of
said obligations in such order or priority as the Mortgagee shall determine, on
or before the respective dates on which the same or any of them would become
delinquent. If one month prior to the due date of any of the aforementioned
obligations the amounts then on deposit therefor shall be insufficient for the
payment of such obligation in full, the Mortgagor within ten (10) days after
demand shall deposit the amount of the deficiency with the Mortgagee. The
Mortgagee shall not be required to segregate the amounts deposited with it under
this Section 1.07, but may commingle same with any other funds held by it.
Nothing herein contained shall be deemed to affect any right or remedy of the
Mortgagee under any provisions of this Mortgage or of any statute or rule of law
to pay any such amount and to add the amount so paid together with interest at
the Note Rate to the indebtedness hereby secured.
(b) The Mortgagor will pay, from time to time when the same shall become
due, all lawful claims and demands of mechanics, materialmen, laborers, and
others which, if unpaid, might result in, or permit the creation of, a lien on
the Mortgaged Property or any part thereof, or on the revenues, rents, issues,
income and profits arising therefrom and in general will do or cause to be done
everything necessary so that the lien hereof shall be fully preserved, at the
cost of the Mortgagor, without expense to the Mortgagee.
(c) Nothing in this Section 1.07 shall require the payment or discharge of
any obligation imposed upon the Mortgagor by this Section so long as the
Mortgagor shall in good faith and at its own expense contest the same or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection thereof or other realization thereon and the sale or forfeiture
of the Premises or any part thereof to satisfy the same; provided that during
such contest the Mortgagor shall, at the option of the Mortgagee, provide
security reasonably satisfactory to the Mortgagee, assuring the discharge of the
Mortgagor's obligation hereunder and of any additional charge, penalty or
expense arising from or incurred as a result of such contest; and provided,
further, that if at any time payment of any obligation imposed upon the
Mortgagor by subsection (a) of this Section shall become necessary to prevent
the delivery of a tax deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of nonpayment, then the Mortgagor shall
pay the same in sufficient time to prevent the delivery of such tax deed or
other similar instrument.
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Section 1.08. The Mortgagor will pay all taxes except income, franchise,
inheritance, estate and gift taxes, imposed on the Mortgagee by reason of its
ownership of the Note or this Mortgage.
Section 1.09. (a) The Mortgagor will maintain public liability insurance in
amounts equal to at least $2,000,000.00 with respect to the Mortgaged Property
and all risk property insurance. Mongagor shall also carry, by way of
endorsement rental loss of income and business interruption (12 month minimum)
insurance in a sum equal to 100% of its annual rent roll, and will keep the
Improvements and Chattels insured against loss by fire, casualty and such other
hazards as may be required by similar lenders on similar properties for the
benefit of the Mortgagee. Such insurance shall be written in forms, amounts, and
by companies licensed in the state where the property is located which companies
must have at least a Best Rating of A-VII and which are otherwise satisfactory
to the Mortgagee. In no event, however, shall property, allrisk or physical
damage insurance be less than the full replacement cost of the property insured.
Mortgagee and its successors and assigns, as their interests may appear, shall
be endorsed on such policy as first mortgagee and as to liability insurance
shall be named as an additional insured. The policies shall by their terms be
noncancellable and not subject to change without at least thirty (30) days prior
written notice to the Mortgagee and losses thereunder shall be payable to the
Mortgagee pursuant to the standard mortgagee endorsement. The policy or policies
of such insurance or certificates of same, shall be delivered to the Mortgagee
seven (7) days prior to closing. The Mortgagor shall give the Mortgagee prompt
notice of any loss covered by such insurance and the Mortgagee shall have the
right to join the Mortgagor in adjusting any loss in excess of $50,000.00
notwithstanding the provision of Real Property Law section 254(4). Renewals of
each required policy of insurance shall be delivered to Mortgagee at least ten
(10) days prior to expiration.
(b) The Mortgagor shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 1.09 unless the Mortgagee has approved the insurance company such
approval not to be unreasonably withheld, and the form and content of the
insurance policy, including, without limitation, the naming thereon of the
Mortgagee as a named insured with loss payable to the Mortgagee under a standard
mortgage endorsement of the character above described.
(c) Any and all insurance proceeds hereunder and condemnation proceeds
(under Section 1.13) will be paid to Mortgagee and Mortgagee may, within its
sole discretion, apply the proceeds toward repayment of the Note or toward the
repair of the Premises. Provided, however, if: (i) Mortgagor is not then, in
default of any term or provision contained in the Documents; (ii) no more than
25% of the net rentable square footage of the Premises has been damaged; and
(iii) the insurance proceeds are less than $712,500; then Mortgagee shall pay
such proceeds to Mortgagor, from time to time, for the sole purpose of repairing
or replacing the damaged portion of the Premises. Mortgagor shall be required to
provide Mortgagee with good and sufficient documentation and information
necessary and required by Mortgagee to verify and confirm the exact nature and
extent of the damage or destruction to the Premises and the amount of funds
properly expended to repair or replace same. Any proceeds (insurance and
condemnation) not
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paid to repair or replace any such damaged or destroyed portion of the Premises
shall be applied to the last maturing installments of principal due and owing
under the Note without prepayment premium (but such application shall not reduce
the Guarantor's guaranteed portion of the Loan) as set forth under the Limited
Guaranty of Payment of even date herewith.
(d) The foregoing insurance may be written on a blanket policy.
Section 1.10. If the Mortgagor or any party under any of the Documents
shall fail to perform any of the covenants contained in this Mortgage, or any
covenant contained in the Note, the assignment of leases, if any, or the other
Documents beyond applicable notice and grace periods, the Mortgagee may make
advances and/or disbursements to perform the same, and all sums so advanced
and/or disbursed shall be a lien upon the Mortgaged Property and shall be
secured hereby. The Mortgagor will repay on demand all sums so advanced and/or
disbursed with interest at the Default Rate. The provisions of this Section 1.10
shall not prevent any default in the observance of any covenant contained in
this Mortgage, or contained in the Note, the assignment of leases, if any, or
the other Documents from constituting a default or an Event of Default.
Section 1.11. (a) The Mortgagor will keep adequate records and books of
account and will permit the Mortgagee, by its agents, accountants and attorneys,
to visit and inspect the Premises and examine its records and books of account
and to discuss its affairs, finances and accounts with the Mortgagor, at such
reasonable times as may be requested by the Mortgagee.
(b) The Mortgagor will at its own cost and expense deliver to the Mortgagee
with reasonable promptness, but in no event more than ninety (90) days after the
end of each fiscal year of the term hereof, financial statements, a balance
sheet and statement of profit and loss for Mortgagor, American Tissue
Corporation and each Guarantor, setting forth in each case, in comparative form,
figures for the preceding year prepared by certified public accountants
reasonably satisfactory to Mortgagee. Such statements shall be in such form as
acceptable to Mortgagee and shall contain such information as is required under
generally accepted accounting principles consistently applied. Throughout the
term of this Mortgage, the Mortgagor with reasonable promptness will deliver to
the Mortgagee such other financial information with respect to the Mortgagor,
American Tissue Corporation and each Guarantor as the Mortgagee may reasonably
request from time to time. All financial statements of the Mortgagor and
American Tissue Corporation shall be delivered in duplicate, and shall be
accompanied by the certificate of the Mortgagor dated within five (5) days of
the delivery of such statements to the Mortgagee, stating that to the best of
its knowledge it knows of no Event of Default, nor of any default which after
notice or lapse of time or both would constitute an Event of Default, which has
occurred and is continuing, or if any such default or Event of Default has
occurred or is continuing, specifying the nature and the period of existence
thereof, and what action the Mortgagor has taken or proposes to take with
respect thereto, and, except as otherwise specified, stating that the Mortgagor
has fulfilled all its obligations under this Mortgage and the Documents which
are required to be fulfilled on or prior to the date of such certificate.
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(c) The Mortgagor, within ten (10) days upon request by the Mortgagee, will
furnish a written statement duly acknowledged of the amount due whether for
principal or interest on this Mortgage and whether to the best of its knowledge
any offsets or defenses exist against the Mortgage Amount and, if any are
alleged to exist, the nature of each such offset or defense shall be set forth
in full detail.
(d) The Mortgagor, within ninety (90) days of the end of each fiscal year,
will furnish a written statement duly acknowledged setting forth the monthly
base rent and indicating thereon the date of and amount of each item of rent
received and statements of operating income and expenses for the Mortgaged
Property.
Section 1.12. (a) The Mortgagor will not threaten, commit, permit or suffer
any waste to occur on or to the Mortgaged Property, or any part thereof, or
alter the Mortgaged Property or any part thereof in any manner or make any
change in its use which will in any way materially increase any risk of fire or
other hazards arising out of construction or operation of the Mortgaged
Property. The Mortgagor will, at all times, maintain the Mortgaged Property in
good operating order and condition and will promptly make, from time to time,
all repairs, renewals, replacements, additions and improvements in connection
therewith which are needful or desirable to such end. The Improvements shall not
be removed, demolished or substantially altered, nor shall any Chattels be
removed without the prior written consent of the Mortgagee, except where
appropriate replacements free of superior title, liens and claims are
immediately made of value at least equal to the value of the Chattels removed.
(b) The Mortgagor will keep and maintain or cause to be kept and maintained
the Mortgaged Property and the sidewalks and curbs abutting the same in good
order and condition and in a rentable and tenantable state of repair and will
make or cause to be made, as and when the same shall become necessary, all
structural and nonstructural, exterior and interior, ordinary and extraordinary,
foreseen and unforeseen repairs, renewals and replacements necessary to that
end. In the event that the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or any other casualty, or in the event of a taking of
a portion of the Mortgaged Property as a result of any exercise of the power of
eminent domain, the Mortgagor shall promptly restore, replace, rebuild, or alter
the same as nearly as possible to the condition they were in immediately prior
to such fire, other casualty or taking, and shall take such other additional
actions and measures as shall be necessary to avoid any default or forfeiture
under any lease or any other applicable agreement. Although damage to or
destruction of the Mortgaged Property, or any portion thereof, shall not of
itself constitute a default hereunder except as otherwise provided herein, the
failure of the Mortgagor to restore, replace, rebuild or alter the same, as
hereinabove provided, shall constitute a default hereunder regardless of the
availability of insurance proceeds or condemnation awards for such purpose.
(c) The Mortgagor will promptly comply, or cause compliance with all
present and future laws, ordinances, rules, regulations and other requirements
of all governmental authorities whatsoever having jurisdiction of or with
respect to the Mortgaged Property or any portion thereof or the use and
occupation thereof.
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(d) The Mortgagor will not, without the prior written consent of the
Mortgagee, initiate, join in, or consent to any change in any private
restrictive covenant, zoning ordinance, or other public or private restrictions
limiting or defining the uses which may be made of the Premises or any part
thereof.
(e) All covenants hereof shall be construed as affording to the Mortgagee
rights additional to and not exclusive of the rights conferred under the
provisions of Sections 254, 271 and 272 of the Real Property Law of the State of
New York or any other applicable law of any other state. If there is a conflict
between any provision of this Mortgage and the provisions of Section 254 of the
Real Property Law of the State of New York or such law of such other state, the
Mortgagor agrees that the applicable provision of this Mortgage shall control.
Section 1.13. The Mortgagor, immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Premises or any
portion thereof, will notify the Mortgagee of the pendency of such proceedings.
The Mortgagee may participate in any such proceedings and the Mortgagor from
time to time will deliver to the Mortgagee all instruments requested by it to
permit such participation. In the event of such condemnation proceedings, the
award or compensation payable is hereby assigned to and shall be paid to the
Mortgagee up to the Mortgage Amount together with accrued interest, late charges
and disbursements made by Mortgagor and secured by this Mortgage. The Mortgagee
shall be under no obligation to question the amount of any such award or
compensation and may accept the same in the amount in which the same shall be
paid. In any such condemnation proceedings the Mortgagee may be represented by
counsel selected by the Mortgagee but the Mortgagor may appear by its counsel to
contest the amount of the condemnation award. The proceeds of any award or
compensation so received shall, be applied either, as provided for under Section
1.09 (c) to prepayment of the Note without prepayment premium or be paid over to
the Mortgagor for restoration of the Improvements. The Mortgagee shall not be
limited to the interest paid on the proceeds of any award or compensation, but
shall be entitled to the payment of interest by the Mortgagor at the rates
provided for herein or in the Note.
Section 1.14. (a) The Mortgagor will not, without the prior written consent
and approval of the Mortgagee in each instance, (i) execute an assignment of the
rents from the Mortgaged Property or any part thereof, (ii) in any other manner
impair the value of the Mortgaged Property or the security of the Mortgage.
Reference is made to Section 291-(f) of the Real Property Law, with respect to
the following: Mortgagor will not accept prepayments of any installments of
rents to become due under such leases, except prepayments in the nature of
security for the performance of the lessees thereunder, without obtaining in
each instance the prior written consent of Mortgagee. Mortgagor will (i) notify
Mortgagee of the terms of any new lease or modification within thirty (30) days
of the execution of any such lease or modification; and (ii) will promptly
provide Mortgagee with a copy of the same.
(b) The Mortgagor will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or any part thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and
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performed and will do all things reasonably necessary to compel performance by
the lessee under each lease of all obligations, covenants, and agreements by
such lessee to be performed thereunder. If any of such leases provide for the
giving by the lessee of certificates with respect to the status of such leases,
the Mortgagor shall exercise its right to request such certificates within five
(5) days of any demand therefor by the Mortgagee. The Mortgagor shall promptly
notify the Mortgagee of (i) the commencement of any action or proceeding by any
lessee, the purpose of which shall be the cancellation of any lease or
diminution or offset against the rent payable under any such lease, or (ii) the
interposition by any lessee of any defense in any action or proceeding brought
by the Mortgagor against such lessee, or (iii) a written notice received by the
Mortgagor from any lessee claiming constructive eviction, and will cause a copy
of any process, pleading or notice received by the Mortgagor in reference to any
such action, defense or claim to be promptly delivered to the Mortgagee.
(c) The Mortgagor shall furnish to the Mortgagee, within ten (10) days of
the expiration of the preceding fiscal year (or more often upon Mortgagee's
request) a written statement containing a schedule of all leases of all or any
part of the Premises, the names of the respective lessees, the terms of their
respective leases, the space occupied and the rentals payable thereunder, and,
if also requested, true copies of all such leases.
(d) Mortgagor shall not and shall have no right to permit the holder of any
subordinate mortgage or other subordinate lien, whether or not consented to by
Mortgagee, to terminate any lease of all or a portion of the Premises whether or
not such lease is subordinate (whether by law or the terms of such lease or a
separate agreement) to the lien of this Mortgage without first obtaining the
prior written consent of Mortgagee. The holder of any subordinate mortgage or
other subordinate lien shall have no such right, whether by foreclosure of its
mortgage or lien or otherwise, to terminate any such lease, whether or not
permitted to do so by Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective and void.
Section 1.15. The Mortgagor, which has simultaneously herewith executed an
assignment of leases, rents and profits which is incorporated herein by
reference, agrees to comply with the provisions thereof.
Section 1.16. To the extent not so provided by applicable law each lease of
the Premises, or any part thereof shall provide that, in the event of the
enforcement by the Mortgagee of the remedies provided for by law or by this
Mortgage, the lessee thereunder will, upon request of any person succeeding to
the interest of the Mortgagor as a result of such enforcement, automatically
become the lessee of said successor in interest, without change in the terms or
other provisions of such lease, provided, however, that said successor in
interest shall not be bound by (i) any payment of rent or additional rent for
more than one month in advance, except prepayments in the nature of security for
the performance by said lessee of its obligations under said lease, (ii) any
amendment or modification of the lease made without the consent of the Mortgagee
or such successor in interest, or (iii) any work required to be done by the
Mortgagor pursuant to the terms of said lease. Each such lease shall also
provide that, upon request by said successor in interest, such lessee shall
execute and deliver an instrument or instruments
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confirming such attornment. Notwithstanding the foregoing, the provisions of
this Section shall not apply to any lease of the Premises or part thereof which
is in effect on the date hereof.
Section 1.17. The Mortgagor agrees that if any action or proceeding be
commenced, excepting an action to foreclose this Mortgage or to collect the
indebtedness hereby secured, to which action or proceeding the Mortgagee is a
party by reason of the execution of this Mortgage or the Note which it secures,
or in which it becomes necessary to defend or uphold the lien of this Mortgage,
all sums paid by the Mortgagee for the expense of any litigation to prosecute or
defend the transaction and the rights and lien created hereby (including,
without limitation, reasonable attorneys' fees) shall be paid by the Mortgagor
together with interest thereon from the date of payment by the Mortgagee at the
Default Rate. All such sums paid and the interest thereon shall be a lien upon
the Mortgaged Property, and shall be secured hereby.
Section 1.18. The Mortgagor agrees that in the event of the passage after
the date of this Mortgage or any law deducting any lien from the value of land
for the purpose of taxation, or changing in any way the laws now in force for
the taxation of mortgages or debts secured by a mortgage, or the manner of the
collection of any such taxes, so as to impose upon Mortgagee any tax that
previously would have been payable by Mortgagor, the whole of the principal sum
secured by this Mortgage, together with interest due thereon, shall at the
option of the Mortgagee, without notice to any party, become immediately due and
payable.
Section 1.19. The Mortgaged Property will be provided with adequate water,
sewer and other utility facilities at all times, in compliace with all
applicable laws and regulations.
Section 1.20. The Mortgagor shall not without first obtaining the written
consent of Mortgagee:
(a) except as permitted herein, sell, assign, lease, convey, mortgage,
pledge, hypothecate, make the subjcet of any security interest, exchange,
subdivide or permit to be divided into multiple condominium or cooperative
units, or in any other manner whatsoever, transfer or encumber all or part of,
or any interest in, or any of the rents derived from, or control of, the
Mortgage Property, or suffer or permit any of the foregoing to occur, whether by
operation of law or otherwise;
(b) except as permitted herein, effectuate or permit a reduction in the
ownership interests in Mortgagor held by any principal(s) of Mortgagor;
(c) effectuate or permit a closing of any public or private offering of
more than 49% of the ownership interests in Mortgagor or in any entity directly
or indirectly owning any interest in Mortgagor or the Mortgaged Property;
(d) effectuate or permit a transfer of the controlling interest in
Mortgagor.
"Transfer of the controlling interest in the Mortgagor" includes, without
limitation, the following:
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(i) the sale, assignment, issuance, redemption, diminution or pledge,
whether through a single transaction or a series of transactions, of more
than 49% of the direct or indirect ownership interest of or change in the
principals in Mortgagor or of any entity that directly or indirectly owns
or controls Mortgagor;
(ii) the modification of any organizational documents of Mortgagor or
of any entity that directly or indirectly owns or controls Mortgagor, if
the effect of such modification is to transfer more than 49% of the
ownership or control of such entity or to limit the liability of Mortgagor
of any entity that directly or indirectly owns or controls Mortgagor;
(iii) the dissolution or termination, whether by operation of law or
otherwise, of Mortgagor or of any entity that directly or indirectly owns
or controls Mortgagor;
(iv) any other transaction or series of transactions by which any
person(s) other than the principal(s) of Mortgagor obtain more than 49% of
the ownership or control of Mortgagor or the Mortgaged Property; or
(e) enter into any transaction with any director, officer, employee or
principal of Mortgagor;
(f) agree in writing (whether on a conditional or unconditional basis) to
do any of the foregoing.
Nothing in this Section shall, however, prohibit the entering into of
leases that comply with this Mortgage, the Assignment of Leases, Rents and
Profits and any other applicable Documents, or in the event Mortgagor is a
cooperative apartment corporation, the transfer and mortgaging from time to time
of leases(s) to individual apartment units and the appurtenant shares. This
paragraph shall apply to each and every such transaction regardless of whether
Mortgagee has consented to or waived by action or inaction its rights hereunder
with respect to any such prior transaction.
Further, nothing in this Section shall, however, prohibit transfers to or
among members of the immediate family (spouses, children and grandchildren) of a
principal of Mortgagor or trust created for the benefit of such family members,
made in connection with bona fide estate planning of such principal or a
transfer of the Premises or interest in Mortgagor to an entity at least 51%
owned by the existing principals of Mortgagor.
Section 1.21. INTENTIONALLY DELETED.
Section 1.22. The Mortgagor will promptly perform and observe, or cause to
be performed or observed, all of the terms, covenants and conditions of all
instruments of record affecting the Mortgaged Property, noncompliance with which
shall affect the security of this Mortgage, or shall impose any duty or
obligation upon the Mortgagor or any lessee or other
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occupant of the Mortgaged Property or any part thereof, and the Mortgagor shall
do or cause to be done all things necessary to preserve intact and unimpaired
any and all easements, appurtenances and other interests and rights in favor of
or constituting any portion of the Mortgaged Property.
Section 1.23. The Mortgagor will, in compliance with Section 13 of the Lien
Law, receive the advances secured hereby and will hold the right to receive such
advances as a trust fund to be applied first for the purpose of paying the cost
of the Improvements and will apply the same first to the payment of the cost of
the Improvements before using any part of the total of the same for any other
purpose.
Section 1.24. The Mortgagee and its authorized representatives shall have
the right at all reasonable times during usual business hours to enter upon and
inspect all portions of the Mortgaged Property.
Section 1.25. (i) Mortgagor represents and warrants that except as
disclosed in the Phase I Environmental Audit copies of which have been reviewed
by Mortgagee and upon the best of Mortgagor's knowledge after due inquiry and
investigation: (1) there has been no release, discharge or deposit of a
Hazardous Substance as defined (a) by either Section 9601(14) of Title 42 of the
United States Code, (including, but not limited to urea formaldehyde foam
insulation, asbestos in any form, di-electric fluids containing more than 50
ppm of polychlorinated biphynls) or (b) by any environmentally related statute
enacted by the State of New York; or any other material hazardous to the health
and safety of users of Premises or those properties adjacent thereto
(collectively called "Hazardous Substances"); (2) Premises are not subject to
any order prohibiting such release, discharge or deposit of or directing cleanup
of or, payment of cleanup costs of Hazardous Substance issued by any
governmental agency; (3) Premises are in full compliance with all laws and
governmental regulations governing Hazardous Substances.
(ii) The Mortgagor covenants that the Mortgaged Property will be kept free
of Hazardous Substances during the term of this Mortgage and that if a release
occurs or there is reasonable cause therefor Mortgagor will periodically conduct
such tests and investigations for the presence of Hazardous Substances using
such engineers, or other experts, as Mortgagee may reasonably request, except
that Mortgagor shall be permitted to maintain for general housekeeping purposes
only certain brand name products containing Hazardous Substances, provided that
such substances are used and stored in accordance with Hazardous Substance laws.
(iii) Mortgagor has no knowledge of, and has received no notice of, any
litigation, administrative enforcement or regulatory actions or proceedings, or
any inquiry by any governmental authority, against Mortgagor or any other
person, nor has any settlement been reached by or with any party or parties,
public or private, alleging the presence or threatened presence of any Hazardous
Substances or the violation of any Hazardous Substances laws on, from, under or
in any portion of the Premises.
(iv) Mortgagor has obtained all certificates, permits, licenses, approvals
and
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authorizations necessary for the lawful construction, occupancy, use and
operation of the Premises and Improvements for the purposes for which they are
currently being used, including, but not limited to, any certificates, permits,
licenses, approvals and authorizations required by any federal, state, county,
regional or local authority whose jurisdiction includes, in whole or in part,
environmental protection or matters pertaining to health, safety and welfare.
Mortgagor has no knowledge of, and has received no notice of, any litigation or
other regulatory, administrative, judicial or legal proceedings which (i)
challenge the issuance of any of the certificates, permits, licenses, approvals
and authorizations obtained for the Premises and Improvements, or (ii) allege
non-compliance by Mortgagor or the Premises and Improvements with any law,
regulation, rule or ordinance which has a material effect on the operation,
occupancy, leasing or use of the Premises and Improvements for the purposes for
which they are currently being used.
(v) To the best of Mortgagor's knowledge each tenant of the Premises has
obtained all certificates, permits, licenses, approvals and authorizations
necessary for the lawful occupancy, use and operation of its demised premises
for the purposes for which it is currently being used, including, but not
limited to, any certificates, permits, licenses, approvals and authorizations
required by any federal, state, county, regional or local authority whose
jurisdiction includes, in whole or in part, environmental protection or matters
pertaining to health, safety and welfare. Mortgagor has no knowledge of, and has
received no notice of, any litigation or other regulatory, administrative,
judicial or legal proceedings which challenge the issuance of any of the
certificates, permits, licenses, approvals and authorizations obtained by a
tenant for its demised premises with any law, regulation, rule or ordinance
which has a material effect on the operation, occupancy, leasing or use of the
demised premises for the purposes for which it is currently being used.
(vi) No waste or waste waters have been, or are being, treated, stored or
disposed of on the Premises, and no threatened damage to the environment
(including, but not limited to, ambient, air, surface water, groundwater, land
surface and subsurface) exists at the Premises.
(vii) No emission of air contaminants or pollutants has emanated or is
emanating from the Premises.
(viii) All surface water drains servicing the Premises have been
constructed in accordance with all applicable laws and ordinances and have been
properly connected to public or private storm or sanitary sewer lines which
either dispose of such water on site or carry such water off the Premises, and
such connection has been approved by all necessary parties and governmental
authorities.
(ix) All garbage, trash and other solid waste from or relating to the
Premises are and will be collected on a regular basis by the local municipality
or an independent commercial waste disposal company.
(x) Mortgagor shall keep and maintain the Premises in compliance with any
and
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all laws relating to Hazardous Substances and all other federal, state and local
laws, ordinances and regulations relating to industrial hygiene or to the
environmental conditions on, under or about the Premises. Mortgagor shall not
permit Hazardous Substances use at, to, from, in, under or about the Premises
other than as permitted under paragraph (ii) of this Section. Mortgagor shall
institute and implement diligently a program designed to cause all of its
tenants and all of Mortgagor's and its tenants' employees, agents, contractors
and subcontractors and any other person lawfully occupying or present on the
Premises to comply with all laws relating to Hazardous Substances. Mortgagor
shall enforce all rights and remedies available to it under the leases of the
Premises, under applicable laws relating to Hazardous Substances and under all
other applicable laws, ordinances, rules, regulations and others (including, but
not limited to, under common law principles for liability resulting from
nuisance, negligence, strict liability in tort and waste) which provide a cause
of action or other basis for recovery of damages, for indemnification, for the
disclosure of information, or for injunctive relief, in the event of Hazardous
Substances use or other activities which do or may result in any loss of value
of, lost use of or other loss, damage or waste to the Premises.
(xi) Mortgagor shall immediately notify Mortgagee in writing of (i) any and
all enforcement, cleanup, removal or other governmental or regulatory actions,
or litigation (whether public or private) relating to the Premises instituted,
contemplated or threatened pursuant to any Hazardous Substances laws or common
law principles, and of any notices received by Mortgagor with respect to the
foregoing; (ii) Mortgagor's discovery of any claim made or threatened by any
third party or governmental agency against Mortgagor or the Premises relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
any Hazardous Substances (the matters set forth in (i) and (ii) of this
subparagraph are hereinafter collectively referred to as "Hazardous Materials
Claims"). Mortgagor shall immediately deliver to Mortgagee copies of all notices
and legal documents relating to Hazardous Materials Claims. Mortgagee shall have
the right to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys' fees in connection therewith paid
by Mortgagor.
(xii) Subject to Mortgagor's right to contest in good faith and diligently
prosecute such contest, Mortgagor shall promptly comply, at Mortgagor's sole
cost and expense, with all requirements of any federal, state, county, local or
regional authority or court decree or order, as to the removal, treatment,
cleanup, disposal or regulation of Hazardous Substances and shall provide
Mortgagee with satisfactory evidence of such compliance. Mortgagor shall provide
Mortgagee with a bond, letter of credit or similar financial assurance
evidencing to Mortgagee's reasonable satisfaction that the necessary funds are
available to pay the cost of compliance with such requirements of any federal,
State, county, local or regional authority or court decree or order.
(xiii) Mortgagor shall not cause or suffer any liens to be recorded against
the Premises as a consequence of, or in any way related to, the presence or
disposal of Hazardous Substances in or about the Premises, including but not
limited to any federal, state or local so-called "Superfund" lien relating to
such matters.
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(xiv) Mortgagor at all times shall defend, indemnify and hold Mortgagee
harmless from and against any and all liabilities (including strict liability)
(including by reason of Mortgagee's own ordinary, but not gross negligence or
willful misconduct), suits, causes of action, damages to property or
individuals, claims, demands, penalties, fines, damages (including but not
limited to interest, penalties, fines and monetary sanctions), losses, costs and
expenses (including but not limited to reasonable attorneys' fees and expenses),
and remediation and cleanup costs (collectively "Liabilities") that may now or
in the future be incurred or suffered by Mortgagee (including by reason of
Mortgagee's own ordinary, but not gross negligence or willful misconduct)
because of, resulting from, in connection with or arising in any manner
whatsoever out of the breach of any warranty or covenant, or the inaccuracy of
any representation of Mortgagor contained or referred to in this Section or that
may be asserted as a direct or indirect result of the presence of any Hazardous
Substances on, in or under the Premises, or any Hazardous Substances use on, at
or from the Premises. Such Liabilities shall also include, without limitation:
(i) injury to or death of any person; (ii) damage to or loss of the use of any
property; (iii) the cost of any demolition and rebuilding of any improvements on
the Premises, repair or remediation and the preparation for and completion of
any activity required by any federal, state, local, county or regional authority
or court order or decree; (iv) any lawsuit brought or threatened, good faith
settlement reached, or governmental order relating to the presence, disposal,
release or threatened release of any Hazardous Substance and (v) the imposition
and removal of any lien on the Premises arising from the activity of Mortgagor
or Mortgagor's predecessors in interest on the Premises or from the existence of
Hazardous Substances upon the Premises or Hazardous Substances use at, on or
upon the Premises, or the violation of any Hazardous Substances law. Any amounts
expended by Mortgagee in connection with any Liabilities, together with interest
thereon at the Default Rate shall be secured by this Mortgage and shall have the
same priority of collection as the principal indebtedness secured hereby until
Mortgagor reimburses Mortgagee pursuant to this indemnity.
(xv) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, this covenant to defend, indemnify and hold
Mortgagee harmless shall survive repayment of all indebtedness secured by this
Mortgage, transfer of the Premises by Mortgagor (including but not limited to
foreclosure sale of the Premises or delivery of a deed in lieu of foreclosure)
and assignment, assumption, modification, amendment, cancellation, release,
termination or discharge of the Note, and shall not be subject to any
anti-deficiency laws. The Mortgagee, for itself, its employees, agents, officers
and directors, hereby expressly agrees and acknowledges that the
indemnification, defend, protect and hold harmless provisions contained in this
Mortgage are limited to those conditions exiting on or prior to the earlier of
(i) acquisition of title to the Premises by Mortgagee, its successors or assigns
(ii) Mortgagee, its successors or successors or assigns becoming a mortgagee in
possession or (iii) the appointment of a receiver, and in no event shall any
indemnification, defend, protect or hold harmless provision extend to or include
the willful misconduct or gross negligence of Mortgagee, its successors,
assigns, employees, officers and directors. Anything in this Mortgage or the
Documents to the contrary notwithstanding, Mortgagor, except for the obligation
to defend itself in the event Mortgagor is named in any action, shall have no
liability to indemnify Mortgagee for any environmental conditions or events on
the Premises occurring or arising: (i) after Mortgagor's payment of the
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loan in full and the discharge of record of the Documents; or, (ii) after the
date on which Mortgagor, with the consent of or as a result of the actions of
Mortgagee, no longer has fee title to the Premises; or, (iii) during any period
in which Mortgagor, with the consent of or a result of the actions Mortgagee,
does not have possession and control of the Premises.
(xvi) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, any information provided to Mortgagee hereunder is
to allow Mortgagee to protect Mortgagee's security interest in the Premises and
is not intended to create any obligations upon Mortgagee with respect to the
operation or ownership of the Premises. Any rights, authority or approvals
granted to Mortgagee by Mortgagor or actions taken by Mortgagee under this
section are solely to protect Mortgagee's security interest in the Premises and
are not intended to create any obligations upon Mortgagee with respect to the
operation or ownership of the Premises.
(xvii) Mortgagor hereby grants to Mortgagee a permanent license for
ingress, egress and inspection for the purpose of entering upon the Premises for
making such inspections and tests as Mortgagee may deem necessary to determine
whether there is compliance with all environmental laws and regulations,
including those pertaining to wetlands.
(xviii) Mortgagee may retain for cause, at Mortgagor's sole cost and
expense, an environmental engineer or consultant (the "Engineer") to conduct
such investigations and tests as provided under subsection (xvii) above. The
engineer shall deliver the results of investigations and tests to Mortgagor and
to Mortgagee. Such results shall be kept confidential by both Mortgagor and
Mortgagee unless Mortgagee is legally compelled or required to disclose such
results or disclosure is reasonably required in order to pursue rights or
remedies provided herein or at law. Mortgagor shall promptly pay the cost of
such investigations and tests upon receipt of the Engineer's bill therefor. If
Mortgagor fails to pay said bills, Mortgagee may pay such bill, and until
reimbursed by Mortgagor, the amount of said payment shall be secured by this
Mortgage and shall accrue interest at the Default Rate until the date paid.
The Mortgagor unconditionally agrees that should the representations
and warranties made under this Section 1.25 be untrue, or should the Mortgagor
breach any provision of the Certificate and Indemnification regarding Hazardous
Substances between Mortgagor and Mortgagee of even date herewith or should
Mortgagor breach the obligation not to release, discharge or deposit Hazardous
Substances on the Premises, Mortgagor will unconditionally indemnify and hold
Mortgagee harmless from and on account of any claim, judgment, cleanup order,
or related expenses (including but not limited to reasonable attorneys' fees
and disbursements incurred by Mortgagee in defending any action, judgment or
cleanup order) in connection with any release, discharge or deposit of any
Hazardous Substances.
Section 1.26. The Mortgagor affirms that all information, reports,
papers and data given to Mortgagee with respect to any of the Premises or
Mortgagor are accurate in all material respects, and there has been no material
adverse change in any condition or fact stated therein.
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ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. If one or more of the following Events of Default shall
happen, that is to say:
(a) if (i) a default shall be made in the payment of any interest on the
Note, when and as the same shall become due and payable, and such default shall
have continued for a period of fifteen (15) days, or (ii) default shall be made
in any payment of the principal on the Note, when and as the same shall become
due and payable, and such default shall have continued for a period of fifteen
(15) days (whether at maturity or by acceleration or otherwise), in each case,
as in the Note and this Mortgage provided or, (iii) default shall be made in the
payment of any tax required by Section 1.07 to be paid and said default shall
have continued for a period of thirty (30) days, or (iv) default shall be made
in the due observance or performance of any covenant or agreement on the part of
the Mortgagor contained in Sections 1.01, 1.14, 1.21, 1.22, 1.25 or 3.11 hereof
(for the purposes of this clause, and for subparagraph (b) below, if any
representation made in Sections 1.01 and 1.25 shall be incorrect, it shall be
deemed to be a default) and such default shall have continued for a period of
more than thirty (30) days after written notice thereof shall have been given to
the Mortgagor by the Mortgagee; or
(b) if default shall be made in the due observance or performance of any
other covenant or agreement on the part of the Mortgagor contained herein and
such default shall have continued for a period of thirty (30) days after written
notice thereof shall have been given to the Mortgagor by the Mortgagee; or
(c) if default shall be made in the due observance or performance of the
covenants or agreements on the part of the Mortgagor contained in Sections 1.09
or 1.20 hereof, which shall be unremedied for a period of more than twenty (20)
days after written notice thereof shall have been given to the Mortgagor by the
Mortgagee; or
(d) if any other Event of Default shall occur under the Note or the
Documents not specifically referred to above, or if any such Documents shall not
contain "Events of Default" and default shall be made in the due observance,
performance or fulfillment of any other covenant or condition on the part of the
Mortgagor or borrower contained in any such Document, and such default shall
have continued for a period of thirty (30) days after written notice thereof
shall have been given to the Mortgagor by the Mortgagee or if such default is by
its nature not susceptible of curing within such thirty (30) day period if
Mortgagor does not commence curing the default within such period and does not
diligently pursue such curing to a successful conclusion; or
(e) if any proceedings are commenced for the condemnation of any part of
the Mortgaged Premises, which condemnation would have, in the opinion of the
Mortgagee, a
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material adverse effect on the value of the remaining security hereunder; or
(f) if any easement over, across or under or otherwise affecting the
Mortgaged Property or any portion thereof shall be granted without the
Mortgagee's prior written consent not to be unreasonably withheld; or
(g) if there occur any other event, which if unremedied, would require a
change in the survey delivered to Mortgagee at time of closing; or
(h) if the holder of or any lien or encumbrance on the Mortgaged Property,
or any part thereof, institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder, which foreclosure or other proceedings
are not discharged (without affecting the Mortgaged Property) or bonded within
thirty (30) days from the institution thereof (this subsection (h) shall not be
construed to imply that the Mortgagee consents to any junior lien or
encumbrance); or
(i) if there should occur any material adverse change in financial
conditions of Mortgagor, American Tissue Corporation or any Guarantor which
remains unremedied for a period of thirty (30) days which in Mortgagee's
judgment, reasonably exercised would adversely impact Mortgagor's ability to pay
the Note; or
(j) if Mortgagor or any Guarantor shall:
(i) default in respect of payment of interest ("basic or default") or
principal or default in payment of any other liabilities, obligations or
agreements (present or future, absolute or contingent, secured or
unsecured, matured or unmatured, several or joint, original or acquired) of
any of them to or with Mortgagee;
(ii) declare voluntary insolvency, as defined in the Bankruptcy Code,
as amended;
(iii) assign their assets including assignments for the benefit of
creditors;
(iv) appoint a committee of any creditors or liquidating agent;
(v) offer to or receive from any creditors a composition or extension
of any of their indebtedness;
(vi) grant a security interest or mortgage in any property pledged or
mortgaged pursuant to this Mortgage;
(vii) suspend, wholly or partially, or liquidate their usual business;
(viii) die (as to both guarantors) if an individual or dissolve, if a
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partnership, limited liability company or corporation;
(ix) fail to pay or discharge any mechanic's lien filed against
Premises within thirty (30) days of the date filed;
and such default shall have continued for a period of fifteen (15) days
ninety (90) days if due to the death of both Guarantors) after written notice
shall have been given to the Mortgagor by the Mortgagee; or
(1) if with respect to Mortgagor or any Guarantor there has been:
(i) commenced any involuntary proceeding, suit or action (at law, or
in equity, or under any of the provisions of any Bankruptcy Code or
amendments thereto, or any other insolvency act or law, state or federal,
now or hereafter existing) for adjudication as a bankrupt, reorganization,
composition, extension, arrangement, wage earners' plan, receivership,
liquidation, dissolution which is not dismissed within thirty (30) days
from the date initiated, or any similar proceeding, initiated by or against
it;
(ii) made an application by any of them for the appointment, or the
appointment in any jurisdiction, at law or in equity, of any receiver,
conservator, rehabilitator or similar officer or committee of, or of the
property of, any of them;
(iii) Made any tax assessment by the United States or any state not
discharged within thirty (30) days;
(iv) entered a judgment in excess of $500,000.00 against or issuance
of an order of attachment or an injunction against any of the property of
any of them not satisfied or discharged within thirty (30) days;
Then in any such event,
I. The Mortgagee may declare the entire principal of the Note then
outstanding (if not then due and payable), and all accrued and unpaid interest
thereon, to be due and payable immediately, and upon any such declaration the
principal of the Note and said accrued and unpaid interest shall become and be
immediately due and payable, anything in the Note or in this Mortgage to the
contrary notwithstanding;
II. The Mortgagee personally, or by its agents or attorneys, may enter into
and upon all or any part of the Premises and each and every part thereof, and
may exclude the Mortgagor, its agents and servants wholly therefrom; and having
and holding the same, may use, operate, manage and control the Premises or any
part thereof and conduct the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or receivers; and upon
every such entry, the Mortgagee, at the expense of the Mortgagor, from
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time to time, either by purchase, repairs or construction, may maintain and
restore the Mortgaged Property, whereof it shall become possessed as aforesaid,
may complete the construction of the Improvements and in the course of such
completion may make such changes in the contemplated Improvements as it may deem
desirable and may insure the same; and likewise, from time to time, at the
expense of the Mortgagor, the Mortgagee may make all necessary or proper
repairs, renewals and replacements and such useful alterations, additions,
betterments and improvements thereto and thereon as to it may seem advisable;
and in every such case the Mortgagee shall have the right to manage and operate
the Mortgaged Property and to carry on the business thereof and exercise all
rights and powers of the Mortgagor with respect thereto either in the name of
the Mortgagor or otherwise as it shall deem best; and the Mortgagee shall be
entitled to collect and receive all gross receipts, earnings, revenues, rents,
issues, profits and income of the Mortgaged Property and every part thereof, all
of which shall for all purposes constitute property of the Mortgagee; and after
deducting the expenses of conducting the business thereof and of all
maintenance, repairs, renewals, replacements, alterations, additions,
betterments and improvement and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property or any
part thereof, as well as just and reasonable compensation for the services of
the Mortgagee and for all attorneys, counsel, agents, clerks, servants and other
employees by it properly engaged and employed, the Mortgagee may apply the
monies arising as aforesaid in such manner and at such times as the Mortgagee
shall determine in its discretion to the payment of the indebtedness secured
hereby and the interest thereon, when and as the same shall become payable
and/or to the payment of any other sums required to be paid by the Mortgagor
under this Mortgage or the Documents; and
III. The Mortgagee, with or without entry, personally or by its agents or
attorneys, insofar as applicable, may:
(i) institute proceedings for the complete or partial foreclosure of this
Mortgage; or
(ii) take such steps to protect and enforce its rights whether by action,
suit or proceeding in equity or at law for the specific performance of any
covenant, condition or agreement in the Note, this Mortgage, or the other
Documents or in aid of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate legal or
equitable remedy or otherwise as the Mortgagee shall elect.
Section 2.02. (a) The Mortgagee may adjourn from time to time any sale by
it to be made under or by virtue of this Mortgage by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, the Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by the Mortgagee under or
by virtue of this Article II, the Mortgagee, or any officer of any court
empowered to do so, shall
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execute and deliver to the accepted purchaser or purchasers a good and
sufficient instrument, or good and sufficient instruments, conveying, assigning
and transferring all estate, right, title and interest in and to the property
and rights sold. The Mortgagor, if so requested by the Mortgagee, shall ratify
and confirm any such sale or sales by executing and delivering to the Mortgagee
or to such purchaser or purchasers all such instruments as may be advisable, in
the judgment of the Mortgagee, for the purpose, and as may be designated in such
request. Any such sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of the Mortgagor in and to the
properties, interests and rights so sold, and shall be a perpetual bar both at
law and in equity against the Mortgagor and against any and all persons claiming
or who may claim the same, or any part thereof from, through or under the
Mortgagor.
(c) In the event of any sale made under or by virtue of this Article II
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale), the
entire principal of, and interest on, the Note, if not previously due and
payable, and all other sums required to be paid by the Mortgagor pursuant to
this Mortgage, immediately thereupon shall, anything in the Note or in this
Mortgage to the contrary notwithstanding, become due and payable.
(d) The purchase money, proceeds or avails of any sale made under or by
virtue of this Article II, together with any other sums which then may be held
by the Mortgagee under this Mortgage, whether under the provisions of this
Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale, and of any
judicial proceedings wherein the same may be made, including reasonable
compensation to the Mortgagee, its agents and attorneys, and of all expenses,
liabilities and advances made or incurred by the Mortgagee under this Mortgage,
together with interest at the Default Rate on all advances made by the Mortgagee
and all taxes or assessments paid by Mortgagee except any taxes, assessments or
other charges subject to which the Mortgaged Property shall have been sold.
Second: To the payment of the whole amount then due, owing or unpaid upon
the Note for interest and any balance remaining to be applied to principal, with
interest on the unpaid principal calculated at the Default Rate from and after
the happening of any default described in clause (a)(i), (ii) or (iii) of
Section 2.01 from the due date of any such payment of principal until the same
is paid.
Third: To the payment of any other sums required to be paid by the
Mortgagor pursuant to any provision of this Mortgage, of the Note, or of the
other Documents, all with interest at the Default Rate, from the date such sums
were or are required to be paid under this Mortgage, the Note or the other
Documents.
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Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
(e) Upon any sale made under or by virtue of this Article II, by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, the
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness of the Mortgagor secured by this Mortgage the
net sales price after deducting therefrom the expenses of the sale and the costs
of the action and any other sums which the Mortgagee is authorized to deduct
under this Mortgage.
Section 2.03. (a) In case an Event of Default described in this Article II
shall have happened, then, upon written demand of the Mortgagee, the Mortgagor
will pay to the Mortgagee the whole amount which then shall have become due and
payable on the Note, for principal and interest or both, as the case may be, and
after the happening of said Event of Default will also pay to the Mortgagee
interest at the Default Rate on the then unpaid principal of the Note, and the
sums required to be paid by the Mortgagor pursuant to any provision of this
Mortgage and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation to
the Mortgagee, its agents, and attorneys and any expenses incurred by the
Mortgagee hereunder. In the event the Mortgagor shall fail forthwith to pay such
amounts upon such demand, the Mortgagee shall be entitled and empowered to
institute such action or proceedings at law or in equity as may be advised by
its counsel for the collection of the sums so due and unpaid, and may prosecute
any such action or proceedings to judgment or final decree and may enforce any
such judgment or final decree against the Mortgagor and collect out of the
property of the Mortgagor wherever situated, as well as out of the Mortgaged
Property, in any manner provided by law, monies adjudged or decreed to be
payable with interest thereon at the Default Rate.
(b) The Mortgagee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage or any guarantee executed by any Guarantor and
the right of the Mortgagee to recover such judgment shall not be affected by any
entry or sale hereunder, or by the exercise of any other right, power or remedy
for the enforcement of the provisions of this Mortgage, or the foreclosure of
the lien hereof; and in the event of a sale of the Mortgaged Property or any
part thereof and of the application of the proceeds of sale, as in this Mortgage
provided, to the payment of the indebtedness hereby secured, the Mortgagee shall
be entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Note, and to enforce payment of all other charges, payments
and costs due under this Mortgage, and shall be entitled to recover judgment for
any portion of the debt remaining unpaid, with interest thereon at the Default
Rate. In case of proceedings against the Mortgagor in insolvency or bankruptcy
or any proceedings for its reorganization or involving the liquidation of its
assets, then the Mortgagee shall be entitled to prove the whole amount of
principal and interest due upon the Note to the full amount thereof, and all
other payments, charges and costs due under this Mortgage, provided, however,
that in no case shall the Mortgagee receive a greater amount than such
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principal and interest and such other payments, charges and costs from the
aggregate amount of the proceeds of the sale of the Mortgaged Property or any
part thereof and the distribution from the estate of the Mortgagor.
(c) No recovery of any judgment by the Mortgagee and no levy of any
execution under any judgment upon the Mortgaged Property or upon any other
property of the Mortgagor shall affect in any manner or to any extent, the lien
of this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of the Mortgagee hereunder, but such liens, rights,
powers and remedies of the Mortgagee shall continue unimpaired as before.
(d) Any monies thus collected by the Mortgagee under this Section 2.03
shall be applied by the Mortgagee in accordance with the provisions of paragraph
(d) of Section 2.02.
Section 2.04. After the happening of any Event of Default and immediately
upon the commencement of any action, suit or other legal proceedings by the
Mortgagee to obtain judgment for the principal of, or interest on, the Note and
other sums required to be paid by the Mortgagor pursuant to any provisions of
this Mortgage, or of the Documents, or of any nature in aid of the enforcement
of the Note or of this Mortgage, the Mortgagor does hereby consent to the
appointment of a receiver or receivers of the Mortgaged Property or any part
thereof or any business or businesses conducted thereon and of all the earnings,
revenues, rents, issues, profits and income thereof. After the happening of any
Event of Default, or upon the commencement of any proceedings to foreclose this
Mortgage or to enforce the specific performance hereof or in aid thereof or upon
the commencement of any other judicial proceeding to enforce any right of the
Mortgagee, the Mortgagee shall be entitled, as a matter of right, if it shall so
elect, without the giving of notice to any other party and without regard to the
adequacy or inadequacy of any security for the Mortgage indebtedness, forthwith
either before or after declaring the unpaid principal of the Note to be due and
payable, to the appointment of such receiver or receivers.
Section 2.05. Notwithstanding the appointment of any receiver, liquidator
or trustee of the Mortgagor, or of any of its property, or of the Mortgaged
Property or any part thereof, the Mortgagee shall be entitled to retain
possession and control of all property now or hereafter held under this
Mortgage.
Section 2.06. No remedy herein conferred upon or reserved to the Mortgagee
is intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission of the Mortgagee to exercise any right or power accruing
upon any Event of Default shall impair any such rights or power, or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein; and every power and remedy given by this Mortgage to the Mortgagee may
be exercised from time to time as often as may be deemed expedient by the
Mortgagee. Nothing in this Mortgage or in the Note shall affect the obligation
of the Mortgagor to pay the principal of, and interest
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on, the Note in the manner and at the time and place therein respectively
expressed.
Section 2.07. Neither the Mortgagor or any Guarantor will at any time
insist upon, or plead, or in any manner whatsoever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Mortgage or any guarantee, nor claim, take or
insist upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisal of the Mortgaged Property, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision herein, or pursuant to the decree, judgment, or order of any court of
competent jurisdiction, and covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to the Mortgagee, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. The Mortgagor and any Guarantors, for themselves
respectively and all who may claim under either of them, waive, to the extent
that they lawfully may, all right to have the Mortgaged Property or any part
thereof marshaled upon any foreclosure hereof.
Section 2.08. During the continuance of any Event of Default and pending
the exercise by the Mortgagee of its right to exclude the Mortgagor from all or
any part of the Premises, the Mortgagor agrees to pay the fair and reasonable
rental value for the use and occupancy of the Premises or any portion thereof
which are in its possession for such period and, upon default of any such
payment, will vacate and surrender possession of the Premises to the Mortgagee
or to a receiver, if any, and in default thereof may be evicted by any summary
action or proceeding for the recovery of possession of the premises for
nonpayment of rent, however designated.
ARTICLE III
MISCELLANEOUS
Section 3.01. All of the grants, covenants, terms, provisions and
conditions herein shall run with the land and shall apply to, bind and inure to
the benefit of, the successors and assigns of the Mortgagor and the successors
and assigns of the Mortgagee. If there be more than one mortgagor, the covenants
and warranties hereof shall be joint and several. As used herein, the singular
shall include the plural as the context requires.
Section 3.02. In the event any one or more of the provisions contained in
this Mortgage or in the Note or in any of the other Documents shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall, at the option of the
Mortgagee, not affect any other provision of this Mortgage, but this Mortgage
shall be construed as if such invalid illegal or unenforceable provision had
never been contained herein or therein.
Section 3.03. All notices hereunder shall be in writing and shall be deemed
to have been
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<PAGE>
sufficiently given or served for all purposes when presented personally or sent
by registered or certified mail to any party hereto at its address above stated,
in the case of the Mortgagee, Attention: R. Martin Hall, Correspondent Lending,
with a copy sent to Payne, Wood & Littlejohn, 290 Broad Hollow Road, Melville,
New York l1747, Attention: Alan C. Polacek, Esq., and in the case of Mortgagor,
Attention: Mr. Nourollah Elghanayan, with a copy sent to Mandel & Resnik, P.C.
at 220 East 42nd Street, New York, New York 10017 Attention: Nicholas J. Kaiser,
Esq. or at such other address of which it shall have notified the party giving
such notice in writing. Any written notice sent by registered or certified mail
shall be deemed to have been served two (2) business days after the date it was
mailed in accordance with the foregoing provisions.
Section 3.04. Whenever in this Mortgage the giving of notice by mail or
otherwise is required, the giving of such notice may be waived in writing by the
person or persons entitled to receive such notice.
Section 3.05. This Mortgage, and any instruments made in connection
herewith, may be assigned by the Mortgagee without notice to, or the consent of,
the Mortgagor or any other party.
Section 3.06. The information set forth on the cover hereof is hereby
incorporated herein.
Section 3.07. The Default Rate provided for herein shall continue to accrue
and be paid on any amount to which the Default Rate is applied until said amount
is paid in full.
Section 3.08. This Mortgage shall be construed and enforced according to
the laws of the State of New York.
Section 3.09. Neither this Mortgage nor any provision hereof may be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the Mortgagee.
Section 3.10. This Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code with respect to the fixtures and
items of personal property referred to in this Mortgage, and with respect to all
replacements thereof, substitutions therefor or additions thereto together with
Mortgagor's interest in subdivision maps, surveys, building permits, engineering
and architectural plans and studies, building materials, work in progress and
the like (all of such items sometimes herein referred to as the "Collateral"),
and that a security interest shall attach thereto for the benefit of the
Mortgagee to secure the payment and performance of the Mortgagor's obligations
under the Note, this Mortgage, and any Documents executed in connection
therewith. The Mortgagor hereby authorizes the Mortgagee to file continuation
financing statements without the signature of the Mortgagor whenever lawful;
otherwise the Mortgagor agrees to execute such financing and continuation
statements as the Mortgagee may request. In the event of a default under the
Note, this Mortgage, or any Documents executed in connection therewith, the
Mortgagee may, in addition to all other rights
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<PAGE>
or remedies it may have in such event, exercise any right or remedy with respect
to the Collateral which it may have as a Secured Party under the provisions of
the Uniform Commercial Code or otherwise, including, without limitation, Section
9-501(4) of the Uniform Commercial Code, and shall have the option of proceeding
as to both real and personal property in accordance with its rights and remedies
in respect of real property, in which event the default provisions of the
Uniform Commercial Code shall not apply. The parties agree that in the event the
Mortgagee elects to proceed with respect to the Collateral separately from the
real property, ten (10) days notice of the sale of the Collateral shall be
reasonable notice. The reasonable expenses of retaking, holding, preparing for
sale, selling and the like incurred by the Mortgagee shall include, but not be
limited to, reasonable attorneys' fees and legal expenses incurred by the
Mortgagee. The Mortgagor agrees that, without the written consent of the
Mortgagee, the Mortgagor will not remove or permit to be removed from the
Mortgaged Property any of the Collateral except either for replacement by items
of substantially the same utility and value or temporarily for repair. All
replacements, renewals and additions to the Collateral shall be and become
immediately subject to the security interest of this Mortgage and this agreement
and be covered thereby. The Mortgagor shall, from time to time on request of the
Mortgagee, deliver to such Mortgagee an inventory of the Collateral in
reasonable detail. This Mortgage shall be deemed to be a Security Agreement
pursuant to the Uniform Commercial Code of the State in which the Mortgaged
Property or any part thereof is located.
Section 3. 11. (a) The Mortgagor represents and warrants to the Mortgagee
that the Premises do not comprise property identified by the Secretary of
Housing and Urban Development as an area having special flood hazards, or to the
contrary, that the Premises have been so identified but that the Premises has
been insured under the National Flood Insurance Act of 1968, as amended by Flood
Disaster Protection Act of 1973.
(b) The Mortgagor covenants and warrants that if the Premises are so
identified by the Secretary of Housing and Urban Development as having special
flood hazards, it will keep the Premises insured against loss by flood hazards
in an amount at least equal to the outstanding principal balance of the Note
secured by this Mortgage, or to the maximum limit of coverage made available
with respect to the particular type of property under the National Flood
Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973,
whichever is less.
Section 3.12. Wherever "attorneys' or counsel fees" are referred to herein,
it shall include such fees whether incurred out of court or in litigation,
including, without limitation, appeals and bankruptcy proceedings.
Section 3.13. Whenever reference is made in this Mortgage to a lease,
lessee, tenancy or tenant, such reference shall be deemed to include a sublease,
sublessee, subtenancy or subtenant, as the case may be.
Section 3.14. To the maximum extent not prohibited by law, any controversy,
dispute or claim arising out of, in connection with, or relating to the Note or
any of the other Documents
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<PAGE>
or any transaction provided for therein, including but not limited to any claim
based on or arising from an alleged tort or an alleged breach of any agreement
contained in any of the Documents. shall, at the request of any party to the
Documents (either before or after the commencement of judicial proceedings), be
settled by arbitration pursuant to Title 9 of the United States Code, which the
parties hereto acknowledge and agree applies to the transaction involved herein,
and in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"). In any such arbitration proceeding: (i) all
statutes of limitation which would otherwise be applicable shall apply; and (ii)
the proceeding shall be conducted in Albany, New York, by a single arbitrator,
if the amount in controversy is $1 million or less, or by a panel of three
arbitrators if the amount in controversy is over $1 million. All arbitrators
shall be selected by the process of appointment from a panel pursuant to section
13 of the AAA Commercial Arbitration Rules and each arbitrator will have
AAA-acknowledged expertise in the appropriate subject matter. Any award rendered
in any such arbitration proceeding shall be final and binding, and judgment upon
any such award may be entered in any court having jurisdiction.
If any party to the Note or other Documents files a proceeding in any court
to resolve any such controversy, dispute or claim, such action shall not
constitute a waiver of the right of such party or a bar to the right of any
other party to seek arbitration under the provisions of this Section of that or
any other claim, dispute or controversy, and the court shall, upon motion of any
party to the proceeding, direct that such controversy, dispute or claim be
arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator
may construe ambiguous terms) the Note or any other Document, (iii) enter
judgment on the debt, (iv) exercise equitable powers or issue or enter any
equitable remedies or (v) allow discovery of attorney/client privileged
information. The Commercial Arbitration Rules of the AAA are hereby modified to
this extent for the purpose of arbitration of any dispute, controversy or claim
arising out of, in connection with, or relating to any Document. The parties
further waive, each to the other, any claims for punitive damages, and agree.
that neither an arbitrator nor any court shall have the power to assess punitive
damages.
No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Documents before, during or after
any arbitration proceeding to: (i) exercise self-help remedies such as set off
or repossession; (ii) foreclose (judicially or otherwise) any lien on or
security interest in any real or personal property collateral; or (iii) obtain
emergency relief from a court of competent jurisdiction to prevent the
dissipation, damage, destruction, transfer, hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Documents. Such emergency relief may be in the nature
of, but is not limited to: prejudgment attachments, garnishments,
sequestrations, appointments of receivers, or other emergency injunctive relief
to preserve the status quo.
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<PAGE>
In the event applicable law prohibits the submission of a particular
controversy, dispute, or claim arising out of or in connection with any of the
Documents or transactions contemplated therein to arbitration, Mortgagor and
Mortgagee agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Premises is located or any other court in which
Mortgagee shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy. Mortgagor and Mortgagee, to the
extent permitted by applicable law, waive any right to assert the doctrine of
forum non-conveniens or to object to the venue to the extent any proceeding is
brought in accordance with this paragraph.
Section 3.15. Except as otherwise provided herein concerning transfers if
the Mortgagor or American Tissue Corporation shall sell, transfer, or otherwise
dispose of their respective interests in the Mortgaged Property, or any part
thereof without the prior consent in writing of the Mortgagee, the Mortgagee
may, at its option, declare the entire indebtedness hereby secured to be
immediately due and payable, without notice to the Mortgagor (which notice the
Mortgagor hereby expressly waives) and upon such declaration the entire
indebtedness hereby secured shall be immediately due and payable, anything
herein or in any bond, note or obligation of the Mortgagor to the contrary
notwithstanding.
Section 3.16. If the payment of the mortgage indebtedness is now or
hereafter further secured by assignments of leases or rentals, security
agreements, financing statements, mortgages, collateral assignments, pledges,
contracts of guaranty, letters of credit or other additional security documents,
any default beyond applicable notice and grace periods under the provisions of
any such further security documents shall constitute and be a default under this
Mortgage, and the Mortgagee may, at its option, exhaust any one or more of the
said security documents and the security thereunder as well as the Mortgaged
Property covered by this Mortgage either concurrently or independently and in
such other and further manner as the Mortgagee may elect, and Mortgagee may
apply the proceeds received therefrom upon the Mortgage indebtedness without
waiving or affecting Mortgagee's rights and remedies under this Mortgage
exercised hereunder or whether contained or exercised under any other such
security documents.
Section 3.17. It is the intent of Mortgagee, Mortgagor, Guarantors, and all
other parties to the Documents, to conform to and contract in strict compliance
with applicable usury law from time to time in effect. All agreements between
Mortgagee or any other holder of the Note and Mortgagor (or any other party
liable with respect to any indebtedness under the Documents) are hereby limited
by this provision, which shall override and control all such agreements. In no
way, nor in any event or contingency (including but not limited to prepayment,
default, demand for payment, or acceleration of the maturity of any obligation,
or the recharacterization of any Application Fees, Standby Fees, Underwriting
Fees, or any other fees required hereunder or under the Documents as interest),
shall the interest taken, reserved, contracted for, charged or received under
the Note, or otherwise, exceed the maximum nonusurious amount permissible under
applicable law. If, from any possible construction of any document, interest
would otherwise be payable in excess of the maximum nonusurious amount, any such
construction
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<PAGE>
shall be subject to this provision and such document shall be automatically
reformed and the interest payable shall be automatically reduced to the maximum
nonusurious amount permitted under applicable law, without the necessity of
execution of any amendment or new document. If the holder thereof shall ever
receive anything of value that is characterized as interest under applicable law
and that would apart from this provision, be in excess of the maximum
nonusurious amount, an amount equal to the amount that would have been excessive
interest shall, without penalty, be applied to the reduction of the principal
amount owing on the indebtedness evidenced thereby in the inverse order of its
maturity and not to the payment of interest, or refunded to Mortgagor or the
other payor thereof if and to the extent such amount, which would have been
excessive, exceeds such unpaid principal. The right to accelerate maturity of
the Note, or any other indebtedness, does not include the right to accelerate
any interest that has not otherwise accrued on the date of such acceleration,
and the holder thereof does not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid to
the holder thereof shall, to the extent permitted by applicable law, be
amortized, protected, allocated, and spread throughout the full stated term
(including any renewal or extension) of such indebtedness so that the amount of
interest on account of such indebtedness does not exceed the maximum
non-usurious amount permitted by applicable law; as used in this paragraph
"applicable law" shall mean the laws of the State of New York or the federal
laws of the United States, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.
Section 3.18. Nothing contained herein shall create any joint venture,
partnership, agency or trust arrangement between Mortgagor and Mortgagee.
Section 3.19. At reasonable intervals, but not more frequently than once
during each twelve (12) month period, the Mortgagee may order a re-appraisal of
the Premises by an independent appraiser of its selection, or by a Mortgagee
employee, and Mortgagor agrees to allow access to the Premises to such
independent appraiser or Mortgagee employee, and in the case of an independent
appraiser retained after an Event of Default to pay to the Mortgagee, within
thirty (30) days of billing, such appraiser's reasonable fee and expenses.
Section 3.20. This Mortgage secures the Note and all amendments,
replacements, substitutions and extensions thereof.
Section 3.21. INTENTIONALLY DELETED.
Section 3.22. Except as otherwise specifically provided in this Mortgage by
applicable grace periods, time is of the essence in the performance by Mortgagor
or each and every obligation required by it to be performed by this Mortgage.
Section 3.23. The covenants contained in this Mortgage shall run with the
land and bind the Mortgagor, his successors and assigns and all subsequent
owners, encumbrancers, tenants and subtenants of the Premises, and shall enure
to the benefit of the Mortgagee, the personal representatives, successors and
assigns of the Mortgagee and all subsequent holders of this
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<PAGE>
Mortgage.
Section 3.24. The parties hereto, for and on behalf of themselves and their
successors in interest, agree that should any agreement be hereafter entered
into modifying or changing the terms of this Mortgage in any particular, the
rights of the parties to such agreement shall, pursuant to the terms thereof, be
superior to the rights of the holder of any subordinate lien.
Section 3.25. Mortgagor covenants and warrants that:
(a) Mortgagor will not use the assets of an employee benefits plan, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as now or hereafter amended ("ERISA"), in the exercise of any of its obligations
or right specified herein or in the Note or in any other instrument which may be
held by Mortgagee as evidence of or security for the obligations secured or in
the performance of any transaction contemplated hereunder or under the Note or
under any other instrument which may be held by Mortgagee as additional security
for the Note;
(b) The Mortgaged Premises do not, and without the written consent of
Mortgagee will not, constitute an asset of such an employee benefit plan; and
(c) Mortgagor will not sell, convey or transfer the Mortgaged Premises to a
person or entity which could not satisfy the undertakings set forth in
subsections (a) and (b) of this Section regardless of whether any of the
above-described conditions arise by operation of law or otherwise.
Section 3.26 This Mortgage may, by separate future written agreement
between Mortgagor and Mortgagee, be split from time to time into two or more
separate mortgages with an aggregate principal balance equal to the principal
balance of the indebtedness secured by this Mortgage at such time (the "Debt")
each of which separate mortgages shall encumber and continue to constitute a
lien on the Mortgaged Property. If Mortgagor and Mortgagee agree to split this
Mortgage, then the parties shall do any act or execute any additional documents
necessary to implement such splitting of this Mortgage, including a splitter and
modification agreement, severed mortgages and severed notes in the aggregate
principal balance of the Debt, all in form and substance satisfactory to
Mortgagor and the title insurance company insuring this Mortgage (or insuring
any severed mortgage arising from a splitting of this Mortgage), all in
furtherance of the provisions of this paragraph.
Section 3.27 In the event that any payment shall become overdue for a
period in excess of five (5) days, a "late charge" of five cents (.05) for every
dollar of any installment so overdue may be charged by the Mortgagee for the
purpose of defraying the expense incident to handling such delinquent payment.
Failure to pay such "late charge" shall be deemed a default under the terms of
this Mortgage.
Section 3.28. This Mortgage may be executed in any number of counterparts
and each of
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such counterparts shall for all purposes be deemed to be an original; and all
such counterparts shall together constitute but one and the same Mortgage.
Section 3.29. Mortgagee shall have the right to approve the management of
and the management contract for the Premises. It shall be a default hereunder if
Mortgagee at any time, and from time to time, notifies Mortgagor in writing that
the management of the Premises is not reasonably satisfactory, and Mortgagor
does not promptly change such management or effect such changes in management
practices or take such steps as one required to make it satisfactory to
Mortgagee. Mortgagor shall not amend, modify or cancel any approved management
contract nor enter into a new management contract without prior written consent
of Mortgagee not to be unreasonably withheld.
Section 3.30. Notwithstanding anything contained herein to the contrary,
Mortgagor may apply to an industrial development agency ("IDA") for a reduction
in taxes based upon Borrower's improvements to the Premises. Such action may
contemplate a transfer of the Premises to an IDA with a lease back to Mortgagor.
Mortgagee agrees to consider such a transfer subject to Mortgagee's review and
approval of the document evidencing the transaction between the Mortgagor and
the IDA.
Section 3.31. Upon payment of all sums due under the Note and Mortgage by
Mortgagor, Mortgagee will execute a non-recourse assignment of mortgage to
Mortgagor's new lender.
IN WITNESS WHEREOF, this Mortgage has been duly executed by the Mortgagor
on the date first above written.
SARATOGA REALTY LLC
By:/s/ N. Elghanayan
---------------------------------
Nourollah Elghanayan, Manager
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<PAGE>
STATE OF NEW YORK, )
: ss:
COUNTY OF SUFFOLK. )
On this 24th day of December, 1997, before me personally came NOUROLLAH
ELGHANAYAN, to me known to be one of the managers of the limited liability
company of SARATOGA REALTY LLC, which executed the foregoing instrument and he
duly acknowledged to me that he is authorized to execute said instrument and
that he executed the same as the act and deed of said limited liability company
by order of the members thereof and for the uses and purposes therein mentioned.
/s/ A.ROBERT STUDLEY
-----------------------------
Notary Public
A.ROBERT STUDLEY
Notary Public State of New York
No. 01ST4505126
Qualified in Nassau County
Commission Expires December 31, 1997
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BANK UNITED DUPLICATE
CONSOLIDATED ORIGINAL
MORTGAGE NOTE
-------------
$200,000.00 Melville, New York
As of October 17, 1997
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of
BANK UNITED its successors and/or assigns (hereinafter called the "Bank"), at
its offices at 3200 Southwest Freeway, Houston, Texas 77027, or such other place
as Bank may designate in writing,
TWO HUNDRED THOUSAND AND 00/100 ($200,000.00) DOLLARS
together with the unpaid balance of $6,300,000.00 represented by note assigned
to Bank by assignment dated October 17, 1997 as follows:
Note of Mack Waterford Properties Limited, et al to Midlantic
National Bank/North dated June 1, 1989 in the original sum of
$11,600,000; and
consolidated herewith to form a single obligation of SIX MILLION FIVE HUNDRED
THOUSAND AND 00/100 ($6,500,000) DOLLARS with interest as hereinafter provided.
The rate of interest on this loan is 8.05% per annum which shall continue
in effect from the date hereof to Maturity (as hereafter defined). Interest
hereon for the period from the date hereof through the first day of the month
next ensuing shall be due and payable simultaneously with the execution of this
Note. The monthly payment of principal and interest shall be $54,571.04 and
shall commence November 17, 1997 and continue on the first day of each and every
month thereafter to Maturity.
The term of this loan shall be ten (10) years with principal amortization
based on a loan maturing over a twenty (20) year term which began on the date
hereof.
The Maturity of this loan is October 17, 2007, when the entire remaining
unpaid balance of principal and any unpaid interest shall be fully due and
payable.
Monthly payments shall be applied first to the payment of interest as
aforesaid and the balance toward reduction of principal. Interest on any past
due amount, whether at maturity or by acceleration, shall be paid until the full
principal balance is actually paid at a rate of two percent per annum in excess
of the above stated interest rate. In no event, however, shall the interest on
this loan be higher than the highest rate of interest permitted under applicable
New York or Federal Law.
<PAGE>
The obligation to pay interest and principal on this Note as aforesaid is
sometimes referred to hereafter collectively as "Obligation".
Borrower may prepay this Note in whole or in part on any monthly
installment date after October 17, 2002 upon payment of a prepayment premium of
5% of the amount prepaid which premium shall reduce to 4% on October 17, 2003,
to 3% on October 17, 2004, to 2% on October 17, 2005 and to 1% on October 17,
2006.
Notwithstanding the foregoing, Borrower may prepay this Note, in whole or
in part, on any monthly installment date during the last three months of the
term of the loan without premium. If at any time during the term of this loan
Bank shall require a reduction in the loan amount, such reduction shall not be
subject to any prepayment premium.
This Note is secured by a Mortgage on premises located at U.S. Route 4 and
Bell's Lane, Waterford, New York known and designated as Section 286 Block 1 Lot
51 on the Saratoga County Tax Map.
The Bank, in its sole discretion, may accept partial payments of interest
and/or principal. If accepted: (1) such payments shall first be applied to
interest as aforesaid, and the balance, if any, toward reduction of principal;
and (2) acceptance of such partial payment or payments shall not constitute a
waiver of default of any provisions of this Note, the mortgage securing it, or
any of the documents executed in connection herewith, nor shall such acceptance
effect a modification of this Note nor operate to create any estoppel against
the holder hereof.
The Bank may, at its option, or upon or at any time after default in the
prompt payment of Obligation or of any other liability of the undersigned,
whether due by acceleration as hereinabove provided or otherwise, proceed to
enforce payment of the same and exercise any of, or all of the rights and
remedies afforded the Bank by applicable law or any document executed in
connection with Obligation or otherwise.
The undersigned agrees that whenever an attorney is used to enforce,
declare or adjudicate any rights or obligations under this note or collect any
amounts due thereunder or with respect to any security securing the same,
whether by suit or by any other means whatsoever, the undersigned shall be
obligated in addition to pay the Bank's reasonable attorneys' fees, costs and
disbursements.
The rights and remedies provided for in this Note, any security agreement,
any guaranty of payment of liabilities, the Mortgage. the assignment of leases,
or other instruments or agreements executed by the undersigned or any guarantors
pertaining to either this Note or any guaranty securing this Note, or in any
other document or agreement executed in connection with this Note, are
cumulative and not exclusive, and the Bank or any subsequent holder of the Note
may proceed against undersigned, any guarantors, of the Note or any other
guaranty, or may proceed against any other person or entity, or with respect to
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<PAGE>
any pledged property, all in pursuance of any remedy afforded the Bank or any
subsequent holder of the Note, either by statute, contractually, or otherwise,
at any time, in any order. either simultaneously or otherwise until the Note and
all amounts due thereunder are fully paid and satisfied. It is understood and
agreed that the undersigned, and the guarantors and each of them, remain and are
at all times jointly and severally liable for the Note and all amounts due
thereunder (except as guarantors' liability is limited pursuant to the guaranty)
until the Note and all amounts due thereunder are fully paid and satisfied,
regardless of any recoveries from sale or disposition of collateral or pendency
of proceedings or completion of proceedings to accomplish the same.
The undersigned waives presentation, protest, demand for payment, notice of
default or non-payment to the undersigned, or any other party liable for or upon
any of said Obligations. The Bank and the undersigned, in any litigation
(whether or not arising out of or relating to the Note or said collateral
security for the repayment thereof) in which Bank and any of them shall be
adverse parties, waive trial by jury and the undersigned, in addition, waive the
right to interpose any defense based upon any Statute of Limitations or any
claim of laches and any set-off or counter claim of any nature or description.
If the undersigned is a partnership, the agreement herein contained shall
remain in force and applicable, notwithstanding any changes in the individuals
composing the partnership, and the term "undersigned", as used herein, shall
include any alternate or successor partnerships, but any predecessor partnership
and their partners shall not thereby be released from any liability. If this
Note is signed by more than one party, the terms "undersigned", as used herein,
shall mean the "undersigned and each of them" and each undertaking herein
contained shall be their joint and several undertaking, provided, however, that
in the phrases "of the undersigned", "by the undersigned", "against the
undersigned", "for the undersigned", "to the undersigned", and "on the
undersigned", the term "undersigned" shall mean the "undersigned or any of
them."
The Bank may release, exchange, sell or surrender any of the mortgaged or
pledged property belonging to any of the undersigned parties hereto or any
guarantors of this Note and it may renew, extend, modify, accelerate,
compromise, settle or release any of the liabilities of any of them and may make
additional advances or extensions of credit to any of them or release or fail to
set off any deposit account or credit of any of them or grant other indulgences
to any of them, all from time to time, before or after maturity hereof, with or
without further notice to or assent from, and without in any way affecting or
releasing the liability of, any of the other parties hereto.
If the time for payment of this Note shall be extended by any law relating
to obligations payable on Sunday or holidays, such extended time shall be
included in the computation of interest or discount.
Any provision hereof which may prove unenforceable under any law shall not
affect the validity of any other provision hereof.
-3-
<PAGE>
No provision of this note (or any documents executed in connection
therewith) may be terminated, changed or waived orally, all such modifications
shall be in writing and duly executed by the party against whom enforcement is
sought.
This Note may be executed in counterparts each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
partially executed signature page of any counterpart of this Note may be
attached to any other partially executed counterpart of this note without
impairing the legal effect of the signature(s) on such signature page.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
DUPLICATE GRAND LLC
ORIGINAL
By: /s/ N. Elghanayan
----------------------------
Nourollah Elghanayan, Member
STATE OF NEW YORK )
: ss:
COUNTY OF SUFFOLK )
On this 15th day of October, 1997, before me personally came NOUROLLAH
ELGHANAYAN, to me known to be one of the members of the limited liability
company of GRAND LLC, which executed the foregoing instrument and he duly
acknowledged to me that he is authorized to execute said instrument and that he
executed the same as the act and deed of said limited liability company by order
of the members thereof and for the uses and purposes therein mentioned.
/s/ Robert Joseph Knopf
----------------------------
Notary Public
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30. 1998
-4-
<PAGE>
================================================================================
CONSOLIDATED MORTGAGE
Date: As of October 17, 1997
Mortgagor: GRAND LLC, a New York limited liability company
Address: 135 Engineers Road
Hauppauge, New York 11788
Mortgagee: BANK UNITED
Address: 3200 Southwest Freeway
Houston, Texas 77027
Consolidated
Mortgage Amount: $ 6,500,000
Location of U.S. Route 4 and Bell's Lane, Waterford
Premises: Saratoga County, New York
Section - 286
Block - 1
Lot - 51
================================================================================
Record and return to: PAYNE, WOOD & LITTLEJOHN
290 BROAD HOLLOW ROAD
MELVILLE NY 11747
ATTN: Alan C. Polacek, Esq.
This mortgage covers property not to be improved by one or more structures
containing in the aggregate not more than six residential dwelling units, each
having their own separate cooking facilities.
<PAGE>
RECITAL
The Mortgagor is the owner of the Premises described in Schedule A hereto.
The Mortgagor has substantial improvements on the Premises and, simultaneously
with the execution of this Mortgage has borrowed the sum of TWO HUNDRED THOUSAND
AND 00/100 ($200,000.00) DOLLARS which sum is consolidated with the unpaid sum
of $6,300,000.00 on a certain note and mortgage dated June 1, 1989 and assigned
to Mortgagee by assignment dated on or about the date hereof and to form a
single lien of SIX MILLION FIVE HUNDRED THOUSAND AND 00/100 ($6,500,000.00)
DOLLARS (hereafter the "Mortgage Amount"). The Mortgagor has executed and
delivered to Mortgagee a consolidated note for $6,500,000.00 dated the date
hereof. The said note, together with any modifications or amendments thereto are
hereinafter collectively referred to as the "Note".
CERTAIN DEFINITIONS
The Mortgagor and the Mortgagee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified, such definitions to be applicable equally to the singular and the
plural forms of such terms:
"Chattels" means all fixtures, articles of personal property now or
hereafter owned by the Mortgagor and attached to or used in connection with said
Premises, including but not limited to all partitions, furnaces, boilers, oil
burners, radiators and piping, coal stokers, plumbing and bathroom fixtures,
refrigeration, air conditioning and sprinkler systems, or other fife prevention
or extinguishing apparatus and materials, wash-tubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, kitchen cabinets, incinerators, plants and shrubbery, and all other
equipment and machinery, appliances, fittings and fixtures of every kind in or
used in the operation of the buildings standing on said Premises, all of which
the Mortgagor represents that he owns, together with any and all replacements
thereof and additions thereto.
"Default Rate" means at a rate equal to five percentum (5%) per annum in
excess of the current Note Rate as described in the Note, but in no event higher
than the maximum rate allowed by applicable law.
"Documents" means the Note (as hereafter defined), Assignment of Leases,
Rents and Profits of even date between Mortgagor and Mortgagee, this Mortgage,
and all other documents further evidencing and/or securing the loan evidenced by
the Note and this Mortgage.
"Events of Default" means the events and circumstances described as such in
Section 2.01 hereof.
"Guarantor" means any person or entity which has guaranteed to Mortgagee
the prompt and full payment of the sums due Mortgagee under the Note and
Documents.
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"Improvements" means all improvements, structures or buildings, and
replacements and alterations thereof, erected or to be erected or now or
hereafter located upon the Premises including all plant equipment, apparatus,
machinery and fixtures of every kind and nature whatsoever owned by Mortgagor
forming part of said improvements, structures or buildings.
"Mortgage" means this consolidated mortgage.
"Mortgage Amount" means SIX MILLION FIVE HUNDRED THOUSAND AND 00/100
($6,500,000.00) DOLLARS.
"Mortgagor" means Grand LLC, a New York limited liability company.
"Mortgagee" means Bank United its successors and/or assigns.
"Note" means the consolidated note of even date from Mortgagor to
Mortgagee.
"Note Rate" means the rate of interest payable under the Note from time to
time during the term thereof.
"Premises" means the Premises described in Schedule A including all of the
easements, rights, privileges and appurtenances thereunto belonging or in anyway
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of the Mortgagor therein and in and to the strips and gores, streets,
and ways adjacent thereto, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
All terms of this Mortgage which are not defined above have the meaning set
forth in this Mortgage or the Documents.
CONSOLIDATION CLAUSE
This Mortgage is hereby consolidated with the following note and mortgage:
Mortgage made by Mack Waterford Properties Limited, et al to Midlantic
National Bank/North dated June 1, 1989 in the amount of $11,600,000 recorded
June 2, 1989 in Liber 1312 mp 166, modified by agreement dated December 29, 1995
recorded February 6, 1996 in Liber 1960 mp 599 and assumption and modification
agreement dated June 14, 1996 recorded in Liber 1996 mp 583. This mortgage was
assigned to Mortgagee by Midlantic Bank NA by assignment dated October 17, 1997
in the unpaid principal sum of $6,300,000.00. All of the above recordings were
made in the Office of the Clerk of Saratoga County.
Which above mortgage is hereby consolidated with this Mortgage to form one
mortgage obligation of SIX MILLION FIVE HUNDRED THOUSAND AND 00/100
($6,500,000.00) DOLLARS with the same intent and with like effect as if one
first mortgage covering the
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Premises had been duly made, executed and delivered by Mortgagor to Mortgagee
containing the terms and conditions herein contained it being understood and
agreed that the terms and conditions contained herein completely and entirely
supersede the terms and conditions in the prior assigned mortgage as to the
whole consolidated sum of $6,500,000.00.
SPREADER
Inasmuch as the assigned mortgage may not cover the entirety of Premises,
and the Mortgagor and Mortgagee desire to spread the lien of the assigned
mortgage to the entirety of the Premises, Mortgagor and Mortgagee hereby
mutually covenant and agree that the lien of the assigned mortgage consolidated
herewith be and the same hereby is spread over the entirety of the Premises not
already covered by assigned mortgage in the same manner and to the same effect
as though each mortgage consolidated herewith had originally covered all of the
land defined as Premises and set forth herein as Schedule "A."
GRANTING CLAUSE
NOW THEREFORE, the Mortgagor, in order to secure the payment of both the
Mortgage Amount and the interest, default interest, late charges, advances,
reimbursements, commitment fees and any other sums payable under the Note, this
Mortgage and the Documents and the performance and observance of all the
provisions hereof and of the Note and the Documents, hereby gives, grants,
bargains, sells, warrants, aliens, demises, releases, conveys, assigns,
transfers, mortgages, hypothecates, deposits, pledges, sets over and confirms
unto the Mortgagee, with mortgage covenants, all its estate, right, title and
interest in, to and under any and all of the following described property (the
"Mortgaged Property") whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels in which a security agreement pursuant to the Uniform
Commercial Code is granted to Mortgagee;
(iv) all proceeds of the conversion, voluntary or involuntary, of any of
the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards and any unearned premiums accrued,
accruing or to accrue under any and all insurance policies now or hereafter
obtained by the Mortgagor and real estate tax and assessment refunds and credits
at any time accruing to the benefit of the Mortgagor or the Mortgaged Property,
even if relating to taxes and assessments payable for a period or periods prior
to the date hereof;
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(v) all leases of the Premises or any part thereof now or hereafter entered
into and all right, title and interest of the Mortgagor thereunder; and
including, without limitation, the Mortgagor's right, if any, to cash or
securities deposited thereunder whether or not same was deposited to secure
performance by the lessees of their obligations thereunder, including, further,
the right upon the happening of an Event of Default, to receive and collect the
rents and other charges thereunder (all of which leases are assigned to the
Mortgagee as further security hereunder pursuant to a separate Assignment of
Rents, Leases and Profits of even date intended to be recorded immediately
following the recordation of this Mortgage, and which is incorporated herein by
reference);
(vi) all utility or municipal deposits made by or on behalf of Mortgagor or
made in connection with the Premises;
(vii) all plans, drawings, specifications, site plans, subdivision maps,
sketches, samples, contracts and agreements, however characterized from time to
time prepared for use in connection with the development of the Premises and the
construction of the Improvements;
(viii) all contracts, agreements and understandings now or hereafter
entered into, relating to or involving the performance of any work, rendering of
any services, and supply of any materials or the conduct of operations in and
the management of the Premises including, without limitation, construction
contracts, architect agreements, management agreements, options and other
agreements, however characterized, affecting the Premises and/or the
Improvements or the public improvements required to be installed under the terms
of governmental approvals relating to the subdivision and/or approved site plan
in which the Premises are a part;
(ix) any and all permits, certificates, approvals and authorizations,
however characterized, issued or in any way furnished whether necessary or not,
for the operation and use of the Premises and/or the Improvements and/or
Chattels including, without limitation, building permits, environmental
certificates, certificates of operation, certificates of occupancy and/or
completion, licenses, warranties and guarantees; and
(x) all Contracts of Sale for portions of the Premises including, without
limitation, deposits made by Purchasers thereunder; and
TO HAVE AND TO HOLD unto the Mortgagee, its successors and assigns forever.
ARTICLE I
PARTICULAR COVENANTS, WARRANTIES AND
REPRESENTATIONS OF THE MORTGAGOR
The Mortgagor covenants, warrants, represents and agrees as follows:
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Section 1.01. The Mortgagor warrants that it has a good and marketable
title to an indefeasible fee estate in the Premises subject in all cases to no
licn, charge or encumbrance except such as are listed as exceptions to title in
the title policy insuring the lien of this Mortgage. The Mortgagor further
warrants that it will own the Chattels free and clear of liens and claims; and
that this Mortgage is and will remain a valid and enforceable first lien on the
Mortgaged Property, subject only to the exceptions set forth above. The
Mortgagor has full power and lawful authority to mortgage the Mortgaged Property
in the manner and form herein done or intended hereafter to be done. The
Mortgagor will preserve such title, and will forever warrant and defend the
validity and priority of the lien hereof against the claims of all persons and
parties whomsoever. The Mortgagor is a limited liability company organized under
the laws of the State of New York with full power and authority to conduct the
business in which it is engaged, own its property and consummate the
transactions contemplated hereby.
Section 1.02. The Mortgagor will, at the cost of the Mortgagor, and without
expense to the Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as the Mortgagee shall from time to time
reasonably require, for the better assuring, conveying, assigning, transferring
and confirming unto the Mortgagee the property and rights hereby conveyed,
mortgaged or assigned or intended now or hereafter so to be, or which the
Mortgagor may be or may hereafter become bound to convey, mortgage or assign to
the Mortgagee or for carrying out the intention or facilitating the performance
of the terms of this Mortgage, and for filing, registering or recording this
Mortgage and, on demand, will execute and deliver, and hereby authorizes the
Mortgagee to execute in the name of the Mortgagor to the extent it may lawfully
do so, in the event of the failure or refusal of the Mortgagor so to do, one or
more financing statements, chattel mortgages or comparable security instruments,
and renewals thereof to evidence more effectively the lien hereof upon the
Chattels.
Section 1.03. (a) The Mortgagor forthwith upon the execution and delivery
of this Mortgage, and thereafter from time to time, will cause this Mortgage,
and any security instrument creating a lien or evidencing the lien hereof upon
the Chattels and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully to protect the lien hereof
upon, and the interest of the Mortgagee in, the Mortgaged Property.
(b) The Mortgagor will pay all filing, registration, imposts, taxes and
recording fees, and all expenses incident to the execution and acknowledgment of
this Mortgage, any mortgage supplemental hereto, any security instrument with
respect to the Chattels, and any instrument of further assurance, and all
federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution, delivery and recording of the Note, this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Chattels or any
instrument of further assurance.
Section 1.04. The Mortgagor will pay when due the principal and interest
and all other sums to become due in respect of the Note at the time and place
and in the manner specified in
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the Note according to the true intent and meaning thereof and without offset or
counterclaim, all in any coin or currency of the United States of America which
at the time of such payment shall be legal tender for the payment of public and
private debts.
Section 1.05. The Mortgagor will, so long as it is owner of any part of the
Mortgaged Property, do all things necessary to preserve and keep in full force
and effect its franchises, rights and privileges under the laws of the State of
New York and will comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental authority or court and applicable to the
Mortgagor or to the Mortgaged Property or any part thereof.
Section 1.06. All rights, title and interest of the Mortgagor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, the Mortgaged Property, hereafter
acquired by, or released to, the Mortgagor or constructed, assembled or placed
by the Mortgagor on the Premises, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, conveyance, assignment or other act by the
Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by the Mortgagor and
specifically described in the granting clause hereof, but at any and all times
the Mortgagor will execute and deliver to the Mortgagee any and all such further
assurances, mortgages, conveyances or assignments thereof as the Mortgagee may
reasonably require for the purpose of expressly and specifically subjecting the
same to the lien of this Mortgage.
Section 1.07. (a) Except as to real estate taxes which must be paid before
the date on which any interest or penalty becomes due on such tax, the
Mortgagor, from time to time when the same shall become due and payable, but
without the benefit of any grace period therefor whether or not a penalty or
interest charge would be imposed in such grace period, will pay and discharge
all taxes of every kind and nature (including real and personal property taxes
and income, franchise, withholding, profits and gross receipts taxes), all
general and special assessments, levies, permits, inspection and license fees,
all water and sewer rents and charges, and all other public charges whether of a
like or different nature, imposed upon or assessed against it or the Mortgaged
Property or any part thereof or upon the revenues, rents, issues, income and
profits of the Mortgaged Property or arising in respect of the occupancy, use or
possession thereof. The Mortgagor will deliver to the Mortgagee receipts
evidencing the payment of all such taxes, assessments, levies, fees, rents and
other public charges imposed upon or assessed against it or the Mortgaged
Property or the revenues, rents, issues, income or profits thereof within 30
days from the date due. Mortgagor will in addition reimburse Mortgagee for the
expense incurred in connection with a tax service contract to be entered between
Mortgagee and the tax service company as pertains to this property. Such fee
shall be paid at closing. The Mortgagee may, at its option, to be exercised, by
thirty (30) days written notice to the Mortgagor at any time after an Event of
Default, require the deposit by the Mortgagor, at the time of each payment of an
installment of interest or principal under the Note, of an additional amount
sufficient to discharge the obligations under this subsection (a). The
determination of the amount so payable and of the fractional part thereof to be
deposited with the Mortgagee, so that the
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aggregate of such deposit shall be sufficient for this purpose, shall be made by
the Mortgagee in its sole discretion. Such amounts shall be held by the
Mortgagee without interest and applied to the payment of the obligations in
respect to which such amounts were deposited or, at the option of the Mortgagee,
to the payment of said obligations in such order or priority as the Mortgagee
shall determine, on or before the respective dates on which the same or any of
them would become delinquent. If one month prior to the due date of any of the
aforementioned obligations the amounts then on deposit therefor shall be
insufficient for the payment of such obligation in full, the Mortgagor within
ten (10) days after demand shall deposit the amount of the deficiency with the
Mortgagee. The Mortgagee shall not be required to segregate the amounts
deposited with it under this Section 1.07, but may commingle same with any other
funds held by it. Nothing herein contained shall be deemed to affect any right
or remedy of the Mortgagee under any provisions of this Mortgage or of any
statute or rule of law to pay any such amount and to add the amount so paid
together with interest at the Note Rate to the indebtedness hereby secured.
(b) The Mortgagor will pay, from time to time when the same shall become
due, all lawful claims and demands of mechanics, materialmen, laborers, and
others which, if unpaid, might result in, or permit the creation of, a lien on
the Mortgaged Property or any part thereof, or on the revenues, rents, issues,
income and profits arising therefrom and in general will do or cause to be done
everything necessary so that the lien hereof shall be fully preserved, at the
cost of the Mortgagor, without expense to the Mortgagee.
(c) Nothing in this Section 1.07 shall require the payment or discharge of
any obligation imposed upon the Mortgagor by this Section so long as the
Mortgagor shall in good faith and at its own expense contest the same or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection thereof or other realization thereon and the sale or forfeiture
of the Premises or any part thereof to satisfy the same; provided that during
such contest the Mortgagor shall, at the option of the Mortgagee, provide
security reasonably satisfactory to the Mortgagee, assuring the discharge of the
Mortgagor's obligation hereunder and of any additional charge, penalty or
expense arising from or incurred as a result of such contest; and provided,
further, that if at any time payment of any obligation imposed upon the
Mortgagor by subsection (a) of this Section shall become necessary to prevent
the delivery of a tax deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of nonpayment, then the Mortgagor shall
pay the same in sufficient time to prevent the delivery of such tax deed or
other similar instrument.
Section 1.08. The Mortgagor will pay all taxes except income, franchise,
inheritance, estate and gift taxes, imposed on the Mortgagee by reason of its
ownership of the Note or this Mortgage.
Section 1.09. (a) The Mortgagor will maintain public liability insurance in
amounts equal to at least $2,000,000.00 with respect to the Mortgaged Property
and all risk property insurance. Mortgagor shall also carry, by way of
endorsement rental loss of income and business interruption (12 month minimum)
insurance in a sum equal to 100% of its annual rent roll, and
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will keep the Improvements and Chattels insured against loss by fire, casualty
and such other hazards as may be required by similar lenders on similar
properties for the benefit of the Mortgagee. Such insurance shall be written in
forms, amounts, and by companies licensed in the state where the property is
located which companies must have at least a Best Rating of A-VII and which are
otherwise satisfactory to the Mortgagee. In no event, however, shall property,
all-risk or physical damage insurance be less than the full replacement cost of
the property insured. Mortgagee and its successors and assigns, as their
interests may appear, shall be endorsed on such policy as first mortgagee and as
to liability insurance shall be named as an additional insured. The policies
shall by their terms be noncancellable and not subject to change without at
least thirty (30) days prior written notice to the Mortgagee and losses
thereunder shall be payable to the Mortgagee pursuant to the standard mortgagee
endorsement. The policy or policies of such insurance or certificates of same,
shall be delivered to the Mortgagee seven (7) days prior to closing. The
Mortgagor shall give the Mortgagee prompt notice of any loss covered by such
insurance and the Mortgagee shall have the right to join the Mortgagor in
adjusting any loss in excess of $50,000.00 notwithstanding the provision of Real
Property Law section 254(4). Renewals of each required policy of insurance shall
be delivered to Mortgagee at least ten (10) days prior to expiration.
(b) The Mortgagor shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 1.09 unless the Mortgagee has approved the insurance company such
approval not to be unreasonably withheld, and the form and content of the
insurance policy, including, without limitation, the naming thereon of the
Mortgagee as a named insured with loss payable to the Mortgagee under a standard
mortgage endorsement of the character above described.
(c) Any and all insurance proceeds hereunder and condemnation proceeds
(under Section 1.13) will be paid to Mortgagee and Mortgagee may, within its
sole discretion, apply the proceeds toward repayment of the Note or toward the
repair of the Premises. Provided, however, if: (i) Mortgagor is not then, in
default of any term or provision contained in the Documents; (ii) no more than
25% of the net rentable square footage of the Premises has been damaged; and
(iii) the insurance proceeds are less than $3,500,000; then Mortgagee shall pay
such proceeds to Mortgagor, from time to time, for the sole purpose of repairing
or replacing the damaged portion of the Premises. Mortgagor shall be required to
provide Mortgagee with good and sufficient documentation and information
necessary and required by Mortgagee to verify and confirm, the exact nature and
extent of the damage or destruction to the Premises and the amount of funds
properly expended to repair or replace same. Any proceeds (insurance and
condemnation) not paid to repair or replace any such damaged or destroyed
portion of the Premises shall be applied to the last maturing installments of
principal due and owing under the Note without prepayment premium (but such
application shall not reduce the Guarantor's guaranteed portion of the Loan) as
set forth under the Limited Guaranty of Payment of even date herewith.
(d) The foregoing insurance may be written on a blanket policy.
Section 1.10. If the Mortgagor or any party under any of the Documents
shall fail to
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perform any of the covenants contained in this Mortgage, or any covenant
contained in the Note, the assignment of leases, if any, or the other Documents
beyond applicable notice and grace periods, the Mortgagee may make advances
and/or disbursements to perform the same, and all sums so advanced and/or
disbursed shall be a lien upon the Mortgaged Property and shall be secured
hereby. The Mortgagor will repay on demand all sums so advanced and/or disbursed
with interest at the Default Rate. The provisions of this Section 1.10 shall not
prevent any default in the observance of any covenant contained in this
Mortgage, or contained in the Note, the assignment of leases, if any, or the
other Documents from constituting a default or an Event of Default.
Section 1.11. (a) The Mortgagor will keep adequate records and books of
account and will permit the Mortgagee, by its agents, accountants and attorneys,
to visit and inspect the Premises and examine its records and books of account
and to discuss its affairs, finances and accounts with the Mortgagor, at such
reasonable times as may be requested by the Mortgagee.
(b) The Mortgagor will at its own cost and expense deliver to the Mortgagee
with reasonable promptness, but in no event more than ninety (90) days after the
end of each fiscal year of the term hereof, financial statements, a balance
sheet and statement of profit and loss for Mortgagor, American Tissue
Corporation and each Guarantor, setting forth in each case, in comparative form,
figures for the preceding year prepared by certified public accountants
reasonably satisfactory to Mortgagee. Such statements shall be in such form as
acceptable to Mortgagee and shall contain such information as is required under
generally accepted accounting principles consistently applied. Throughout the
term of this Mortgage, the Mortgagor with reasonable promptness will deliver to
the Mortgagee such other financial information with respect to the Mortgagor,
American Tissue Corporation and each Guarantor as the Mortgagee may reasonably
request from time to time. All financial statements of the Mortgagor and
American Tissue Corporation shall be delivered in duplicate, and shall be
accompanied by the certificate of the Mortgagor dated within five (5) days of
the delivery of such statements to the Mortgagee, stating that to the best of
its knowledge it knows of no Event of Default, nor of any default which after
notice or lapse of time or both would constitute an Event of Default, which has
occurred and is continuing, or if any such default or Event of Default has
occurred or is continuing, specifying the nature and the period of existence
thereof, and what action the Mortgagor has taken or proposes to take with
respect thereto, and, except as otherwise specified, stating that the Mortgagor
has fulfilled all its obligations under this Mortgage and the Documents which
are required to be fulfilled on or prior to the date of such certificate.
(c) The Mortgagor, within ten (10) days upon request by the Mortgagee, will
furnish a written statement duly acknowledged of the amount due whether for
principal or interest on this Mortgage and whether to the best of its knowledge
any offsets or defenses exist against the Mortgage Amount and, if any are
alleged to exist, the nature of each such offset or defense shall be set forth
in full detail.
(d) The Mortgagor, within ninety (90) days of the end of each fiscal year,
will furnish a written statement duly acknowledged setting forth the monthly
base rent and indicating thereon
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the date of and amount of each item of rent received and statements of operating
income and expenses for the Mortgaged Property.
Section 1.12. (a) The Mortgagor will not threaten, commit, permit or suffer
any waste to occur on or to the Mortgaged Property, or any part thereof, or
alter the Mortgaged Property or any part thereof in any manner or make any
change in its use which will in any way materially increase any risk of fire or
other hazards arising out of construction or operation of the Mortgaged
Property. The Mortgagor will, at all times, maintain the Mortgaged Property in
good operating order and condition and will promptly make, from time to time,
all repairs, renewals, replacements, additions and improvements in connection
therewith which are needful or desirable to such end. The Improvements shall not
be removed, demolished or substantially altered, nor shall any Chattels be
removed without the prior written consent of the Mortgagee, except where
appropriate replacements free of superior title, liens and claims are
immediately made of value at least equal to the value of the Chattels removed.
(b) The Mortgagor will keep and maintain or cause to be kept and maintained
the Mortgaged Property and the sidewalks and curbs abutting the same in good
order and condition and in a rentable and tenantable state of repair and will
make or cause to be made, as and when the same shall become necessary, all
structural and nonstructural, exterior and interior, ordinary and extraordinary,
foreseen and unforeseen repairs, renewals and replacements necessary to that
end. In the event that the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or any other casualty, or in the event of a taking of
a portion of the Mortgaged Property as a result of any exercise of the power of
eminent domain, the Mortgagor shall promptly restore, replace, rebuild, or alter
the same as nearly as possible to the condition they were in immediately prior
to such fire, other casualty or taking, and shall take such other additional
actions and measures as shall be necessary to avoid any default or forfeiture
under any lease or any other applicable agreement. Although damage to or
destruction of the Mortgaged Property, or any portion thereof, shall not of
itself constitute a default hereunder except as otherwise provided herein, the
failure of the Mortgagor to restore, replace, rebuild or alter the same, as
hereinabove provided, shall constitute a default hereunder regardless of the
availability of insurance proceeds or condemnation awards for such purpose.
(c) The Mortgagor will promptly comply, or cause compliance with all
present and future laws, ordinances, rules, regulations and other requirements
of all governmental authorities whatsoever having jurisdiction of or with
respect to the Mortgaged Property or any portion thereof or the use and
occupation thereof.
(d) The Mortgagor will not, without the prior written consent of the
Mortgagee, initiate, join in, or consent to any change in any private
restrictive covenant, zoning ordinance, or other public or private restrictions
limiting or defining the uses which may be made of the Premises or any part
thereof.
(e) All covenants hereof shall be construed as affording to the Mortgagee
rights additional to and not exclusive of the rights conferred under the
provisions of Sections 254, 271
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and 272 of the Real Property Law of the State of New York or any other
applicable law of any other state. If there is a conflict between any provision
of this Mortgage and the provisions of Section 254 of the Real Property Law of
the State of New York or such law of such other state, the Mortgagor agrees that
the applicable provision of this Mortgage shall control.
Section 1.13. The Mortgagor, immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Premises or any
portion thereof, will notify the Mortgagee of the pendency of such proceedings.
The Mortgagee may participate in any such proceedings and the Mortgagor from
time to time will deliver to the Mortgagee all instruments requested by it to
permit such participation. In the event of such condemnation proceedings, the
award or compensation payable is hereby assigned to and shall be paid to the
Mortgagee up to the Mortgage Amount together with accrued interest, late charges
and disbursements made by Mortgagor and secured by this Mortgage. The Mortgagee
shall be under no obligation to question the amount of any such award or
compensation and may accept the same in the amount in which the same shall be
paid. In any such condemnation proceedings the Mortgagee may be represented by
counsel selected by the Mortgagee but the Mortgagor may appear by its counsel to
contest the amount of the condemnation award. The proceeds of any award or
compensation so received shall, be applied either, as provided for under Section
1.09 (c) to prepayment of the Note without prepayment premium or be paid over to
the Mortgagor for restoration of the Improvements. The Mortgagee shall not be
limited to the interest paid on the proceeds of any award or compensation, but
shall be entitled to the payment of interest by the Mortgagor at the rates
provided for herein or in the Note.
Section 1.14. (a) The Mortgagor will not, without the prior written consent
and approval of the Mortgagee in each instance, (i) execute an assignment of the
rents from the Mortgaged Property or any part thereof, (ii) in any other manner
impair the value of the Mortgaged Property or the security of the Mortgage.
Reference is made to Section 291-(f) of the Real Property Law, with respect to
the following: Mortgagor will not accept prepayments of any installments of
rents to become due under such leases, except prepayments in the nature of
security for the performance of the lessees thereunder, without obtaining in
each instance the prior written consent of Mortgagee. Mortgagor will (i) notify
Mortgagee of the terms of any new lease or modification within seven (7) days of
the execution of any such lease or modification; and (ii) will provide Mortgagee
with a copy of the same within ten (10) days of its execution.
(b) The Mortgagor will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or any part thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will do all
things necessary to compel performance by the lessee under each lease of all
obligations, covenants, and agreements by such lessee to be performed
thereunder. If any of such leases provide for the giving by the lessee of
certificates with respect to the status of such leases, the Mortgagor shall
exercise its right to request such certificates within five (5) days of any
demand therefor by the Mortgagee. The Mortgagor shall promptly notify the
Mortgagee of (i) the commencement of any action or proceeding by any lessee, the
purpose of which shall be the cancellation of any lease or diminution or offset
against the rent payable under any such
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lease, or (ii) the interposition by any lessee of any defense in any action or
proceeding brought by the Mortgagor against such lessee, or (iii) a written
notice received by the Mortgagor from any lessee claiming constructive eviction,
and will cause a copy of any process, pleading or notice received by the
Mortgagor in reference to any such action, defense or claim to be promptly
delivered to the Mortgagee.
(c) The Mortgagor shall furnish to the Mortgagee, within ten (10) days of
the expiration of the preceding fiscal year (or more often upon Mortgagee's
request) a written statement containing a schedule of all leases of all or any
part of the Premises, the names of the respective lessees, the terms of their
respective leases, the space occupied and the rentals payable thereunder, and,
if also requested, true copies of all such leases.
(d) Mortgagor shall not and shall have no right to permit the holder of any
subordinate mortgage or other subordinate lien, whether or not consented to by
Mortgagee, to terminate any lease of all or a portion of the Premises whether or
not such lease is subordinate (whether by law or the terms of such lease or a
separate agreement) to the lien of this Mortgage without first obtaining the
prior written consent of Mortgagee. The holder of any subordinate mortgage or
other subordinate lien shall have no such right, whether by foreclosure of its
mortgage or lien or otherwise, to terminate any such lease, whether or not
permitted to do so by Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective and void.
Section 1.15. The Mortgagor, which has simultaneously herewith executed an
assignment of leases, rents and profits which is incorporated herein by
reference, agrees to comply with the provisions thereof.
Section 1.16. To the extent not so provided by applicable law each lease of
the Premises, or any part thereof shall provide that, in the event of the
enforcement by the Mortgagee of the remedies provided for by law or by this
Mortgage, the lessee thereunder will, upon request of any person succeeding to
the interest of the Mortgagor as a result of such enforcement, automatically
become the lessee of said successor in interest, without change in the terms or
other provisions of such lease, provided, however, that said successor in
interest shall not be bound by (i) any payment of rent or additional rent for
more than one month in advance, except prepayments in the nature of security for
the performance by said lessee of its obligations under said lease, (ii) any
amendment or modification of the lease made without the consent of the Mortgagee
or such successor in interest, or (iii) any work required to be done by the
Mortgagor pursuant to the terms of said lease. Each such lease shall also
provide that, upon request by said successor in interest, such lessee shall
execute and deliver an instrument or instruments confirming such attornment.
Section 1.17. The Mortgagor agrees that if any action or proceeding be
commenced, excepting an action to foreclose this Mortgage or to collect the
indebtedness hereby secured, to which action or proceeding the Mortgagee is a
party by reason of the execution of this Mortgage or the Note which it secures,
or in which it becomes necessary to defend or uphold the lien of this Mortgage,
all sums paid by the Mortgagee for the expense of any litigation to prosecute or
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defend the transaction and the rights and lien created hereby (including,
without limitation, reasonable attorneys' fees) shall be paid by the Mortgagor
together with interest thereon from the date of payment by the Mortgagee at the
Default Rate. All such sums paid and the interest thereon shall be a lien upon
the Mortgaged Property, and shall be secured hereby.
Section 1.18. The Mortgagor agrees that in the event of the passage after
the date of this Mortgage of any law deducting any lien from the value of land
for the purpose of taxation, or changing in any way the laws now in force for
the taxation of mortgages or debts secured by a mortgage, or the manner of the
collection of any such taxes, so as to impose upon Mortgagee any tax that
previously would have been payable by Mortgagor, the whole of the principal sum
secured by this Mortgage, together with interest due thereon, shall at the
option of the Mortgagee, without notice to any party, become immediately due and
payable.
Section 1.19. The Mortgaged Property will be provided with adequate water,
sewer and other utility facilities at all times, in compliance with all
applicable laws and regulations.
Section 1.20. The Mortgagor shall not without first obtaining the written
consent of Mortgagee:
(a) except as permitted herein, sell, assign, lease, convey, mortgage,
pledge, hypothecate, make the subject of any security interest, exchange,
subdivide or permit to be divided into multiple condominium or cooperative
units, or in any other manner whatsoever, transfer or encumber all or part of,
or any interest in, or any of the rents derived from, or control of, the
Mortgage Property, or suffer or permit any of the foregoing to occur, whether by
operation of law or otherwise;
(b) except as permitted herein, effectuate or permit a reduction in the
ownership interests in Mortgagor held by any principal(s) of Mortgagor;
(c) effectuate or permit a closing of any public or private offering of
more than 49% of the ownership interests in Mortgagor or in any entity directly
or indirectly owning any interest in Mortgagor or the Mortgaged Property;
(d) effectuate or permit a transfer of the controlling interest in
Mortgagor.
"Transfer of the controlling interest in Mortgagor" includes, without
limitation, the following:
(i) the sale, assignment, issuance, redemption, diminution or pledge,
whether through a single transaction or a series of transactions, of more
than 49% of the direct or indirect ownership interest of or change in the
principals in Mortgagor or of any entity that directly or indirectly owns
or controls Mortgagor;
(ii) the modification of any organizational documents of Mortgagor or
of any entity that directly or indirectly owns or controls Mortgagor, if
the effect of such modification is
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to transfer more than 49% of the ownership or control of such entity or to
limit the liability of Mortgagor of any entity that directly or indirectly
owns or controls Mortgagor;
(iii) the dissolution or termination, whether by operation of law or
otherwise, of Mortgagor or of any entity that directly or indirectly owns
or controls Mortgagor;
(iv) any other transaction or series of transactions by which any
person(s) other than the principal(s) of Mortgagor obtain more than 49% of
the ownership or control of Mortgagor or the Mortgaged Property; or
(e) enter into any transaction with any director, officer, employee or
principal of Mortgagor
(f) agree in writing (whether on a conditional or unconditional basis) to
do any of the foregoing:
Nothing in this Section shall, however, prohibit the entering into of
leases that comply with this Mortgage, the Assignment of Leases, Rents and
Profits and any other applicable Documents, or in the event Mortgagor is a
cooperative apartment corporation, the transfer and mortgaging from time to time
of leases(s) to individual apartment units and the appurtenant shares. This
paragraph shall apply to each and every such transaction regardless of whether
Mortgagee has consented to or waived by action or inaction its rights hereunder
with respect to any such prior transaction.
Further, nothing in this Section shall, however, prohibit transfers to or
among members of the immediate family (spouses, children and grandchildren) of a
principal of Mortgagor or trust created for the benefit of such family members,
made in connection with bona fide estate planning of such principal or a
transfer of the Premises or interest in Mortgagor to an entity at least 51%
owned by the existing principals of Mortgagor.
Section 1.21. INTENTIONALLY DELETED.
Section 1.22. The Mortgagor will promptly perform and observe, or cause to
be performed or observed, all of the terms, covenants and conditions of all
instruments of record affecting the Mortgaged Property, noncompliance with which
shall affect the security of this Mortgage, or shall impose any duty or
obligation upon the Mortgagor or any lessee or other occupant of the Mortgaged
Property or any part thereof, and the Mortgagor shall do or cause to be done all
things necessary to preserve intact and unimpaired any and all easements,
appurtenances and other interests and rights in favor of or constituting any
portion of the Mortgaged Property.
Section 1.23. The Mortgagor will, in compliance with Section 13 of the Lien
Law, receive the advances secured hereby and will hold the right to receive such
advances as a trust fund to be
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applied first for the purpose of paying the cost of the Improvements and will
apply the same first to the payment of the cost of the Improvements before using
any part of the total of the same for any other purpose.
Section 1.24. The Mortgagee and its authorized representatives shall have
the right at all reasonable times during usual business hours to enter upon and
inspect all portions of the Mortgaged Property.
Section 1.25. (i) Mortgagor represents and warrants that except as
disclosed in the phase I Environmental Audit copies of which have been reviewed
by Mortgagee and upon the best of Mortgagor's knowledge after due inquiry and
investigation: (1) there has been no release, discharge or deposit of a
Hazardous Substance as defined (a) by either Section 9601(14) of Title 42 of the
United States Code, (including, but not limited to urea formaldehyde foam
insulation, asbestos in any form, di-electric fluids containing more than 50 ppm
of polychlorinated biphynls) or (b) by any environmentally related statute
enacted by the State of New York; or any other material hazardous to the health
and safety of users of Premises or those properties adjacent thereto
(collectively called "Hazardous Substances"); (2) Premises are not subject to
any order prohibiting such release, discharge or deposit of or directing cleanup
of or, payment of cleanup costs of Hazardous Substance issued by any
governmental agency; (3) Premises are in full compliance with all laws and
governmental regulations governing Hazardous Substances.
(ii) The Mortgagor covenants that the Mortgaged Property will be kept free
of Hazardous Substances during the term of this Mortgage and that if a release
occurs or there is reasonable cause therefor Mortgagor will periodically conduct
such tests and investigations for the presence of Hazardous Substances using
such engineers, or other experts, as Mortgagee may reasonably request, except
that Mortgagor shall be permitted to maintain for general housekeeping purposes
only certain brand name products containing Hazardous Substances, provided that
such substances are used and stored in accordance with Hazardous Substance laws.
(iii) Mortgagor has no knowledge of, and has received no notice of, any
litigation, administrative enforcement or regulatory actions or proceedings, or
any inquiry by any governmental authority, against Mortgagor or any other
person, nor has any settlement been reached by or with any party or parties,
public or private, alleging the presence or threatened presence of any Hazardous
Substances or the violation of any Hazardous Substances laws on, from, under or
in any portion of the Premises.
(iv) Mortgagor has obtained all certificates, permits, licenses, approvals
and authorizations necessary for the lawful construction, occupancy, use and
operation of the Premises and Improvements for the purposes for which they are
currently being used, including, but not limited to, any certificates, permits,
licenses, approvals and authorizations required by any federal, state, county,
regional or local authority whose jurisdiction includes, in whole or in part,
environmental protection or matters pertaining to health, safety and welfare.
Mortgagor has no knowledge of, and has received no notice of, any litigation or
other regulatory, administrative, judicial or legal proceedings which (i)
challenge the issuance of any of the certificates, permits,
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licenses, approvals and authorizations obtained for the Premises and
Improvements, or (ii) allege non-compliance by Mortgagor or the Premises and
Improvements with any law, regulation, rule or ordinance which has a material
effect on the operation, occupancy, leasing or use of the Premises and
Improvements for the purposes for which they are currently being used.
(v) Each tenant of the Premises has obtained all certificates, permits,
licenses, approvals and authorizations necessary for the lawful occupancy, use
and operation of its demised premises for the purposes for which it is currently
being used, including, but not limited to, any certificates, permits, licenses,
approvals and authorizations required by any federal, state, county, regional or
local authority whose jurisdiction includes, in whole or in part, environmental
protection or matters pertaining to health, safety and welfare. Mortgagor has no
knowledge of, and has received no notice of, any litigation or other regulatory,
administrative, judicial or legal proceedings which challenge the issuance of
any of the certificates, permits, licenses, approvals and authorizations
obtained by a tenant for its demised premises with any law, regulation, rule or
ordinance which has a material effect on the operation, occupancy, leasing or
use of the demised premises for the purposes for which it is currently being
used.
(vi) No waste or waste waters have been, or are being, treated, stored or
disposed of on the Premises, and no threatened damage to the environment
(including, but not limited to, ambient, air, surface water, groundwater, land
surface and subsurface) exists at the Premises.
(vii) No emission of air contaminants or pollutants has emanated or is
emanating from the Premises.
(viii) All surface water drains servicing the Premises have been
constructed in accordance with all applicable laws and ordinances and have been
properly connected to public or private storm or sanitary sewer lines which
either dispose of such water on site or carry such water off the Premises, and
such connection has been approved by all necessary parties and governmental
authorities.
(ix) All garbage, trash and other solid waste from or relating to the
Premises are and will be collected on a regular basis by the local municipality
or an independent commercial waste disposal company.
(x) Mortgagor shall keep and maintain the Premises in compliance with any
and all laws relating to Hazardous Substances and all other federal, state and
local laws, ordinances and regulations relating to industrial hygiene or to the
environmental conditions on, under or about the Premises. Mortgagor shall not
permit Hazardous Substances use at, to, from, in, under or about the Premises
other than as permitted under paragraph (ii) of this Section. Mortgagor shall
institute and implement diligently a program designed to cause all of its
tenants and all of Mortgagor's and its tenants' employees, agents, contractors
and subcontractors and any other person lawfully occupying or present on the
Premises to comply with all laws relating to Hazardous Substances. Mortgagor
shall enforce all rights and remedies available to it under the
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leases of the Premises, under applicable laws relating to Hazardous Substances
and under all other applicable laws, ordinances, rules, regulations and others
(including, but not limited to, under common law principles for liability
resulting from nuisance, negligence, strict liability in tort and waste) which
provide a cause of action or other basis for recovery of damages, for
indemnification, for the disclosure of information, or for injunctive relief, in
the event of Hazardous Substances use or other activities which do or may result
in any loss of value of, lost use of or other loss, damage or waste to the
Premises.
(xi) Mortgagor shall immediately notify Mortgagee in writing of (i) any and
all enforcement, cleanup, removal or other governmental or regulatory actions,
or litigation (whether public or private) relating to the Premises instituted,
contemplated or threatened pursuant to any Hazardous Substances laws or common
law principles, and of any notices received by Mortgagor with respect to the
foregoing; (ii) Mortgagor's discovery of any claim made or threatened by any
third party or governmental agency against Mortgagor or the Premises relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
any Hazardous Substances (the matters set forth in (i) and (ii) of this
subparagraph are hereinafter collectively referred to as "Hazardous Materials
Claims"). Mortgagor shall immediately deliver to Mortgagee copies of all notices
and legal documents relating to Hazardous Materials Claims. Mortgagee shall have
the right to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys' fees in connection therewith paid
by Mortgagor.
(xii) Subject to Mortgagor's right to contest in good faith and diligently
prosecute such contest, Mortgagor shall promptly comply, at Mortgagor's sole
cost and expense, with all requirements of any federal, state, county, local or
regional authority or court decree or order, as to the removal, treatment,
cleanup, disposal or regulation of Hazardous Substances and shall provide
Mortgagee with satisfactory evidence of such compliance. Mortgagor shall provide
Mortgagee with a bond, letter of credit or similar financial assurance
evidencing to Mortgagee's reasonable satisfaction that the necessary funds are
available to pay the cost of compliance with such requirements of any federal,
State, county, local or regional authority or court decree or order.
(xiii) Mortgagor shall not cause or suffer any liens to be recorded against
the Premises as a consequence of, or in any way related to, the presence or
disposal of Hazardous Substances in or about the Premises, including but not
limited to any federal, state or local so-called "Superfund" lien relating to
such matters.
(xiv) Mortgagor at all times shall defend, indemnify and hold Mortgagee
harmless from and against any and all liabilities (including strict liability)
(including by reason of Mortgagee's own ordinary, but not gross negligence or
willful misconduct), suits, causes of action, damages to property or
individuals, claims, demands, penalties, fines, damages (including but not
limited to interest, penalties, fines and monetary sanctions), losses, costs and
expenses (including but not limited to reasonable attorneys' fees and expenses),
and remediation and cleanup costs (collectively "Liabilities") that may now or
in the future be incurred or suffered by
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Mortgagee (including by reason of Mortgagee's own ordinary, but not gross
negligence or willful misconduct) because of, resulting from, in connection with
or arising in any manner whatsoever out of the breach of any warranty or
covenant, or the inaccuracy of any representation of Mortgagor contained or
referred to in this Section or that may be asserted as a direct or indirect
result of the presence of any Hazardous Substances on, in or under the Premises,
or any Hazardous Substances use on, at or from the Premises. Such Liabilities
shall also include, without limitation: (i) injury to or death of any person;
(ii) damage to or loss of the use of any property; (iii) the cost of any
demolition and rebuilding of any improvements on the Premises, repair or
remediation and the preparation for and completion of any activity required by
any federal, state, local, county or regional authority or court order or
decree; (iv) any lawsuit brought or threatened, good faith settlement reached,
or governmental order relating to the presence, disposal, release or threatened
release of any Hazardous Substances and (v) the imposition and removal of any
lien on the Premises arising from the activity of Mortgagor or Mortgagor's
predecessors in interest on the Premises or from the existence of Hazardous
Substances upon the Premises or Hazardous Substances use at, on or upon the
Premises, or the violation of any Hazardous Substances law. Any amounts expended
by Mortgagee in connection with any Liabilities, together with interest thereon
at the Default Rate shall be secured by this Mortgage and shall have the same
priority of collection as the principal indebtedness secured hereby until
Mortgagor reimburses Mortgagee pursuant to this indemnity.
(xv) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, this covenant to defend, indemnify and hold
Mortgagee harmless shall survive repayment of all indebtedness secured by this
Mortgage, transfer of the Premises by Mortgagor (including but not limited to
foreclosure sale of the Premises or delivery of a deed in lieu of foreclosure)
and assignment, assumption, modification, amendment, cancellation, release,
termination or discharge of the Note, and shall not be subject to any
anti-deficiency laws. The Mortgagee, for itself, its employees, agents, officers
and directors, hereby expressly agrees and acknowledges that the
indemnification, defend, protect and hold harmless provisions contained in this
Mortgage are limited to those conditions exiting on or prior to the earlier of
(i) acquisition of title to the Premises by Mortgagee, its successors or assigns
(ii) Mortgagee, its successors or successors or assigns becoming a mortgagee in
possession or (iii) the appointment of a receiver, and in no event shall any
indemnification, defend, protect or hold harmless provision extend to or include
the willful misconduct or gross negligence of Mortgagee, its successors,
assigns, employees, officers and directors. Anything in this Mortgage or the
Documents to the contrary notwithstanding, Mortgagor, except for the obligation
to defend itself in the event Mortgagor is named in any action, shall have no
liability to indemnify Mortgagee for any environmental conditions or events on
the Premises occurring or arising: (i) after Mortgagor's payment of the loan in
full and the discharge of record of the Documents; or, (ii) after the date on
which Mortgagor, with the consent of or as a result of the actions of Mortgagee,
no longer has fee title to the Premises; or, (iii) during any period in which
Mortgagor, with the consent of or as a result of the actions Mortgagee, does not
have possession and control of the Premises.
(xvi) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, any information provided to Mortgagee hereunder is
to allow Mortgagee to
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protect Mortgagee's security interest in the Premises and is not intended to
create any obligations upon Mortgagee with respect to the operation or ownership
of the Premises. Any rights, authority or approvals granted to Mortgagee by
Mortgagor or actions taken by Mortgagee under this section are solely to protect
Mortgagee's security interest in the Premises and are not intended to create any
obligations upon Mortgagee with respect to the operation or ownership of the
Premises.
(xvii) Mortgagor hereby grants to Mortgagee a permanent license for
ingress, egress and inspection for the purpose of entering upon the Premises for
making such inspections and tests as Mortgagee may deem necessary to determine
whether there is compliance with all environmental laws and regulations,
including those pertaining to wetlands.
(xviii) Mortgagee may retain for cause, at Mortgagor's sole cost and
expense, an environmental engineer or consultant (the "Engineer") to conduct
such investigations and tests as provided under subsection (xvii) above. The
engineer shall deliver the results of investigations and tests to Mortgagor and
to Mortgagee. Such results shall be kept confidential by both Mortgagor and
Mortgagee unless Mortgagee is legally compelled or required to disclose such
results or disclosure is reasonably required in order to pursue rights or
remedies provided herein or at law. Mortgagor shall promptly pay the cost of
such investigations and tests upon receipt of the Engineer's bill therefor. If
Mortgagor fails to pay said bills, Mortgagee may pay such bill, and until
reimbursed by Mortgagor, the amount of said payment shall be secured by this
Mortgage and shall accrue interest at the Default Rate until the date paid.
The Mortgagor unconditionally agrees that should the representations and
warranties made under this Section 1.25 be untrue, or should the Mortgagor
breach any provision of the Certificate and Indemnification regarding Hazardous
Substances between Mortgagor and Mortgagee of even date herewith or should
Mortgagor breach the obligation not to release, discharge or deposit Hazardous
Substances on the Premises, Mortgagor will unconditionally indemnify and hold
Mortgagee harmless from and on account of any claim, judgment, cleanup order, or
related expenses (including but not limited to reasonable attorneys' fees and
disbursements incurred by Mortgagee in defending any action, judgment or cleanup
order) in connection with any release, discharge or deposit of any Hazardous
Substances.
Section 1.26. The Mortgagor affirms that all information, reports, papers
and data given to Mortgagee with respect to any of the Premises or Mortgagor are
accurate in all material respects, and there has been no material adverse change
in any condition or fact stated therein.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. If one or more of the following Events of Default shall
happen, that is to say:
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(a) if (i) a default shall be made in the payment of any interest on the
Note, when and as the same shall become due and payable, and such default shall
have continued for a period of fifteen (15) days, or (ii) default shall be made
in any payment of the principal on the Note, when and as the same shall become
due and payable, and such default shall have continued for a period of fifteen
(15) days (whether at maturity or by acceleration or otherwise), in each case,
as in the Note and this Mortgage provided or, (iii) default shall be made in the
payment of any tax required by Section 1.07 to be paid and said default shall
have continued for a period of thirty (30) days, or (iv) default shall be made
in the due observance or performance of any covenant or agreement on the part of
the Mortgagor contained in Sections 1.01, 1.14, 1.21, 1.22, 1.25 or 3.11 hereof
(for the purposes of this clause, and for subparagraph (b) below, if any
representation made in Sections 1.01 and 1.25 shall be incorrect, it shall be
deemed to be a default) and such default shall have continued for a period of
more than thirty (30) days after written notice thereof shall have been given to
the Mortgagor by the Mortgagee; or
(b) if default shall be made in the due observance or performance of any
other covenant or agreement on the part of the Mortgagor contained herein and
such default shall have continued for a period of thirty (30) days after written
notice thereof shall have been given to the Mortgagor by the Mortgagee; or
(c) if default shall be made in the due observance or performance of the
covenants or agreements on the part of the Mortgagor contained in Sections 1.09
or 1.20 hereof, which shall be unremedied for a period of more than twenty (20)
days after written notice thereof shall have been given to the Mortgagor by the
Mortgagee; or
(d) if any other Event of Default shall occur under the Note or the
Documents not specifically referred to above, or if any such Documents shall not
contain "Events of Default" and default shall be made in the due observance,
performance or fulfillment of any other covenant or condition on the part of the
Mortgagor or borrower contained in any such Document, and such default shall
have continued for a period of thirty (30) days after written notice thereof
shall have been given to the Mortgagor by the Mortgagee or if such default is by
its nature not susceptible of curing within such thirty (30) day period if
Mortgagor does not commence curing the default within such period and does not
diligently pursue such curing to a successful conclusion; or
(e) if any proceedings are commenced for the condemnation of any part of
the Mortgaged Premises, which condemnation would have, in the opinion of the
Mortgagee, a material adverse effect on the value of the remaining security
hereunder; or
(f) if any easement over, across or under or otherwise affecting the
Mortgaged Property or any portion thereof shall be granted without the
Mortgagee's prior written consent not to be unreasonably withheld; or
(g) if there occur any other event, which if unremedied, would require a
change in the survey delivered to Mortgagee at time of closing; or
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(h) if the holder of or any lien or encumbrance on the Mortgaged Property,
or any part thereof, institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder, which foreclosure or other proceedings
are not discharged (without affecting the Mortgaged Property) or bonded within
thirty (30) days from the institution thereof (this subsection (i) shall not be
construed to imply that the Mortgagee consents to any junior lien or
encumbrance); or
(i) if there should occur any material adverse change in financial
conditions of Mortgagor, American Tissue Corporation or any Guarantor which
remains unremedied for a period of thirty (30) days which in Mortgagee's
judgment, reasonably exercised would adversely impact mortgagor's ability to pay
the Note; or
(j) if Mortgagor or any Guarantor shall:
(i) default in respect of payment of interest ("basic or default") or
principal or default in payment of any other liabilities, obligations or
agreements (present or future, absolute or contingent, secured or
unsecured, matured or unmatured, several or joint, original or acquired) of
any of them to or with Mortgagee;
(ii) declare voluntary insolvency, as defined in the Bankruptcy Code,
as amended:
(iii) assign their assets including assignments for the benefit of
creditors;
(iv) appoint a committee of any creditors or liquidating agent;
(v) offer to or receive from any creditors a composition or extension
of any of their indebtedness;
(vi) grant a security interest or mortgage in any property pledged or
mortgaged pursuant to this Mortgage;
(vii) suspend, wholly or partially, or liquidate their usual business;
(viii) die (as to both guarantors) if an individual or dissolve, if a
partnership, limited liability company or corporation;
(ix) fail to pay or discharge any mechanic's lien filed against
Premises within thirty (30) days of the date filed;
and such default shall have continued for a period of fifteen (15) days (90
days if due to the death of both Guarantors) after written notice shall have
been given to the Mortgagor by the Mortgagee; or
(1) if with respect to Mortgagor or any Guarantor there has been:
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(i) commenced any involuntary proceeding, suit or action (at law, or
in equity, or under any of the provisions of any Bankruptcy Code or
amendments thereto, or any other insolvency act or law, state or federal,
now or hereafter existing) for adjudication as a bankrupt, reorganization,
composition, extension, arrangement, wage earners' plan, receivership,
liquidation, dissolution which is not dismissed within thirty (30) days
from the date initiated, or any similar proceeding, initiated by or against
it;
(ii) made an application by any of them for the appointment, or the
appointment in any jurisdiction, at law or in equity, of any receiver,
conservator, rehabilitator or similar officer or committee of, or of the
property of, any of them;
(iii) Made any tax assessment by the United States or any state not
discharged within thirty (30) days;
(iv) entered a judgment in excess of $500,000.00 against or issuance
of an order of attachment or an injunction against any of the property of
any of them not satisfied or discharged within thirty (30) days;
Then in any such event,
I. The Mortgagee may declare the entire principal of the Note then
outstanding (if not then due and payable), and all accrued and unpaid interest
thereon, to be due and payable immediately, and upon any such declaration the
principal of the Note and said accrued and unpaid interest shall become and be
immediately due and payable, anything in the Note or in this Mortgage to the
contrary notwithstanding;
II. The Mortgagee personally, or by its agents or attorneys, may enter into
and upon all or any part of the Premises and each and every part thereof, and
may exclude the Mortgagor, its agents and servants wholly therefrom; and having
and holding the same, may use, operate, manage and control the Premises or any
part thereof and conduct the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or receivers; and upon
every such entry, the Mortgagee, at the expense of the Mortgagor, from time to
time, either by purchase, repairs or construction, may maintain and restore the
Mortgaged Property, whereof it shall become possessed as aforesaid, may complete
the construction of the Improvements and in the course of such completion may
make such changes in the contemplated Improvements as it may deem desirable and
may insure the same; and likewise, from time to time, at the expense of the
Mortgagor, the Mortgagee may make all necessary or proper repairs, renewals and
replacements and such useful alterations, additions, betterments and
improvements thereto and thereon as to it may seem advisable; and in every such
case the Mortgagee shall have the right to manage and operate the Mortgaged
Property and to carry on the business thereof and exercise all rights and powers
of the Mortgagor with respect thereto either in the name of the Mortgagor or
otherwise as it shall deem best; and the Mortgagee shall be entitled to collect
and receive all gross receipts, earnings, revenues, rents,
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issues, profits and income of the Mortgaged Property and every part thereof, all
of which shall for all purposes constitute property of the Mortgagee; and after
deducting the expenses of conducting the business thereof and of all
maintenance, repairs, renewals, replacements, alterations, additions,
betterments and improvement and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property or any
part thereof, as well as just and reasonable compensation for the services of
the Mortgagee and for all attorneys, counsel, agents, clerks, servants and other
employees by it properly engaged and employed, the Mortgagee may apply the
monies arising as aforesaid in such manner and at such times as the Mortgagee
shall determine in its discretion to the payment of the indebtedness secured
hereby and the interest thereon, when and as the same shall become payable
and/or to the payment of any other sums required to be paid by the Mortgagor
under this Mortgage or the Documents; and
Ill. The Mortgagee, with or without entry, personally or by its agents or
attorneys, insofar as applicable, may:
(i) institute proceedings for the complete or partial foreclosure of this
Mortgage; or
(ii) take such steps to protect and enforce its rights whether by action,
suit or proceeding in equity or at law for the specific performance of any
covenant, condition or agreement in the Note, this Mortgage, or the other
Documents or in aid of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate legal or
equitable remedy or otherwise as the Mortgagee shall elect.
Section 2.02. (a) The Mortgagee may adjourn from time to time any sale by
it to be made under or by virtue of this Mortgage by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, the Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by the Mortgagee under or
by virtue of this Article II, the Mortgagee, or any officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument; or good and sufficient instruments,
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. The Mortgagor, if so requested by the
Mortgagee, shall ratify and confirm any such sale or sales by executing and
delivering to the Mortgagee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of the Mortgagee, for the
purpose, and as may be designated in such request. Any such sale or sales made
under or by virtue of this Article II, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
the Mortgagor in and to the properties, interests and rights so sold, and shall
be a perpetual bar both at law and in equity against the Mortgagor and
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against any and all persons claiming or who may claim the same, or any part
thereof from, through or under the Mortgagor.
(c) In the event of any sale made under or by virtue of this Article II
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale), the
entire principal of, and interest on, the Note, if not previously due and
payable, and all other sums required to be paid by the Mortgagor pursuant to
this Mortgage, immediately thereupon shall, anything in the Note or in this
Mortgage to the contrary notwithstanding, become due and payable.
(d) The purchase money, proceeds or avails of any sale made under or by
virtue of this Article II, together with any other sums which then may be held
by the Mortgagee under this Mortgage, whether under the provisions of this
Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale, and of any
judicial proceedings wherein the same may be made, including reasonable
compensation to the Mortgagee, its agents and attorneys, and of all expenses,
liabilities and advances made or incurred by the Mortgagee under this Mortgage,
together with interest at the Default Rate on all advances made by the Mortgagee
and all taxes or assessments paid by Mortgagee except any taxes, assessments or
other charges subject to which the Mortgaged Property shall have been sold.
Second: To the payment of the whole amount then due, owing or unpaid upon
the Note for interest and any balance remaining to be applied to principal, with
interest on the unpaid principal calculated at the Default Rate from and after
the happening of any default described in clause (a)(i), (ii) or (iii) of
Section 2.01 from the due date of any such payment of principal until the same
is paid.
Third: To the payment of any other sums required to be paid by the
Mortgagor pursuant to any provision of this Mortgage, of the Note, or of the
other Documents, all with interest at the Default Rate, from the date such sums
were or are required to be paid under this Mortgage, the Note or the other
Documents.
Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
(e) Upon any sale made under or by virtue of this Article II, by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, the
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness of the Mortgagor secured by this Mortgage the
net sales price after deducting therefrom the expenses of the sale and the costs
of the action and any other sums which the Mortgagee is authorized to deduct
under this Mortgage.
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Section 2.03. (a) In case an Event of Default described in this Article II
shall have happened, then, upon written demand of the Mortgagee, the Mortgagor
will pay to the Mortgagee the whole amount which then shall have become due and
payable on the Note, for principal and interest or both, as the case may be, and
after the happening of said Event of Default will also pay to the Mortgagee
interest at the Default Rate on the then unpaid principal of the Note, and the
sums required to be paid by the Mortgagor pursuant to any provision of this
Mortgage and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation to
the Mortgagee, its agents, and attorneys and any expenses incurred by the
Mortgagee hereunder. In the event the Mortgagor shall fail forthwith to pay such
amounts upon such demand, the Mortgagee shall be entitled and empowered to
institute such action or proceedings at law or in equity as may be advised by
its counsel for the collection of the sums so due and unpaid, and may prosecute
any such action or proceedings to judgment or final decree and may enforce any
such judgment or final decree against the Mortgagor and collect out of the
property of the Mortgagor wherever situated, as well as out of the Mortgaged
Property, in any manner provided by law, monies adjudged or decreed to be
payable with interest thereon at the Default Rate.
(b) The Mortgagee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage or any guarantee executed by any Guarantor and
the right of the Mortgagee to recover such judgment shall not be affected by any
entry or sale hereunder, or by the exercise of any other right, power or remedy
for the enforcement of the provisions of this Mortgage, or the foreclosure of
the lien hereof; and in the event of a sale of the Mortgaged Property or any
part thereof and of the application of the proceeds of sale, as in this Mortgage
provided, to the payment of the indebtedness hereby secured, the Mortgagee shall
be entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Note, and to enforce payment of all other charges, payments
and costs due under this Mortgage, and shall be entitled to recover judgment for
any portion of the debt remaining unpaid, with interest thereon at the Default
Rate. In case of proceedings against the Mortgagor in insolvency or bankruptcy
or any proceedings for its reorganization or involving the liquidation of its
assets, then the Mortgagee shall be entitled to prove the whole amount of
principal and interest due upon the Note to the full amount thereof, and all
other payments, charges and costs due under this Mortgage, provided, however,
that in no case shall the Mortgagee receive a greater amount than such principal
and interest and such other payments, charges and costs from the aggregate
amount of the proceeds of the sale of the Mortgaged Property or any part thereof
and the distribution from the estate of the Mortgagor.
(c) No recovery of any judgment by the Mortgagee and no levy of any
execution under any judgment upon the Mortgaged Property or upon any other
property of the Mortgagor shall affect in any manner or to any extent, the lien
of this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of the Mortgagee hereunder, but such liens, rights,
powers and remedies of the Mortgagee shall continue unimpaired as before.
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(d) Any monies thus collected by the Mortgagee under this Section 2.03
shall be applied by the Mortgagee in accordance with the provisions of paragraph
(d) of Section 2.02.
Section 2.04. After the happening of any Event of Default and immediately
upon the commencement of any action, suit or other legal proceedings by the
Mortgagee to obtain judgment for the principal of, or interest on, the Note and
other sums required to be paid by the Mortgagor pursuant to any provisions of
this Mortgage, or of the Documents, or of any nature in aid of the enforcement
of the Note or of this Mortgage, the Mortgagor does hereby consent to the
appointment of a receiver or receivers of the Mortgaged Property or any part
thereof or any business or businesses conducted thereon and of all the earnings,
revenues, rents, issues, profits and income thereof. After the happening of any
Event of Default, or upon the commencement of any proceedings to foreclose this
Mortgage or to enforce the specific performance hereof or in aid thereof or upon
the commencement of any other judicial proceeding to enforce any right of the
Mortgagee, the Mortgagee shall be entitled, as a matter of right, if it shall so
elect, without the giving of notice to any other party and without regard to the
adequacy or inadequacy of any security for the Mortgage indebtedness, forthwith
either before or after declaring the unpaid principal of the Note to be due and
payable, to the appointment of such receiver or receivers.
Section 2.05. Notwithstanding the appointment of any receiver, liquidator
or trustee of the Mortgagor, or of any of its property, or of the Mortgaged
Property or any part thereof, the Mortgagee shall be entitled to retain
possession and control of all property now or hereafter held under this
Mortgage.
Section 2.06. No remedy herein conferred upon or reserved to the Mortgagee
is intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission of the Mortgagee to exercise any right or power accruing
upon any Event of Default shall impair any such rights or power, or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein; and every power and remedy given by this Mortgage to the Mortgagee may
be exercised from time to time as often as may be deemed expedient by the
Mortgagee. Nothing in this Mortgage or in the Note shall affect the obligation
of the Mortgagor to pay the principal of, and interest on, the Note in the
manner and at the time and place therein respectively expressed.
Section 2.07. Neither the Mortgagor or any Guarantor will at any time
insist upon, or plead, or in any manner whatsoever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Mortgage or any guarantee, nor claim, take or
insist upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisal of the Mortgaged Property, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision herein, or pursuant to the decree, judgment, or order of any court of
competent jurisdiction, and covenants not to hinder, delay or
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impede the execution of any power herein granted or delegated to the Mortgagee,
but to suffer and permit the execution of every power as though no such law or
laws had been made or enacted. The Mortgagor and any Guarantors, for themselves
respectively and all who may claim under either of them, waive, to the extent
that they lawfully may, all right to have the Mortgaged Property or any part
thereof marshaled upon any foreclosure hereof.
Section 2.08. During the continuance of any Event of Default and pending
the exercise by the Mortgagee of its right to exclude the Mortgagor from all or
any part of the Premises, the Mortgagor agrees to pay the fair and reasonable
rental value for the use and occupancy of the Premises or any portion thereof
which are in its possession for such period and, upon default of any such
payment, will vacate and surrender possession of the Premises to the Mortgagee
or to a receiver, if any, and in default thereof may be evicted by any summary
action or proceeding for the recovery of possession of the premises for
nonpayment of rent, however designated.
ARTICLE Ill
MISCELLANEOUS
Section 3.01. All of the grants, covenants, terms, provisions and
conditions herein shall run with the land and shall apply to, bind and inure to
the benefit of, the successors and assigns of the Mortgagor and the successors
and assigns of the Mortgagee. If there be more than one mortgagor, the covenants
and warranties hereof shall be joint and several. As used herein, the singular
shall include the plural as the context requires.
Section 3.02. In the event any one or more of the provisions contained in
this Mortgage or in the Note or in any of the other Documents shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceabiity shall, at the option of the Mortgagee,
not affect any other provision of this Mortgage, but this Mortgage shall be
construed as if such invalid illegal or unenforceable provision had never been
contained herein or therein.
Section 3.03. All notices hereunder shall be in writing and shall be deemed
to have been sufficiently given or served for all purposes when presented
personally or sent by registered or certified mail to any party hereto at its
address above stated, in the case of the Mortgagee, Attention: R. Martin Hall,
Correspondent Lending, with a copy sent to Payne, Wood & Littlejohn, 290 Broad
Hollow Road, Melville, New York 11747, Attention: Alan C. Polacek, Esq., and in
the case of Mortgagor, Attention: Mr. Nourollah Elghanayan, with a copy sent to
Mandel & Resnik at 220 East 42nd Street, New York, New York 10017 Attn: Nicholas
J. Kaiser, Esq. or at such other address of which it shall have notified the
party giving such notice in writing. Any written notice sent by registered or
certified mail shall be deemed to have been served two (2) business days after
the date it was mailed in accordance with the foregoing provisions.
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Section 3.04. Whenever in this Mortgage the giving of notice by mail or
otherwise is required, the giving of such notice may be waived in writing by the
person or persons entitled to receive such notice.
Section 3.05. This Mortgage, and any instruments made in connection
herewith, may be assigned by the Mortgagee without notice to, or the consent of,
the Mortgagor or any other party.
Section 3.06. The information set forth on the cover hereof is hereby
incorporated herein.
Section 3.07. The Default Rate provided for herein shall continue to accrue
and be paid on any amount to which the Default Rate is applied until said amount
is paid in full.
Section 3.08. This Mortgage shall be construed and enforced according to
the laws of the State of New York.
Section 3.09. Neither this Mortgage nor any provision hereof may be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the Mortgagee.
Section 3.10. This Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code with respect to the fixtures and
items of personal property referred to in this Mortgage, and with respect to all
replacements thereof, substitutions therefor or additions thereto together with
Mortgagor's interest in subdivision maps, surveys, building permits, engineering
and architectural plans and studies, building materials, work in progress and
the like (all of such items sometimes herein referred to as the "Collateral"),
and that a security interest shall attach thereto for the benefit of the
Mortgagee to secure the payment and performance of the Mortgagor's obligations
under the Note, this Mortgage, and any Documents executed in connection
therewith. The Mortgagor hereby authorizes the Mortgagee to file continuation
financing statements without the signature of the Mortgagor whenever lawful;
otherwise the Mortgagor agrees to execute such financing and continuation
statements as the Mortgagee may request. In the event of a default under the
Note, this Mortgage, or any Documents executed in connection therewith, the
Mortgagee may, in addition to all other rights or remedies it may have in such
event, exercise any right or remedy with respect to the Collateral which it may
have as a Secured Party under the provisions of the Uniform Commercial Code or
otherwise, including, without limitation, Section 9-501(4) of the Uniform
Commercial Code, and shall have the option of proceeding as to both real and
personal property in accordance with its rights and remedies in respect of real
property, in which event the default provisions of the Uniform Commercial Code
shall not apply. The parties agree that in the event the Mortgagee elects to
proceed with respect to the Collateral separately from the real property, ten
(10) days notice of the sale of the Collateral shall be reasonable notice. The
reasonable expenses of retaking, holding, preparing for sale, selling and the
like incurred by the Mortgagee shall include, but not be limited to, reasonable
attorneys' fees and legal expenses incurred by the Mortgagee. The Mortgagor
agrees that, without the written consent of the
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Mortgagee, the Mortgagor will not remove or permit to be removed from the
Mortgaged Property any of the Collateral except either for replacement by items
of substantially the same utility and value or temporarily for repair. All
replacements, renewals and additions to the Collateral shall be and become
immediately subject to the security interest of this Mortgage and this agreement
and be covered thereby. The Mortgagor shall, from time to time on request of the
Mortgagee, deliver to such Mortgagee an inventory of the Collateral in
reasonable detail. This Mortgage shall be deemed to be a Security Agreement
pursuant to the Uniform Commercial Code of the State in which the Mortgaged
Property or any part thereof is located.
Section 3.11. (a) The Mortgagor represents and warrants to the Mortgagee
that the Premises do not comprise property identified by the Secretary of
Housing and Urban Development as an area having special flood hazards, or to the
contrary, that the Premises have been so identified but that the Premises has
been insured under the National Flood Insurance Act of 1968, as amended by Flood
Disaster Protection Act of 1973.
(b) The Mortgagor covenants and warrants that if the Premises are so
identified by the Secretary of Housing and Urban Development as having special
flood hazards, it will keep the Premises insured against loss by flood hazards
in an amount at least equal to the outstanding principal balance of the Note
secured by this Mortgage, or to the maximum limit of coverage made available
with respect to the particular type of property under the National Flood
Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973,
whichever is less.
Section 3.12. Wherever "attorneys' or counsel fees" are referred to herein,
it shall include such fees whether incurred out of court or in litigation,
including, without limitation, appeals and bankruptcy proceedings.
Section 3.13. Whenever reference is made in this Mortgage to a lease,
lessee, tenancy or tenant, such reference shall be deemed to include a sublease,
sublessee, subtenancy or subtenant, as the case may be.
Section 3.14. To the maximum extent not prohibited by law, any controversy,
dispute or claim arising out of, in connection with, or relating to the Note or
any of the other Documents or any transaction provided for therein, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Documents, shall, at the
request of any party to the Documents (either before or after the commencement
of judicial proceedings), be settled by arbitration pursuant to Title 9 of the
United States Code, which the parties hereto acknowledge and agree applies to
the transaction involved herein, and in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"). In any
such arbitration proceeding: (i) all statutes of limitation which would
otherwise be applicable shall apply; and (ii) the proceeding shall be conducted
in Albany, New York, by a single arbitrator, if the amount in controversy is $1
million or less, or by a panel of three arbitrators if the amount in controversy
is over $1 million. All arbitrators shall be selected by the process of
appointment from a panel pursuant to
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section 13 of the AAA Commercial Arbitration Rules and each arbitrator will have
AAA-acknowledged expertise in the appropriate subject matter. Any award rendered
in any such arbitration proceeding shall be final and binding, and judgment upon
any such award may be entered in any court having jurisdiction.
If any party to the Note or other Documents files a proceeding in any court
to resolve any such controversy, dispute or claim, such action shall not
constitute a waiver of the right of such party or a bar to the right of any
other party to seek arbitration under the provisions of this Section of that or
any other claim, dispute or controversy, and the court shall, upon motion of any
party to the proceeding, direct that such controversy, dispute or claim be
arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator
may construe ambiguous terms) the Note or any other Document, (iii) enter
judgment on the debt, (iv) exercise equitable powers or issue or enter any
equitable remedies or (v) allow discovery of attorney/client privileged
information. The Commercial Arbitration Rules of the AAA are hereby modified to
this extent for the purpose of arbitration of any dispute, controversy or claim
arising out of, in connection with, or relating to any Document. The parties
further waive, each to the other, any claims for punitive damages, and agree
that neither an arbitrator nor any court shall have the power to assess punitive
damages.
No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Documents before, during or after
any arbitration proceeding to: (i) exercise self-help remedies such as set off
or repossession; (ii) foreclose (judicially or otherwise) any lien on or
security interest in any real or personal property collateral; or (iii) obtain
emergency relief from a court of competent jurisdiction to prevent the
dissipation, damage, destruction, transfer, hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Documents. Such emergency relief may be in the nature
of, but is not limited to: pre-judgment attachments, garnishments,
sequestrations, appointments of receivers, or other emergency injunctive relief
to preserve the status quo.
In the event applicable law prohibits the submission of a particular
controversy, dispute, or claim arising out of or in connection with any of the
Documents or transactions contemplated therein to arbitration, Mortgagor and
Mortgagee agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Premises is located or any other court in which
Mortgagee shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy. Mortgagor and Mortgagee, to the
extent permitted by applicable law, waive any right to assert the doctrine of
forum non-conveniens or to object to the venue to the extent any proceeding is
brought in accordance with this paragraph.
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Section 3.15. Except as otherwise provided herein concerning transfers if
the Mortgagor or American Tissue Corporation shall sell, transfer, or otherwise
dispose of their respective interests in the Mortgaged Property, or any part
thereof without the prior consent in writing of the Mortgagee, the Mortgagee
may, at its option, declare the entire indebtedness hereby secured to be
immediately due and payable, without notice to the Mortgagor (which notice the
Mortgagor hereby expressly waives) and upon such declaration the entire
indebtedness hereby secured shall be immediately due and payable, anything
herein or in any bond, note or obligation of the Mortgagor to the contrary
notwithstanding.
Section 3.16. If the payment of the mortgage indebtedness is now or
hereafter further secured by assignments of leases or rentals, security
agreements, financing statements, mortgages, collateral assignments, pledges,
contracts of guaranty, letters of credit or other additional security documents,
any default beyond applicable notice and grace periods under the provisions of
any such further security documents shall constitute and be a default under this
Mortgage, and the Mortgagee may, at its option, exhaust any one or more of the
said security documents and the security thereunder as well as the Mortgaged
Property covered by this Mortgage either concurrently or independently and in
such other and further manner as the Mortgagee may elect, and Mortgagee may
apply the proceeds received therefrom upon the Mortgage indebtedness without
waiving or affecting Mortgagee's rights and remedies under this Mortgage
exercised hereunder or whether contained or exercised under any other such
security documents.
Section 3.17. It is the intent of Mortgagee, Mortgagor, Guarantors, and all
other parties to the Documents, to conform to and contract in strict compliance
with applicable usury law from time to time in effect. All agreements between
Mortgagee or any other holder of the Note and Mortgagor (or any other party
liable with respect to any indebtedness under the Documents) are hereby limited
by this provision, which shall override and control all such agreements. In no
way, nor in any event or contingency (including but not limited to prepayment,
default, demand for payment, or acceleration of the maturity of any obligation,
or the recharacterization of any Application Fees, Standby Fees, Underwriting
Fees, or any other fees required hereunder or under the Documents as interest),
shall the interest taken, reserved, contracted for, charged or received under
the Note, or otherwise, exceed the maximum nonusurious amount permissible under
applicable law. If, from any possible construction of any document, interest
would otherwise be payable in excess of the maximum nonusurious amount, any such
construction shall be subject to this provision and such document shall be
automatically reformed and the interest payable shall be automatically reduced
to the maximum nonusurious amount permitted under applicable law, without the
necessity of execution of any amendment or new document. If the holder thereof
shall ever receive anything of value that is characterized as interest under
applicable law and that would apart from this provision, be in excess of the
maximum nonusurious amount, an amount equal to the amount that would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the indebtedness evidenced thereby in the inverse
order of its maturity and not to the payment of interest, or refunded to
Mortgagor or the other payor thereof if and to the extent such amount, which
would have been excessive, exceeds such unpaid principal. The right to
accelerate
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maturity of the Note, or any other indebtedness, does not include the right to
accelerate any interest that has not otherwise accrued on the date of such
acceleration, and the holder thereof does not intend to charge or receive any
unearned interest in the event of acceleration. All interest paid or agreed to
be paid to the holder thereof shall, to the extent permitted by applicable law,
be amortized, protected, allocated, and spread throughout the full stated term
(including any renewal or extension) of such indebtedness so that the amount of
interest on account of such indebtedness does not exceed the maximum
non-usurious amount permitted by applicable law; as used in this paragraph
"applicable law" shall mean the laws of the State of New York or the federal
laws of the United States, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.
Section 3.18. Nothing contained herein shall create any joint venture,
partnership, agency or trust arrangement between Mortgagor and Mortgagee.
Section 3.19. At reasonable intervals, but not more frequently than once
during each 12 month period, the Mortgagee may order a re-appraisal of the
Premises by an independent appraiser of its selection, or by a Mortgagee
employee, and Mortgagor agrees to allow access to the Premises to such
independent appraiser or Mortgagee employee, and in the case of an independent
appraiser retained after an Event of Default to pay to the Mortgagee, within 30
days of billing, such appraiser's reasonable fee and expenses.
Section 3.20. This Mortgage secures the Note and all amendments,
replacements, substitutions and extensions thereof.
Section 3.21. INTENTIONALLY DELETED.
Section 3.22. Except as otherwise specifically provided in this Mortgage by
applicable grace periods, time is of the essence in the performance by Mortgagor
or each and every obligation required by it to be performed by this Mortgage.
Section 3.23. The covenants contained in this Mortgage shall run with the
land and bind the Mortgagor, his successors and assigns and all subsequent
owners, encumbrancers, tenants and subtenants of the Premises, and shall enure
to the benefit of the Mortgagee, the personal representatives, successors and
assigns of the Mortgagee and all subsequent holders of this Mortgage.
Section 3.24. The parties hereto, for and on behalf of themselves and their
successors in interest, agree that should any agreement be hereafter entered
into modifying or changing the terms of this Mortgage in any particular, the
rights of the parties to such agreement shall, pursuant to the terms thereof, be
superior to the rights of the holder of any subordinate lien.
Section 3.25. Mortgagor covenants and warrants that:
(a) Mortgagor will not use the assets of an employee benefits plan, as
defined in
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<PAGE>
Section 3(3) of the Employee Retirement income Security Act of 1974, as now or
hereafter amended ("ERISA"), in the exercise of any of its obligations or right
specified herein or in the Note or in any other instrument which may be held by
Mortgagee as evidence of or security for the obligations secured or in the
performance of any transaction contemplated hereunder or under the Note or under
any other instrument which may be held by Mortgagee as additional security for
the Note;
(b) The Mortgaged Premises do not, and without the written consent of
Mortgagee will not, constitute an asset of such an employee benefit plan; and
(c) Mortgagor will not sell, convey or transfer the Mortgaged Premises to a
person or entity which could not satisfy the undertakings set forth in
subsections (a) and (b) of this Section regardless of whether any of the
above-described conditions arise by operation of law or otherwise.
Section 3.26 This Mortgage may, by separate future written agreement
between Mortgagor and Mortgagee, be split from time to time into two or more
separate mortgages with an aggregate principal balance equal to the principal
balance of the indebtedness secured by this Mortgage at such time (the "Debt")
each of which separate mortgages shall encumber and continue to constitute a
lien on the Mortgaged Property. If Mortgagor and Mortgagee agree to split this
Mortgage, then the parties shall do any act or execute any additional documents
necessary to implement such splitting of this Mortgage, including a splitter and
modification agreement, severed mortgages and severed notes in the aggregate
principal balance of the Debt, all in form and substance satisfactory to
Mortgagor and the title insurance company insuring this Mortgage (or insuring
any severed mortgage arising from a splitting of this Mortgage), all in
furtherance of the provisions of this paragraph.
Section 3.27 In the event that any payment shall become overdue for a
period in excess of five days, a "late charge" of 5 cents for every dollar of
any installment so overdue may be charged by the Mortgagee for the purpose of
defraying the expense incident to handling such delinquent payment. Failure to
pay such "late charge" shall be deemed a default under the terms of this
Mortgage.
Section 3.28. This Mortgage may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original; and all such counterparts shall together constitute but one and the
same Mortgage.
Section 3.29. Mortgagee shall have the right to approve the management of
and the management contract for the Premises. It shall be a default hereunder if
Mortgagee at any time, and from time to time, notifies Mortgagor in writing that
the management of the Premises is not reasonably satisfactory, and Mortgagor
does not promptly change such management or effect such changes in management
practices or take such steps as one required to make it satisfactory to
Mortgagee. Mortgagor shall not amend, modify or cancel any approved management
contract nor enter into a new management contract without prior written consent
of
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<PAGE>
Mortgagee not to be unreasonably withheld.
Section 3.30. Notwithstanding anything contained herein to the contrary,
Mortgagor has applied to the Town of Waterford Industrial Development Agency
("IDA") for a reduction in taxes based on Borrower's improvements to the
Premises. Such application contemplates a transfer of the Premises to IDA with a
lease back to Mortgagor. Mortgagee agrees to consider such transfer subject to
Mortgagee's review and approval of the documents evidencing the transaction
between Mortgagor and IDA.
IN WITNESS WHEREOF, this Mortgage has been duly executed by the Mortgagor
on the date first above written.
GRAND LLC
By:/s/ N. Elghanayan
---------------------------------
Nourollah Elghanayan, Member
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<PAGE>
STATE OF NEW YORK, )
: ss:
COUNTY OF SUFFOLK. )
On this 15th day of October, 1997, before me personally came NOUROLLAH
ELGHANAYAN, to me known to be one of the members of the limited liability
company of GRAND LLC, which executed the foregoing instrument and he duly
acknowledged to me that he is authorized to execute said instrument and that he
executed the same as the act and deed of said limited liability company by order
of the members thereof and for the uses and purposes therein mentioned.
ROBERT JOSEPH KNOPF
-------------------------------
Notary Public
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30, 1998
-36-
THE ROSLYN SAVINGS BANK
DUPLICATE
ORIGINAL
CONSOLIDATED
MORTGAGE NOTE
$4,982,764.87 Melville, New York
July 21, 1998
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of
THE ROSLYN SAVINGS BANK, its successors and/or assigns (hereinafter called the
"Bank"), at its offices at 1400 Old Northern Boulevard, Roslyn, New York 11576,
or such other place as Bank may designate in writing,
FOUR MILLION NINE HUNDRED EIGHTY TWO THOUSAND SEVEN HUNDRED SIXTY FOUR AND
87/100 ($4,982,764.87) DOLLARS such sum is hereby consolidated with the
aggregate unpaid balance of $9,342,235.13 owing on the following nine (9) notes
all held by Bank 1) Note dated October 4, 1991 in the amount of $2,500,000.00
made by American Tissue Gilpin Realty Corporation to Roosevelt Savings Bank, 2)
Note dated February 3, 1993 in the amount of $842,932.14 made by American Tissue
Gilpin Realty Corporation to Home Federal Savings Bank 3) Consolidated Note
dated January 24, 1997 in the amount of $335,470.39 made by Gilpin Realty Corp.
to The Roslyn Savings Bank; 4) Note dated January 24, 1997 in the amount of
$2,900,000 made by Coram Realty LLC to The Roslyn Savings Bank; 5) Note dated
March 7, 1997 in the amount of $550,000 made by Engineers Road, LLC to The
Roslyn Savings Bank; 6) Amended and Restated Note dated May 14, 1996 in the
amount of $1,270,000 made by Engineers Road LLC to The Roslyn Savings Bank
(restating note dated January 18, 1989 made by Allan V. Rose to National
Westminster Bank USA in the amount of $3,375,000); 7) Note dated August 28, 1967
in the amount of $1,000,000 made by Galcar Realty Corp. to Security National
Bank of Long Island; 8) Note dated March 31, 1978 in the amount of $1,279,374.49
made by Sam-Po Realty Ltd. to Phoenix Mutual Life Insurance Company; 9) Note
dated July 31, 1990 in the amount of $516,933.60 made by Arnold Drive Associates
to Sun Life Insurance and Annuity Company of New York (consolidated with Notes 7
and 8 to form a single indebtedness of $1,750,000) Notes 7, 8 and 9 were
assigned to Bank by assignment dated on or about the date hereof, all notes are
hereby consolidated herewith to form a single obligation of $14,325,000, with
interest as hereinafter provided;
The rate of interest on this loan is 7 1/2% which shall continue in effect
from the date hereof to August 1, 2008. Interest hereon for the period from the
date hereof to the first day of the month next ensuing shall be due and payable
simultaneously with the execution of this Note. The monthly payment of principal
and interest shall be $115,401.23 and shall commence September 1, 1998 and
continue on the first day of each and every month thereafter to August 1, 2008
when the entire remaining unpaid balance of principal and any unpaid interest
shall be fully due and payable.
<PAGE>
Monthly payments shall be applied first to the payment of interest as
aforesaid and the balance toward reduction of principal. Interest on any past
due amount, whether at maturity or by acceleration, shall be paid until the full
principal balance is actually paid at a rate of two percent per annum in excess
of the above stated interest rate. In no event, however, shall the interest on
this loan be higher than the highest rate of interest permitted under applicable
New York or Federal Law.
The obligation to pay interest and principal on this Note as aforesaid is
sometimes referred to hereafter collectively as "Obligation".
Borrower may prepay this Note in whole or in part at any time upon payment
of a prepayment premium equal to 3% of the amount prepaid, which premium shall
reduce to 2 1/2% on August 1, 1999, 2% on August 1, 2000, 1 1/2% on August 1,
2001, 1% on August 1, 2002, 1/2% on August 1, 2003 and 0% on August 1, 2004.
This Note is secured by a Mortgage on premises located at (i) 45 Gilpin
Avenue, Hauppauge, New York known and designated as District 0500 Section 038.00
Block 02.00 Lot 019.000, (ii) 135 Engineers Road, Hauppauge, known and
designated as District 0800 Section 185.00 Block 01.00 Lot 065.006, (iii)
466-468 Coram Yaphank Road (Mill Road), Coram, known and designated as District
0200 Section 496.00 Block 06.00 Lots 005.001 and 005.002 and (iv) 1 Arnold Drive
Huntington NY, known and designated as District 0400 Section 104.00 Block 01.00
Lot 033.001 on the Suffolk County Tax Map.
The Bank, in its sole reasonable discretion, may accept partial payments of
interest and/or principal. If accepted: (1) such payments shall first be applied
to interest as aforesaid, and the balance, if any, toward reduction of
principal; and (2) acceptance of such partial payment or payments shall not
constitute a waiver of default of any provisions of this Note, the mortgage
securing it, or any of the documents executed in connection herewith, nor shall
such acceptance effect a modification of this Note nor operate to create any
estoppel against the holder hereof.
The Bank may, at its option, or upon or at any time after default in the
prompt payment of Obligation or of any other liability of the undersigned,
whether due by acceleration as hereinabove provided or otherwise, proceed to
enforce payment of the same and exercise any of, or all of the rights and
remedies afforded the Bank by applicable law or any document executed in
connection with Obligation or otherwise.
The undersigned agrees that whenever an attorney is used to enforce,
declare or adjudicate any rights or obligations under this note or collect any
amounts due thereunder or with respect to any security securing the same,
whether by suit or by any other means whatsoever, the undersigned shall be
obligated in addition to pay the Bank's reasonable attorneys' fees, costs and
disbursements.
The rights and remedies provided for in this Note, any security agreement,
any
-2-
<PAGE>
guaranty of payment of liabilities, the Mortgage, the assignment of leases, or
other instruments or agreements executed by the undersigned or any guarantors
pertaining to either this Note or any guaranty securing this Note, or in any
other document or agreement executed in connection with this Note, are
cumulative and not exclusive, and the Bank or any subsequent holder of the Note
may proceed against undersigned, any guarantors, of the Note or any other
guaranty, or may proceed against any other person or entity, or with respect to
any pledged property, all in pursuance of any remedy afforded the Bank or any
subsequent holder of the Note, either by statute, contractually, or otherwise,
at any time, in any order, either simultaneously or otherwise until the Note and
all amounts due thereunder are fully paid and satisfied. It is understood and
agreed that the undersigned, and the guarantors and each of them, remain and are
at all times jointly and severally liable for the Note and all amounts due
thereunder (except as guarantor's liability is limited pursuant to the guaranty)
until the Note and all amounts due thereunder are fully paid and satisfied,
regardless of any recoveries from sale or disposition of collateral or pendency
of proceedings or completion of proceedings to accomplish the same.
The undersigned waives presentation, protest, demand for payment, notice of
default or non-payment to the undersigned, or any other party liable for or upon
any of said Obligations. The Bank and the undersigned, in any litigation
(whether or not arising out of or relating to the Note or said collateral
security for the repayment thereof) in which Bank and any of them shall be
adverse parties, waive trial by jury and the undersigned, in addition, waive the
right to interpose any defense based upon any Statute of Limitations or any
claim of laches and any set-off or counter claim of any nature or description.
If the undersigned is a partnership, the agreement herein contained shall
remain in force and applicable, notwithstanding any changes in the individuals
composing the partnership, and the term "undersigned", as used herein, shall
include any alternate or successor partnerships, but any predecessor partnership
and their partners shall not thereby be released from any liability. If this
Note is signed by more than one party, the terms "undersigned", as used herein,
shall mean the "undersigned and each of them" and each undertaking herein
contained shall be their joint and several undertaking, provided, however, that
in the phrases "of the undersigned", "by the undersigned", "against the
undersigned", "for the undersigned", "to the undersigned", and "on the
undersigned", the term "undersigned" shall mean the "undersigned or any of
them."
The Bank may release, exchange, sell or surrender any of the mortgaged or
pledged property belonging to any of the undersigned parties hereto or any
guarantors of this Note and it may renew, extend, modify, accelerate,
compromise, settle or release any of the liabilities of any of them and may make
additional advances or extensions of credit to any of them or release or fail to
set off any deposit account or credit of any of them or grant other indulgences
to any of them, all from time to time, before or after maturity hereof, with or
without further notice to or assent from, and without in any way affecting or
releasing the liability of, any of the other parties hereto.
-3-
<PAGE>
If the time for payment of this Note shall be extended by any law relating
to obligations payable on Sunday or holidays, such extended time shall be
included in the computation of interest or discount.
Any provision hereof which may prove unenforceable under any law shall not
affect the validity of any other provision hereof.
No provision of this note may be terminated, changed or waived orally, all
such modifications shall be in writing and duly executed by the party against
whom enforcement is sought.
This Note may be executed in counterparts each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
partially executed signature page of any counterpart of this Note may be
attached to any other partially executed counterpart of this note without
impairing the legal effect of the signature(s) on such signature page.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
GILPIN REALTY CORP.
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, President
ENGINEERS ROAD, LLC
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, Member
CORAM REALTY LLC
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, Member
DUPLICATE
ORIGINAL
HUNTINGTON LLC
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, Member
-4-
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF SUFFOLK )
On the 21st day of July in the year 1998 before me, the undersigned, a
Notary Public in and for said State, personally appeared NOUROLLAH ELGHANAYAN,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is(are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Mary Jeanne Miller
----------------------------------
Notary Public
Mary Jeanne Miller
Notary Public State of New York
No. 30-4677301
Qualified in Nassau County
Commission Expires Nov. 17, 1998
-5-
<PAGE>
================================================================================
CONSOLIDATED MORTGAGE
Date: July 21, 1998
Mortgagor: GILPIN REALTY CORP., CORAM REALTY LLC,
ENGINEERS ROAD, LLC & HUNTINGTON LLC
Address: 135 Engineers Road
Hauppauge, New York
Mortgagee: THE ROSLYN SAVINGS BANK
Address: 1400 Old Northern Boulevard
Roslyn, New York 11576
Consolidated
Mortgage Amount: $14,325,000
Location of Parcel 1, 135 Engineers Road, Hauppauge
Premises: Parcel 2,466-468 Coram Yaphank Road (Mill Road), Coram
Parcel 3, 45 Gilpin Avenue, Hauppauge,
Parcel 4, 1 Arnold Drive, Huntington,
Suffolk County, New York
Parcel 1 Parcel 2 Parcel 3 Parcel 4
District - 0800 0200 0500 0400
Section - 185.00 496.00 038.00 104.00
Block - 01.00 06.00 02.00 01.00
Lot(s) - 065.006 005.001 & 019.000 033.001
005.002
================================================================================
Record and return to: THE ROSLYN SAVINGS BANK
1400 OLD NORTHERN BOULEVARD
ROSLYN NY 11576
ATTN: John R. Bransfield, Jr.
This mortgage covers property not to be improved by one or more structures
containing in the aggregate not more than six residential dwelling units, each
having their own separate cooking facilities.
<PAGE>
RECITAL
The Mortgagor is the owner of the Premises described in Schedule A hereto.
The Mortgagor has erected substantial improvements on the Premises and in order
to finance the same will borrow the sum of FOUR MILLION NINE HUNDRED EIGHTY TWO
THOUSAND SEVEN HUNDRED SIXTY FOUR AND 87/100 ($4,982,764.87) DOLLARS which sum
is consolidated with the unpaid sum of $9,342,235.13 due on certain notes and
mortgages currently held by Mortgagee to form a single lien of FOURTEEN MILLION
THREE HUNDRED TWENTY-FIVE THOUSAND AND 00/100 ($14,325,000.00) DOLLARS
(hereafter the Mortgage Amount"). The Mortgagor has executed and delivered to
Mortgagee a consolidated note for $14,325,000.00 dated the date hereof. The said
note, together with any modifications or amendments thereto are hereinafter
collectively referred to as the "Note".
CERTAIN DEFINITIONS
The Mortgagor and the Mortgagee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified, such definitions to be applicable equally to the singular and the
plural forms of such terms:
"Chattels" means all fixtures, articles of personal property now or
hereafter owned by the Mortgagor and attached to or used in connection with said
premises, including but not limited to all partitions, furnaces, boilers, oil
burners, radiators and piping, coal stokers, plumbing and bathroom fixtures,
refrigeration, air conditioning and sprinkler systems, or other fire prevention
or extinguishing apparatus and materials, wash-tubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, kitchen cabinets, incinerators, plants and shrubbery, and all other
equipment and machinery, appliances, fittings and fixtures of every kind in or
used in the operation of the buildings standing on said premises, together with
any and all replacements thereof and additions thereto.
"Default Rate" means at a rate equal to Two percentum (2%) percentum per
annum in excess of the current Note Rate as described in the Note, but in no
event higher than the maximum rate allowed by applicable law.
"Documents" means the Note (as hereafter defined), Assignment of Leases,
Rents and Profits of even date between Mortgagor and Mortgagee, this Mortgage,
and all other documents further evidencing and/or securing the loan evidenced by
the Note and this Mortgage.
"Even of Default" means the events and circumstances described as such in
Section 2.01 hereof.
"Guarantor" means any person or entity which has guaranteed to Mortgagee
the prompt and full payment of the sums (or a portion thereof) due Mortgagee
under the Note and
-2-
<PAGE>
Documents.
"Improvements" means all improvements, structures or buildings, and
replacements and alterations thereof, erected or to be erected or now or
hereafter located upon the Premises including all plant equipment, apparatus,
machinery and fixtures of every kind and nature whatsoever owned by Mortgagor
forming part of said improvements, structures or buildings.
"Mortgage" means this consolidated mortgage.
"Mortgage Amount" means FOURTEEN MILLION THREE HUNDRED TWENTY-FIVE THOUSAND
AND 00/100 ($14,325,000.00) DOLLARS.
"Mortgagor" means Gilpin Realty Corp., Engineers Road, LLC, Coram Realty
LLC and Huntington LLC.
"Mortgagee" means The Roslyn Savings Bank, its successors and/or assigns.
"Note" means the note of even date from Mortgagor to Mortgagee.
"Note Rate" means the rate of interest payable under the Note from time to
time during the term thereof.
"Premises" means the Premises described in Schedule A including all of the
easements, rights, privileges and appurtenances thereunto belonging or in anyway
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of the Mortgagor therein and in and to the strips and gores, streets,
and ways adjacent thereto, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
All terms of this Mortgage which are not defined above have the meaning set
forth in this Mortgage or the Documents.
CONSOLIDATION CLAUSE
This mortgage is hereby consolidated with the following six mortgages:
1. Mortgage made by American Tissue-Gilpin Realty Corporation ("American")
to Roosevelt Savings Bank dated October 4, 1991 in the amount of $2,500,000
recorded October 9, 1991 in Liber 17090 mp 475. This mortgage was assigned to
Home Federal Savings Bank by assignment dated February 1, 1993 recorded February
9, 1993 in Liber 18618 mp 333.
2. Mortgage made by American to Home Federal Savings Bank dated February 3,
1993, recorded February 9, 1993 in Liber 18618 mp 334 in the amount of
$842,932.14 consolidated with Mortgage #1 to form a single lien by Agreement
recorded in Liber 18618 mp
-3-
<PAGE>
335 and assigned to The Roslyn Savings Bank by assignment dated January 21, 1997
recorded February 6, 1997 in Liber 19164 mp 72.
3. Mortgage made by Gilpin Realty Corp. to The Roslyn Savings Bank dated
January 24, 1997 recorded February 6, 1997 in Liber 19164 mp 73, in the amount
of $325,479.39 (consolidated with mortgages 1 and 2 above to form a single lien
of $3,350,000).
4. Mortgage made by Coram Realty LLC to The Roslyn Savings Bank dated
January 24, 1997 in the amount of $2,900,000 recorded February 6, 1997 in Liber
19164 mp 81.
5. Mortgage made by Engineers Road, LLC to The Roslyn Savings Bank dated
March 7, 1997 in the amount of $550,000 recorded March 27, 1997 in Liber 19181
mp 212.
6. Mortgage made by Allan V Rose d/b/a AVR Realty Company to National
Westminster Bank USA dated January 18, 1989 in the amount of $3,375,000 recorded
February 17, 1989 in Liber 14914 mp 470 assigned by Fleet Bank (fka National
Westminster Bank USA) by assignment dated May 9, 1996 recorded June 6, 1996 in
Liber 19070 mp 795, which mortgage was amended and restated by Mortgage made by
Engineers Road, LLC to The Roslyn Savings Bank dated May 14, 1996 in the amount
of $1,270,000 recorded June 6, 1996 in Liber 11777 mp 183.
7. Mortgage made by Galcar Realty Corp. to Security National Bank of Long
Island dated August 28, 1967 in the amount of $1,000,000 recorded August 31,
1967 in Liber 5219 mp 72, assigned to Massachusetts Mutual Life Insurance
Company by assignment dated June 28, 1968 recorded July 3, 1968 in Liber 5408 mp
386 extended by agreement dated June 28, 1968 recorded July 9, 1968 in Liber
5411 mp 320 and assigned to Phoenix Mutual Life Insurance Company by Assignment
dated March 31, 1978 recorded April 14, 1978 in Liber 8149 mp 421.
8. Mortgage made by Sam-Po Realty Ltd. to Phoenix Mutual Life Insurance
Company dated March 31, 1978 in the amount of $1,279,374.49 recorded April 14,
1978 in Liber 8149 mp 452 (consolidated with mortgage #7 to form a single lien
of $1,650,000) assigned to The Chase Manhattan Bank NA by assignment dated
February 21, 1989 recorded April 10, 1989 in Liber 15031 mp 433 and to Sun Life
Insurance and Annuity Company of New York ("Sun") by assignment dated July 25,
1990 recorded August 16, 1990 in Liber 16217 mp 161.
9. Mortgage made by Arnold Drive Associates to Sun dated July 31, 1990 in
the amount of $516,933.60 recorded August 16, 1990 in Liber 16217 mp 3
consolidated with mortgages 7 and 8 by agreement dated July 31, 1990 recorded
August 16, 1990 in Liber 16217 mp 8 to form a single lien of $1,750,000 modified
by agreement dated September 26, 1994 recorded October 5, 1994 in Liber 18876 mp
40 and assigned to The Roslyn Savings Bank by assignment dated on or about the
date hereof.
Said mortgages are hereby consolidated with this Mortgage to form one obligation
of FOURTEEN MILLION THREE HUNDRED TWENTY-FIVE THOUSAND AND 00/100
-4-
<PAGE>
($14,325,000.00) DOLLARS with the same intent and with like effect as if one
first mortgage covering the Premises had been duly made, executed and delivered
by Mortgagor to Mortgagee containing the terms and conditions herein contained
it being understood and agreed that the terms and conditions contained herein
completely and entirely supersede the terms and conditions in the prior assigned
mortgages as to the whole consolidated sum of $14,325,000.00.
SPREADER
Inasmuch as the above mortgages do not cover the entirety of Premises, and
the Mortgagor and Mortgagee desire to spread the liens of the above mortgages to
the entirety of the Premises, Mortgagor and Mortgagee hereby mutually covenant
and agree that the lien of the above mortgages consolidated herewith be and the
same hereby is spread over the entirety of the Premises not already covered by
said mortgages in the same manner and to the same effect as though each mortgage
consolidated herewith had originally covered all of the land defined as Premises
and set forth herein as Schedule "A."
GRANTING CLAUSE
NOW THEREFORE, the Mortgagor, in order to secure the payment of both the
Mortgage Amount and the interest, default interest, late charges, advances,
reimbursements, commitment fees and any other sums payable under the Note, this
mortgage and the Documents and the performance and observance of all the
provisions hereof and of the Note and the Documents, hereby gives, grants,
bargains, sells, warrants, aliens, demises, releases, conveys, assigns,
transfers, mortgages, hypothecates, deposits, pledges, sets over and confirms
unto the Mortgagee, with mortgage covenants, all its estate, right, title and
interest in, to and under any and all of the following described property (the
"Mortgaged Property") whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels in which a security agreement pursuant to the
Uniform Commercial Code is granted to Mortgagee;
(iv) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation awards and any unearned
premiums accrued, accruing or to accrue under any and all insurance
policies now or hereafter obtained by the Mortgagor and real estate tax and
assessment refunds and credits at any time accruing to the benefit of the
Mortgagor or the Mortgaged Property;
-5-
<PAGE>
(v) all leases of the Premises or any part thereof now or hereafter
entered into and all right, title and interest of the Mortgagor thereunder;
and including, without limitation, the Mortgagor's right, if any, to cash
or securities deposited thereunder whether or not same was deposited to
secure performance by the lessees of their obligations thereunder,
including, further, the right upon the happening of an Event of Default
beyond the expiration of any applicable notice, grace or cure period, to
receive and collect the rents and other charges thereunder (all of which
leases are assigned to the Mortgagee as further security hereunder pursuant
to a separate Assignment of Rents, Leases and Profits of even date intended
to be recorded immediately following the recordation of this Mortgage, and
which is incorporated herein by reference);
(vi) all utility or municipal deposits made by or on behalf of
Mortgagor or made in connection with the Premises;
(vii) all plans, drawings, specifications, site plans, subdivision
maps, sketches, samples, contracts and agreements, however characterized
from time to time prepared for use in connection with the development of
the Premises and the construction of the Improvements;
(viii) all contracts, agreements and understandings now or hereafter
entered into, relating to or involving the performance of any work,
rendering of any services, and supply of any materials or the conduct of
operations in and the management of the Premises (excluding such agreements
made by tenants) including, without limitation, construction contracts,
architect agreements, management agreements, options and other agreements,
however characterized, affecting the Premises and/or the Improvements or
the public improvements required to be installed under the terms of
governmental approvals relating to the subdivision and/or approved site
plan in which the Premises are a part;
(ix) any and all permits, certificates, approvals and authorizations,
however characterized, issued or in any way furnished whether necessary or
not, for the operation and use of the Premises and/or the Improvements
and/or Chattels including, without limitation, building permits,
environmental certificates, certificates of operation, certificates of
occupancy and/or completion, licenses, warranties and guarantees; and
TO HAVE AND TO HOLD unto the Mortgagee, its successors and assigns forever.
ARTICLE I
PARTICULAR COVENANTS, WARRANTIES AND
REPRESENTATIONS OF THE MORTGAGOR
The Mortgagor covenants, warrants, represents and agrees as follows:
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Section 1.01. The Mortgagor warrants that it has a good and marketable
title to an indefeasible fee estate in the Premises subject in all cases to no
lien, charge or encumbrance except such as are listed as exceptions to title in
the title policy insuring the lien of this Mortgage. The Mortgagor further
warrants that it will own the Chattels free and clear of liens and claims; and
that this Mortgage is and will remain a valid and enforceable first lien on the
Mortgaged Property, subject only to the exceptions set forth above. The
Mortgagor has full power and lawful authority to mortgage the Mortgaged Property
in the manner and form herein done or intended hereafter to be done. The
Mortgagor will preserve such title, and will forever warrant and defend the
validity and priority of the lien hereof against the claims of all persons and
parties whomsoever. The Mortgagor consists of a corporation and three limited
liability companies all formed pursuant to the laws of the State of New York
each with full power and authority to conduct the business in which they are
engaged, own their property and consummate the transactions contemplated hereby.
Section 1.02. The Mortgagor will, at the cost of the Mortgagor, and without
expense to the Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, mortgages, assignments, notices of assignment, transfers and
assurances as the Mortgagee shall from time to time reasonably require, for the
better assuring, conveying, assigning, transferring and confirming unto the
Mortgagee the property and rights hereby conveyed, mortgaged or assigned or
intended now or hereafter so to be, or which the Mortgagor may be or may
hereafter become bound to convey, mortgage or assign to the Mortgagee or for
carrying out the intention or facilitating the performance of the terms of this
Mortgage, and for filing, registering or recording this Mortgage and, on demand,
will execute and deliver, and hereby authorizes the Mortgagee to execute in the
name of the Mortgagor to the extent it may lawfully do so, in the event of the
failure or refusal of the Mortgagor so to do, one or more continuations of
financing statements, chattel mortgages or comparable security instruments, to
evidence more effectively the lien hereof upon the Chattels.
Section 1.03. (a) The Mortgagor forthwith upon the execution and delivery
of this Mortgage, and thereafter from time to time, will cause this Mortgage,
and any security instrument creating a lien or evidencing the lien hereof upon
the Chattels and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully to protect the lien hereof
upon, and the interest of the Mortgagee in, the Mortgaged Property.
(b) The Mortgagor will pay all filing, registration, imposts, taxes and
recording fees, and all reasonable expenses incident to the execution and
acknowledgment of this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Chattels, and any instrument of further
assurance, and all federal, state, county and municipal stamp taxes and other
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution, delivery and recording of the Note, this Mortgage, any
mortgage supplemental hereto, any security instrument with respect to the
Chattels or any instrument of further assurance.
Section 1.04. The Mortgagor will pay when due the principal and interest
and all other
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sums to become due in respect of the Note at the time and place and in the
manner specified in the Note according to the true intent and meaning thereof
and without offset or counterclaim, all in any coin or currency of the United
States of America which at the time of such payment shall be legal tender for
the payment of public and private debts.
Section 1.05. The Mortgagor will, so long as it is owner of any part of the
Mortgaged Property, do all things necessary to preserve and keep in full force
and effect its franchises, rights and privileges under the laws of the State of
New York and will comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental authority or court and applicable to the
Mortgagor or to the Mortgaged Property or any part thereof.
Section 1.06. All rights, title and interest of the Mortgagor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, the Mortgaged Property, hereafter
acquired by, or released to, the Mortgagor or constructed, assembled or placed
by the Mortgagor on the Premises, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, conveyance, assignment or other act by the
Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by the Mortgagor and
specifically described in the granting clause hereof, but at any and all times
the Mortgagor will execute and deliver to the Mortgagee any and all such further
assurances, mortgages, conveyances or assignments thereof as the Mortgagee may
reasonably require for the purpose of expressly and specifically subjecting the
same to the lien of this Mortgage.
Section 1.07. (a) Except as to real estate taxes which must be paid before
the date on which any interest or penalty becomes due on such tax, the
Mortgagor, from time to time when the same shall become due and payable, will
pay and discharge all taxes of every kind and nature (including real and
personal property taxes and income, franchise, withholding, profits and gross
receipts taxes), all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges, and all
other public charges whether of a like or different nature, imposed upon or
assessed against it or the Mortgaged Property or any part thereof or upon the
revenues, rents, issues, income and profits of the Mortgaged Property or arising
in respect of the occupancy, use or possession thereof. The Mortgagor will
deliver to the Mortgagee receipts evidencing the payment of all such taxes,
assessments, levies, fees, rents and other public charges imposed upon or
assessed against it or the Mortgaged Property or the revenues, rents, issues,
income or profits thereof within 30 days from Mortgagee's request therefor.
Mortgagor will in addition reimburse Mortgagee for the expense incurred in
connection with a Tax Service Contract to be entered between Mortgagee and the
Tax Service Company as pertains to this property. Such fee shall be paid at
closing. In the event of the occurrence and continuance of an Event of Default
which remains uncured beyond applicable grace periods and results in the
declaration of a default by Mortgagee, the Mortgagee may, at its option, to be
exercised, by thirty (30) days written notice to the Mortgagor, require the
deposit by the Mortgagor, at the time of each payment of an installment of
interest or principal under the Note, of an additional amount sufficient to
discharge the obligations under this subsection (a). The
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determination of the amount so payable and of the fractional part thereof to be
deposited with the Mortgagee, so that the aggregate of such deposit shall be
sufficient for this purpose, shall be made by the Mortgagee in its sole
discretion. Such amounts shall be held by the Mortgagee without interest and
applied to the payment of the obligations in respect to which such amounts were
deposited or, at the option of the Mortgagee after default, to the payment of
said obligations in such order or priority as the Mortgagee shall reasonably
determine, on or before the respective dates on which the same or any of them
would become delinquent. If one month prior to the due date of any of the
aforementioned obligations the amounts then on deposit therefor shall be
insufficient for the payment of such obligation in full, the Mortgagor within
ten (10) days after demand shall deposit the amount of the deficiency with the
Mortgagee. The Mortgagee shall not be required to segregate the amounts
deposited with it under this Section 1.07, but may commingle same with any other
funds held by it. Nothing herein contained shall be deemed to affect any right
or remedy of the Mortgagee under any provisions of this Mortgage or of any
statute or rule of law to pay any such amount and to add the amount so paid
together with interest at the Note Rate to the indebtedness hereby secured.
(b) The Mortgagor will pay, from time to time when the same shall become
due, all lawful claims and demands of mechanics, materialmen, laborers, and
others which, if unpaid, might result in, or permit the creation of, a lien on
the Mortgaged Property or any part thereof, or on the revenues, rents, issues,
income and profits arising therefrom and in general will do or cause to be done
everything necessary so that the lien hereof shall be fully preserved, at the
cost of the Mortgagor, without expense to the Mortgagee.
(c) Nothing in this Section 1.07 shall require the payment or discharge of
any obligation imposed upon the Mortgagor by this Section so long as the
Mortgagor shall in good faith and at its own expense contest the same or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection thereof or other realization thereon and the sale or forfeiture
of the Premises or any part thereof to satisfy the same; provided that during
such contest the Mortgagor shall, at the option of the Mortgagee, provide
security reasonably satisfactory to the Mortgagee, assuring the discharge of the
Mortgagor's obligation hereunder and of any additional charge, penalty or
expense arising from or incurred as a result of such contest; and provided,
further, that if at any time payment of any obligation imposed upon the
Mortgagor by subsection (a) of this Section shall become necessary to prevent
the delivery of a tax deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of nonpayment, then the Mortgagor shall
pay the same in sufficient time to prevent the delivery of such tax deed or
other similar instrument.
Section 1.08. The Mortgagor will pay all taxes except income, franchise,
inheritance, estate and gift taxes, imposed on the Mortgagee by reason of its
ownership of the Note or this Mortgage.
Section 1.09. (a) The Mortgagor will maintain public liability insurance in
amounts equal to at least $2,000,000.00 with respect to the Mortgaged Property
and all risk property insurance including builder's risk coverage (non-reporting
form). Mortgagor shall also carry, by
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way of endorsement rental loss of income insurance in a sum equal to 100% of its
annual rent roll, and will keep the Improvements and Chattels insured against
loss by fire, casualty and such other customary hazards as may be required by
similar lenders on similar properties for the benefit of the Mortgagee. Such
insurance shall be written in forms, amounts, and by companies licensed in the
state where the property is located which companies must have at least a Best
Rating of A-8 and which are otherwise reasonably satisfactory to the Mortgagee.
In no event, however, shall property, all-risk or physical damage insurance be
less than the full replacement cost of the property insured. Mortgagee and its
successors and assigns, as their interests may appear, shall be endorsed on such
policy as first mortgagee. The policies shall by their terms be noncancellable
and not subject to change without at least thirty (30) days prior written notice
to the Mortgagee and losses thereunder shall be payable to the Mortgagee
pursuant to the standard mortgagee endorsement. The policy or policies of such
insurance or certificates of same, shall be delivered to the Mortgagee prior to
closing. The Mortgagor shall give the Mortgagee prompt notice of any loss
covered by such insurance and the Mortgagee shall have the right to join the
Mortgagor in adjusting any loss in excess of $50,000.00 notwithstanding the
provision of Real Property Law section.254(4). Provided Mortgagor is not in
default hereunder and there is no event pending but for the passage of time
and/or the giving of notice could ripen into an Event of Default hereunder and
provided that Mortgagor first deposits the amount of any shortfall in needed
restoration funds with Mortgagee, any monies received as payment for any partial
loss under any such insurance shall be paid over to the Mortgagee to be applied
pursuant to subsection (b) hereof. Renewals of each required policy of insurance
shall be delivered to Mortgagee at least ten (10) days prior to expiration.
(b) So long as no Event of Default beyond the expiration of any applicable
notice, grace or cure period, has occurred and is continuing under the Note and
this Mortgage, proceeds of any condemnation (under Section 1.13) or from any
casualty insurance policies ("proceeds") in excess of $75,000 (such lesser sums
to be paid directly to Mortgagor) will be applied as follows: Mortgagee will
make the proceeds available to Mortgagor to permit repair, restoration and
rebuilding the Premises and/or Improvements in accordance with plans and
specifications therefor which have been submitted to Mortgagee for its prior
written approval, such approval not to be unreasonably withheld. Mortgagee shall
escrow such proceeds and shall require an architect's and/or engineer's
certification for request of any disbursements of the proceeds stating that the
proceeds are being utilized in substantial accordance with the reconstruction
plans and specifications. If there shall exist excess proceeds, the excess shall
be applied on account of the principal balance without prepayment premium or
penalty. However, in the event that Mortgagor chooses not to repair, restore or
rebuild, and Mortgagee, based upon its sole discretion reasonably exercised,
determines that it is economically feasible to repair, restore or rebuild the
Premises and/or Improvements the proceeds shall be applied by Mortgagee to the
principal balance, and the Mortgagor shall pay the prepayment premium, if any,
as described in the Note. If Mortgagee, based upon its sole discretion
reasonably exercised, determines that it is not economically feasible to repair,
restore or rebuild the Premises and/or Improvements whether or not Mortgagor
chooses to repair, restore or rebuild the Premises and/or Improvements, such
proceeds shall be applied on account of the principal balance without prepayment
premium or penalty. If an Event of Default beyond the expiration of any
applicable notice, grace or cure
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period, by Mortgagor is pending or has occurred and is continuing or if
Mortgagor fails to repair, restore or rebuild the Premises and/or Improvements,
Mortgagee, at its option, may apply the proceeds in any one or more of the
following ways: (a) toward the obligations secured by the Note, including any
prepayment premium; (b) to restoration of the Premises and/or Improvements, or
(c) to Mortgagor.
(c) The Mortgagor shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 1.09 unless the Mortgagee has approved the insurance company (not
to be unreasonably withheld) and the form and content of the insurance policy,
including, without limitation, the naming thereon of the Mortgagee as a named
insured with loss payable to the Mortgagee under a standard mortgage endorsement
of the character above described.
(d) The foregoing insurance may be written on a blanket policy.
Section 1.10. If the Mortgagor or any party under any of the Documents
shall fail to perform any of the covenants contained in this Mortgage, or any
covenant contained in the Note, the assignment of leases, if any, or the other
Documents beyond applicable notice and grace periods, the Mortgagee may make
advances and/or disbursements to perform the same, and all sums so advanced
and/or disbursed shall be a lien upon the Mortgaged Property and shall be
secured hereby. The Mortgagor will repay on demand all sums so advanced and/or
disbursed with interest at the Note Rate. The provisions of this Section 1.10
shall not prevent any default in the observance of any covenant contained in
this Mortgage, or contained in the Note, the assignment of leases, if any, or
the other Documents from constituting a default or an Event of Default.
Section 1.11. (a) The Mortgagor will keep adequate records and books of
account and will permit the Mortgagee, by its agents, accountants and attorneys,
to visit and inspect the Premises and examine its records and books of account
and to discuss its affairs, finances and accounts with the Mortgagor, at such
reasonable times upon reasonable notice as may be requested by the Mortgagee.
(b) The Mortgagor and each Guarantor will at its own cost and expense
deliver to the Mortgagee with reasonable promptness, but in no event after 120
days after the close of their respective fiscal year during the term hereof,
financial statements, a balance sheet and statement of profit and loss for
Mortgagor and Guarantors and annual audited financial statements for American
Tissue Corporation (prepared on an individual basis and on a consolidated basis
with all of its affiliated operating entities) and an operating statement for
the Premises, setting forth in each case, in comparative form, figures for the
preceding year prepared by certified public accountants reasonably satisfactory
to Mortgagee on a basis acceptable to Mortgagee. Such statements shall be in
such form as reasonably acceptable to Mortgagee and shall contain such
information as is required under generally accepted accounting principles.
Throughout the term of this Mortgage, the Mortgagor with reasonable promptness
will deliver to the Mortgagee such other financial information with respect to
the Mortgagor, Guarantors and Premises and as the
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Mortgagee may reasonably request from time to time. All financial statements of
the Mortgagor shall be delivered in duplicate, and shall be accompanied by the
certificate of the Mortgagor dated within five (5) days of the delivery of such
statements to the Mortgagee, stating that to the best of its knowledge it knows
of no Event of Default, nor of any default which after notice or lapse of time
or both would constitute an Event of Default, which has occurred and is
continuing, or if any such default or Event of Default has occurred or is
continuing, specifying the nature and the period of existence thereof, and what
action the Mortgagor has taken or proposes to take with respect thereto, and,
except as otherwise specified, stating that the Mortgagor has fulfilled all its
obligations under this Mortgage and the Documents which are required to be
fulfilled on or prior to the date of such certificate.
(c) The Mortgagor, within ten (10) days upon request by the Mortgagee, will
furnish a written statement duly acknowledged of the amount due whether for
principal or interest on this Mortgage and whether to the best of its knowledge
any offsets or defenses exist against the Mortgage Amount and, if any are
alleged to exist, the nature of each such offset or defense shall be set forth
in full detail.
(d) The Mortgagor, within 30 days of Mortgagee's request, will furnish a
written statement duly acknowledged setting forth the monthly base rent and
indicating thereon the date of and amount of each item of rent received and
statements of operating income and expenses for the Mortgaged Property.
Section 1.12. (a) The Mortgagor will not threaten, commit, permit or suffer
any waste to occur on or to the Mortgaged Property, or any part thereof. The
Mortgagor will, at all times, maintain the Mortgaged Property in good operating
order and condition and will promptly make, from time to time, all repairs,
renewals, replacements, additions and improvements in connection therewith which
are needful or desirable to such end. The Improvements shall not be removed or
demolished, nor shall any Chattels be removed without the prior written consent
of the Mortgagee, except where appropriate replacements free of superior title,
liens and claims are immediately made of value at least equal to the value of
the Chattels removed.
(b) The Mortgagor will keep and maintain or cause to be kept and maintained
the Mortgaged Property and the sidewalks and curbs abutting the same in good
order and condition and in a rentable and tenantable state of repair and will
make or cause to be made, as and when the same shall become reasonably
necessary, all structural and nonstructural, exterior and interior, ordinary and
extraordinary, foreseen and unforeseen repairs, renewals and replacements
necessary to that end. In the event that the Mortgaged Property shall be damaged
or destroyed, in whole or in part, by fire or any other casualty, or in the
event of a taking of a portion of the Mortgaged Property as a result of any
exercise of the power of eminent domain, the Mortgagor shall promptly restore,
replace, rebuild, or alter the same as nearly as possible to the condition they
were in immediately prior to such fire, other casualty or taking, and shall
take such other additional actions and measures as shall be reasonably necessary
to avoid any default or forfeiture under any Lease or any other applicable
agreement. Although damage to or destruction of the Mortgaged Property, or any
portion thereof, shall not of itself constitute a default hereunder
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except as otherwise provided herein, the failure of the Mortgagor to restore,
replace, rebuild or alter the same, as hereinabove provided, shall constitute a
default hereunder regardless of the availability of insurance proceeds or
condemnation awards for such purpose.
(c) The Mortgagor will promptly comply, or cause compliance with all
present and future laws, ordinances, rules, regulations and other requirements
of all governmental authorities whatsoever having jurisdiction of or with
respect to the Mortgaged Property or any portion thereof or the use and
occupation thereof.
(d) The Mortgagor will not, without the prior written consent of the
Mortgagee, initiate, join in, or consent to any change in any private
restrictive covenant, zoning ordinance, or other public or private restrictions
limiting or defining the uses which may be made of the Premises or any part
thereof.
(e) All covenants hereof shall be construed as affording to the Mortgagee
rights additional to and not exclusive of the rights conferred under the
provisions of Sections 254, 271 and 272 of the Real Property Law of the State of
New York or any other applicable law of any other state. If there is a conflict
between any provision of this Mortgage and the provisions of Section 254 of the
Real Property Law of the State of New York, the Mortgagor agrees that the
applicable provision of this Mortgage shall control.
Section 1.13. The Mortgagor, immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Premises or any
portion thereof, will notify the Mortgagee of the pendency of such proceedings.
The Mortgagee may participate in any such proceedings and the Mortgagor from
time to time will deliver to the Mortgagee all instruments requested by it to
permit such participation. In the event of such condemnation proceedings, the
award or compensation payable is hereby assigned to and shall be paid to the
Mortgagee up to the Mortgage Amount together with accrued interest, late charges
and disbursements made by Mortgagor and secured by this Mortgage. The Mortgagee
shall be under no obligation to question the amount of any such award or
compensation and may accept the same in the amount in which the same shall be
paid. In any such condemnation proceedings the Mortgagee may be represented by
counsel selected by the Mortgagee but the Mortgagor may appear by its counsel to
contest the amount of the condemnation award. The proceeds of any award or
compensation so received shall, either be applied, without premium, to the
prepayment of the Note or be paid over to the Mortgagor for restoration of the
Improvements as provided under Section 1.09(b) hereof. The Mortgagee shall not
be limited to the interest paid on the proceeds of any award or compensation,
but shall be entitled to the payment of interest by the Mortgagor at the rates
provided for herein or in the Note.
Section 1.14. (a) The Mortgagor will not, without the prior written consent
and approval of the Mortgagee in each instance, (i) execute an assignment of the
rents from the Mortgaged Property or any part thereof, (ii) in any other manner
impair the value of the Mortgaged Property or the security of the Mortgage.
Reference is made to Section 291-(f) of the Real Property Law, with respect to
the following: Mortgagor will not accept prepayments of any installments of
rents
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to become due under such leases, except prepayments in the nature of security
for the performance of the lessees thereunder, without obtaining in each
instance the prior written consent of Mortgagee. Mortgagor will notify Mortgagee
of the terms of any new lease or modification and will provide Mortgagee with a
copy of the same within thirty (30) days of its execution.
(b) The Mortgagor will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or any part thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will do all
things necessary to compel performance by the lessee under each lease of all
obligations, covenants, and agreements by such lessee to be performed
thereunder. If any of such leases provide for the giving by the lessee of
certificates with respect to the status of such leases, the Mortgagor shall
exercise its right to request such certificates within fifteen (15) days of any
demand therefor by the Mortgagee. The Mortgagor shall promptly notify the
Mortgagee of (i) the commencement of any action or proceeding by any lessee, the
purpose of which shall be the cancellation of any lease or diminution or offset
against the rent payable under any such lease, or (ii) the interposition by any
lessee of any defense in any action or proceeding brought by the Mortgagor
against such lessee, or (iii) a written notice received by the Mortgagor from
any lessee claiming constructive eviction, and will cause a copy of any process,
pleading or notice received by the Mortgagor in reference to any such action,
defense or claim to be promptly delivered to the Mortgagee.
(c) Intentionally deleted.
(d) Mortgagor shall not and shall have no right to permit the holder of any
subordinate mortgage or other subordinate lien, whether or not consented to by
Mortgagee, to terminate any lease of all or a portion of the Premises whether or
not such lease is subordinate (whether by law or the terms of such lease or a
separate agreement) to the lien of this Mortgage without first obtaining the
prior written consent of Mortgagee. The holder of any subordinate mortgage or
other subordinate lien shall have no such right, whether by foreclosure of its
mortgage or lien or otherwise, to terminate any such lease, whether or not
permitted to do so by Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective and void.
Section 1.15. The Mortgagor, which has simultaneously herewith executed an
assignment of leases, rents and profits which is incorporated herein by
reference, agrees to comply with the provisions thereof.
Section 1.16. To the extent not so provided by applicable law each lease of
the Premises, or any part thereof shall provide that, in the event of the
enforcement by the Mortgagee of the remedies provided for by law or by this
Mortgage, the lessee thereunder will, upon request of any person succeeding to
the interest of the Mortgagor as a result of such enforcement, automatically
become the lessee of said successor in interest, without change in the terms or
other provisions of such lease, provided, however, that said successor in
interest shall not be bound by (i) any payment of rent or additional rent for
more than one month in advance, except
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prepayments in the nature of security for the performance by said lessee of its
obligations under said lease, (ii) any amendment or modification of the lease
made without the consent of the Mortgagee or such successor in interest, or
(iii) any work required to be done by the Mortgagor pursuant to the terms of
said lease. Each such lease shall also provide that, upon request by said
successor in interest, such lessee shall execute and deliver an instrument or
instruments confirming such attornment.
Section 1.17. The Mortgagor agrees that if any action or proceeding be
commenced, excepting an action to foreclose this Mortgage or to collect the
indebtedness hereby secured, to which action or proceeding the Mortgagee is a
party by reason of the execution of this Mortgage or the Note which it secures,
or in which it becomes necessary to defend or uphold the lien of this Mortgage,
all sums paid by the Mortgagee for the expense of any litigation to prosecute or
defend the transaction and the rights and lien created hereby (including,
without limitation, reasonable attorneys' fees) shall be paid by the Mortgagor
together with interest thereon from the date of payment by the Mortgagee at the
Note Rate. All such sums paid and the interest thereon shall be a lien upon the
Mortgaged Property, and shall be secured hereby.
Section 1.18. The Mortgagor agrees that in the event of the passage after
the date of this Mortgage of any law deducting any lien from the value of land
for the purpose of taxation, or changing in any way the laws now in force for
the taxation of mortgages or debts secured by a mortgage, or the manner of the
collection of any such taxes, so as to impose upon Mortgagee any tax that
previously would have been payable by Mortgagor, the whole of the principal sum
secured by this Mortgage, together with interest due thereon, shall at the
option of the Mortgagee, without notice to any party, become immediately due and
payable.
Section 1.19. The Mortgaged Property will be provided with adequate water,
sewer and other utility facilities at all times, in compliance with all
applicable laws and regulations.
Section 1.20. The Mortgagor shall not:
(a) except as permitted herein sell, assign, lease, convey, mortgage,
pledge, hypothecate, make the subject of any security interest, exchange,
subdivide or permit to be divided into multiple condominium or cooperative
units, or in any other manner whatsoever, transfer or encumber all or part of,
or any interest in, or any of the rents derived from, or control of, the
Mortgage Property, or suffer or permit any of the foregoing to occur, whether by
operation of law or otherwise,
(b) except as permitted herein, effectuate or permit a reduction in the
ownership interests in Mortgagor held by any principal(s) of Mortgagor;
(c) effectuate or permit a closing of any public or private offering of
more than 50% ownership interests in Mortgagor or the Mortgaged Property;
(d) effectuate or permit a transfer of the controlling interest in
Mortgagor.
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"Transfer of the controlling interest in Mortgagor" includes, without
limitation, the following:
(i) the sale, assignment, issuance, redemption, diminution or pledge,
whether through a single transaction or a series of transactions, of more
than 50% the direct or indirect ownership interest of or change in the
principals in Mortgagor;
(ii) the modification of any organizational documents of Mortgagor if
the effect of such modification is to transfer more than 50% of the
ownership or control of such entity or to limit the liability of Mortgagor;
(iii) the dissolution or termination, whether by operation of law or
otherwise, of Mortgagor;
(iv) any other transaction or series of transactions by which any
person(s) other than the principal(s) of Mortgagor obtain more than 50%
ownership or control of Mortgagor or the Mortgaged Property; or
(e) agree in writing (whether on a conditional or unconditional basis) to
do any of the foregoing:
Nothing in this Section shall, however, prohibit the entering into of
leases that comply with this Mortgage, the Assignment of Leases, Rents and
Profits and any other applicable Documents, or in the event Mortgagor is a
cooperative apartment corporation, the transfer and mortgaging from time to time
of leases(s) to individual apartment units and the appurtenant shares. This
paragraph shall apply to each and every such transaction regardless of whether
Mortgagee has consented to or waived by action or inaction its rights hereunder
with respect to any such prior transaction.
Further, nothing in this Section shall, however, prohibit transfers to or
among members of the immediate family (spouses, children and grandchildren) of a
principal or trusts created for the benefit of such family members, made in
connection with born fide estate planning of such principal or a transfer of the
Premises or interest in Mortgagor to an entity at least 50% owned by the
existing principals of Mortgagor.
Section 1.21. INTENTIONALLY DELETED.
Section 1.22. The Mortgagor will promptly perform and observe, or cause to
be performed or observed, all of the terms, covenants and conditions of all
instruments of record affecting the Mortgaged Property, noncompliance with which
shall affect the security of this Mortgage, or shall impose any duty or
obligation upon the Mortgagor or any lessee or other occupant of the Mortgaged
Property or any part thereof, and the Mortgagor shall do or cause to be done all
things reasonably necessary to preserve intact and unimpaired any and all
easements, appurtenances and other interests and rights in favor of or
constituting any portion of the Mortgaged Property.
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Section 1.23. The Mortgagor will, in compliance with Section 13 of the Lien
Law, receive the advances secured hereby and will hold the right to receive such
advances as a trust fund to be applied first for the purpose of paying the cost
of the Improvements and will apply the same first to the payment of the cost of
the Improvements before using any part of the total of the same for any other
purpose.
Section 1.24. The Mortgagee and its authorized representatives shall have
the right at all reasonable times on reasonable notice during usual business
hours to enter upon and inspect all portions of the Mortgaged Property.
Mortgagee shall make reasonable efforts not to interfere with Mortgagor's
business during inspections.
Section 1.25. Mortgagor represents and warrants that except as disclosed in
the Phase 1 Environmental Audits copies of which have been reviewed by Mortgagee
and upon the best of Mortgagor's knowledge after due inquiry and investigation:
(i) (1) there has been no release, discharge or deposit of a Hazardous Substance
as defined (a) by either Section 9601(14) of Title 42 of the United States Code,
(including, but not limited to urea formaldehyde foam insulation, asbestos in
any form, di-electric fluids containing more than 50 ppm of polychlorinated
biphynls) or (b) by any environmentally related statute enacted by the State of
New York; or any other material hazardous to the health and safety of users of
Premises or those properties adjacent thereto (collectively called "Hazardous
Substances"); (2) Premises are not subject to any order prohibiting such
release, discharge or deposit of or directing cleanup of or, payment of cleanup
costs of Hazardous Substance issued by any governmental agency; (3) Premises are
in full compliance with all laws and governmental regulations governing
Hazardous Substances.
(ii) The Mortgagor covenants that the Mortgaged Property will be kept free
of Hazardous Substances during the term of this Mortgage and that if a release
occurs or there is reasonable cause therefor Mortgagor, will periodically
conduct such tests and investigations for the presence of Hazardous Substances
using such engineers, or other experts, as Mortgagee may reasonably request,
except that Mortgagor shall be permitted to maintain products containing
Hazardous Substances, provided that they are handled and maintain in accordance
with applicable Environmental Laws.
(iii) Mortgagor has no knowledge of, and has received no notice of, any
litigation, administrative enforcement or regulatory actions or proceedings, or
any inquiry by any governmental authority, against Mortgagor or any other
person, nor has any settlement been reached by or with any party or parties,
public or private, alleging the presence or threatened presence of any Hazardous
Substances or the violation of any Hazardous Substances laws on, from, under or
in any portion of the Premises.
(iv) Mortgagor has obtained all certificates, permits, licenses, approvals
and authorizations necessary for the lawful construction, occupancy, use and
operation of the Premises and Improvements for the purposes for which they are
currently being used, including, but not limited to, any certificates, permits,
licenses, approvals and authorizations required by any federal, state, county,
regional or local authority whose jurisdiction includes, in whole or in
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part, environmental protection or matters pertaining to health, safety and
welfare. Mortgagor has no knowledge of, and has received no notice of, any
litigation or other regulatory, administrative, judicial or legal proceeds which
(i) challenge the issuance of any of the certificates, permits, licenses,
approvals and authorizations obtained for the Premises and Improvements, or (ii)
allege non-compliance by Mortgagor or the Premises and Improvements with any
law, regulation, rule or ordinance which has a material effect on the operation,
occupancy, leasing or use of the Premises and Improvements for the purposes for
which they are currently being used.
(v) Each tenant of the Premises has obtained all certificates, permits,
licenses, approvals and authorizations necessary for the lawful occupancy, use
and operation of its demised premises for the purposes for which it is currently
being used, including, but not limited to, any certificates, permits, licenses,
approvals and authorizations required by any federal, state, county, regional or
local authority whose jurisdiction includes, in whole or in part, environmental
protection or matters pertaining to health, safety and welfare. Mortgagor has no
knowledge of, and has received no notice of, any litigation or other regulatory,
administrative, judicial or legal proceedings which (i) challenge the issuance
of any of the certificates, permits, licenses, approvals and authorizations
obtained by a tenant for its demised premises with any law, regulation, rule or
ordinance which has a material effect on the operation, occupancy, leasing or
use of the demised premises for the purposes for which it is currently being
used.
(vi) Except as to any septic system at the Premises, no waste or waste
waters have been, or are being, treated, stored or disposed of on the Premises,
and no threatened damage to the environment (including, but not limited to,
ambient, air, surface water, groundwater, land surface and subsurface) exists at
the Premises.
(vii) No emission of air contaminants or pollutants has emanated or is
emanating from the Premises.
(viii) All surface water drains servicing the Premises have been
constructed in accordance with all applicable laws and ordinances and have been
properly connected to public or private storm or sanitary sewer lines which
either dispose of such water on site or carry such water off the Premises, and
such connection has been approved by all necessary parties and governmental
authorities.
(ix) All garbage, trash and other solid waste from or relating to the
Premises are and will be collected on a regular basis by the local municipality
or an independent commercial waste disposal company.
(x) Mortgagor shall keep and maintain the Premises in compliance with any
and all laws relating to Hazardous Substances and all other federal, state and
local laws, ordinances and regulations relating to industrial hygiene or to the
environmental conditions on, under or about the Premises. Mortgagor shall not
permit Hazardous Substances use at, to, from, in, under or about the Premises
other than as permitted under paragraph (ii) of this Section. Mortgagor shall
institute and implement diligently a program designed to cause all of its
tenants and all of
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Mortgagor's and its tenants' employees, agents, contractors and subcontractors
and any other person lawfully occupying or present on the Premises to comply
with all laws relating to Hazardous Substances. Mortgagor shall enforce all
rights and remedies available to it under the leases of the Premises, under
applicable laws relating to Hazardous Substances and under all other applicable
laws, ordinances, rules, regulations and others (including, but not limited to,
under common law principles for liability resulting from nuisance, negligence,
strict liability in tort and waste) which provide a cause of action or other
basis for recovery of damages, for indemnification, for the disclosure of
information, or for injunctive relief, in the event of Hazardous Substances use
or other activities which do or may result in any loss of value of, lost use of
or other loss, damage or waste to the Premises.
(xi) Mortgagor shall immediately notify Mortgagee in writing of (i) any and
all enforcement, cleanup, removal or other governmental or regulatory actions,
or litigation (whether public or private) relating to the Premises instituted,
contemplated or threatened pursuant to any Hazardous Substances laws or common
law principles, and of any notices received by Mortgagor with respect to the
foregoing; (ii) Mortgagor's discovery of any claim made or threatened by any
third party or governmental agency against Mortgagor or the Premises relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
any Hazardous Substances (the matters set forth in (i) and (ii) of this
subparagraph are hereinafter collectively referred to as "Hazardous Materials
Claims"). Mortgagor shall immediately deliver to Mortgagee copies of all notices
and legal documents relating to Hazardous Materials Claims. Mortgagee shall have
the right to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys' fees in connection therewith paid
by Mortgagor.
(xii) Subject to Mortgagor's right to consent in good faith and diligently
prosecute such contest, Mortgagor shall promptly comply, at Mortgagor's sole
cost and expense, with all requirements of any federal, state, county, local or
regional authority or court decree or order, as to the removal, treatment,
cleanup, disposal or regulation of Hazardous Substances and shall provide
Mortgagee with satisfactory evidence of such compliance. Mortgagor shall provide
Mortgagee with a bond, letter of credit or similar financial assurance
evidencing to Mortgagee's reasonable satisfaction that the necessary funds are
available to pay the cost of compliance with such requirements of any federal,
State, county, local or regional authority or court decree or order.
(xiii) Mortgagor shall not cause or suffer any liens to be recorded against
the Premises as a consequence of, or in any way related to, the presence or
disposal of Hazardous Substances in or about the Premises, including but not
limited to any federal, state or local so-called "Superfund" lien relating to
such matters.
(xiv) Mortgagor at all times shall defend, indemnify and hold Mortgagee
harmless from and against any and all liabilities (including strict liability),
suits, causes of action, damages to property or individuals, claims, demands,
penalties, fines, damages (including but not limited to interest, penalties,
fines and monetary sanctions), losses, costs and expenses (including but not
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limited to reasonable attorneys' fees and expenses), and remediation and cleanup
costs (collectively "Liabilities") that may now or in the future be incurred or
suffered by Mortgagee because of, resulting from, in connection with or arising
in any manner whatsoever out of the breach of any warranty or covenant, or the
inaccuracy of any representation of Mortgagor contained or referred to in this
Section or that may be asserted as a direct or indirect result of the presence
of any Hazardous Substances on, in or under the Premises, or any Hazardous
Substances use on, at or from the Premises. Such Liabilities shall also include,
without limitation: (i) injury to or death of any person; (ii) damage to or loss
of the use of any property; (iii) the cost of any demolition and rebuilding of
any improvements on the Premises, repair or remediation and the preparation for
and completion of any activity required by any federal, state, local, county or
regional authority or court order or decree; (iv) any lawsuit brought or
threatened, good faith settlement reached, or governmental order relating to the
presence, disposal, release or threatened release of any and (v) the imposition
and removal of any lien on the Premises arising from the activity of Mortgagor
or Mortgagor's predecessors in interest on the Premises or from the existence of
Hazardous Substances upon the Premises or Hazardous Substances use at, on or
upon the Premises, or the violation of any Environmental Law. Any amounts
expended by Mortgagee in connection with any Liabilities, together with interest
thereon at the Default Rate shall be secured by this Mortgage and shall have the
same priority of collection as the principal indebtedness secured hereby until
Mortgagor reimburses Mortgagee pursuant to this indemnity.
(xv) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, this covenant to defend, indemnify and hold
Mortgagee harmless shall survive repayment of all indebtedness secured by this
Mortgage, transfer of the Premises by Mortgagor (including but not limited to
foreclosure sale of the Premises or delivery of a deed in lieu of foreclosure)
and assignment, assumption, modification, amendment, cancellation, release,
termination of discharge of the Note, and shall not be subject to any
anti-deficiency laws.
The Mortgagee, for itself, its employees, agents, officers and trustees,
hereby expressly agrees and acknowledges that the indemnification, defend,
protect and hold harmless provisions contained in this Mortgage are limited to
those conditions existing on or prior to the earlier of (i) acquisition of title
to the Premises by Mortgagee, its successors or assigns (ii) Mortgagee, its
successors or assigns becoming a mortgagee in possession or (iii) the
appointment of a receiver, and in no event shall any indemnification, defend,
protect or hold harmless provision extend to or include the willful misconduct
or negligence of Mortgagee, its successors, assigns, employees, officers and
trustees. Anything in this Mortgage or the Documents to the contrary
notwithstanding, Mortgagor, except for the obligation to defend itself in the
event Mortgagor is named in any action, shall have liability to indemnify
Mortgagee for any environmental conditions or events on the Premises occurring:
(i) after Mortgagor's payment of the loan in full and the discharge of record of
the Documents; or, (ii) after the date on which Mortgagor, with the consent of
or as a result of the actions of Mortgagee, no longer has fee title to the
Premises; or, (iii) during any period in which Mortgagor, with the consent of or
as a result of the actions of Mortgagee, does not have possession and control of
the Premises.
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(xvi) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, any information provided to Mortgagee hereunder is
to allow Mortgagee to protect Mortgagee's security interest in the Premises and
is not intended to create any obligations upon Mortgagee with respect to the
operation or ownership of the Premises. Any rights, authority or approvals
granted to Mortgagee by Mortgagor or actions taken by Mortgagee under this
section are solely to protect Mortgagee's security interest in the Premises and
are not intended to create any obligations upon Mortgagee with respect to the
operation or ownership of the Premises.
(xvii) Mortgagor hereby grants to Mortgagee a permanent license for
ingress, egress and inspection for the purpose of entering upon the Premises for
making such inspections and tests as Mortgagee may deem reasonably necessary to
determine whether there is compliance with all environmental laws and
regulations, including those pertaining to wetlands subject to Paragraph XVIII
and reasonable notice to Mortgagor. Mortgagee shall make reasonable efforts to
not interfere with Mortgagor's business during inspections.
(xviii) Mortgagee may retain, at Mortgagor's sole cost and expense, an
environmental engineer or consultant (the "Engineer") to conduct such
investigations and tests as provided under subsection (xvii) above. The engineer
shall deliver the results of investigations and tests to Mortgagor and to
Mortgagee. Such results shall be kept confidential by both Mortgagor and
Mortgagee unless Mortgagee is legally compelled or required to disclose such
results or disclosure is reasonably required in order to pursue rights or
remedies provided herein or at law. Mortgagor shall promptly pay the cost of
such investigations and tests upon receipt of the Engineer's bill therefor. If
Mortgagor fails to pay said bills, Mortgagee may pay such bill, and until
reimbursed by Mortgagor, the amount of said payment shall be secured by this
Mortgage and shall accrue interest at the Default Rate until the date paid.
Notwithstanding the foregoing Mortgagee shall not require tests or
investigations unless a release occurs or there is other reasonable cause for
such investigations or testing.
The Mortgagor unconditionally agrees that should the representations and
warranties made under this Section 1.25 be untrue, or should the Mortgagor
breach any provision of the Environmental Certificate and Indemnity Agreement
between Mortgagor and Mortgagee of even date herewith or should Mortgagor breach
the obligation not to release, discharge or deposit Hazardous Substances on the
Premises, Mortgagor will unconditionally indemnify and bold Mortgagee harmless
from and on account of any claim, judgment, cleanup order, or related expenses
(including but not limited to reasonable attorneys' fees and disbursements
incurred by Mortgagee in defending any action, judgment or cleanup order) in
connection with any release, discharge or deposit of any Hazardous Substances.
Section 1.26. The Mortgagor affirms that, to the best of its knowledge, all
information, reports, papers and data given to Mortgagee with respect to any of
the Premises or Mortgagor are accurate in all material respects, and there has
been no material adverse change in any condition or fact stated therein.
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ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. If one or more of the following Events of Default shall
happen, that is to say:
(a) if (i) a default shall be made in the payment of any interest on
the Note, when and as the same shall become due and payable, and such
default shall have continued for a period of fifteen (15) days after
written notice, or (ii) default shall be made in any payment of the
principal on the Note, when and as the same shall become due and payable,
and such default shall have continued for a period of fifteen (15) days
after written notice (whether at maturity or by acceleration or otherwise),
in each case, as in the Note and this Mortgage provided or, (iii) default
shall be made in the payment of any tax required by Section 1.07 to be paid
and said default shall have continued for a period of fifteen (15) days
after written notice, or (iv) default shall be made in the due observance
or performance of any covenant or agreement on the part of the Mortgagor
contained in Sections 1.01. 1.14, 1.22, 1.25 or 3.11 hereof (for the
purposes of this clause, and for subparagraph (b) below, if any
representation made in Sections 1.01 and 1.25 shall be incorrect, it shall
be deemed to be a default) and such default shall have continued for a
period of more than thirty (30) days after written notice; or
(b) if default shall be made in the due observance or performance of
any other covenant or agreement on the part of the Mortgagor contained
herein and such default shall have continued for a period of thirty (30)
days after written notice thereof shall have been given to the Mortgagor by
the Mortgagee or if such default is by its nature not susceptible of curing
within such thirty (30) day period if Mortgagor does not commence curing
the default within such period and diligently pursues such curing to
conclusion; or
(c) if default shall be made in the due observance or performance of
the covenants or agreements on the part of the Mortgagor contained in
Sections 1.09 or 1.20 hereof, which shall be unremedied for a period of
more than twenty (20) days after written notice; or
(d) if any other Event of Default shall occur under the Note or the
Documents not specifically referred to above, or if any such Documents
shall not contain "Events of Default" and default shall be made in the due
observance, performance or fulfillment of any other covenant or condition
on the part of the Mortgagor or borrower contained in any such Document,
and such default shall have continued for a period of thirty (30) days
after written notice or if such default is by its nature not susceptible of
curing within such thirty (30) day period if Mortgagor does not commence
curing the default within such period and diligently pursues such curing to
conclusion; or
(e) if any proceedings are commenced for the condemnation of any part
of the Mortgaged Premises, which condemnation would have, in the reasonable
opinion of the Mortgagee, a material adverse effect on the value of the
remaining security hereunder; or
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(f) If Mortgagor fails to maintain for the Premises an annual
operating cash flow (prior to taxes, non-cash charges and debt service) in
an amount sufficient to provide an annual debt service coverage ratio at
least 1.20X as determined under generally accepted accounting principles.
(g) if any easement over, across or under or otherwise affecting the
Mortgaged Property or any portion thereof shall be granted without the
Mortgagee's prior written consent (not to be unreasonably withheld); or
(h) if there occur any other event, which if unremedied, would require
a material change in the survey delivered to Mortgagee at time of closing;
or
(i) if the holder of or any lien or encumbrance on the Mortgaged
Property, or any part thereof, institutes foreclosure or other proceedings
for the enforcement of its remedies thereunder, which foreclosure or other
proceedings are not discharged (without affecting the Mortgaged Property)
or bonded within thirty (30) days from the institution thereof (this
subsection (i) shall not be construed to imply that the Mortgagee consents
to any junior lien or encumbrance); or
(j) if Mortgagor or any Guarantor shall:
(i) default in respect of payment of interest ("basic or
default") or principal all after applicable notice and grace period;
(ii) declare voluntary insolvency, as defined in the Bankruptcy
Code, as amended;
(iii) assign their assets for the benefit of creditors;
(iv) appoint a committee of any creditors or liquidating agent;
(v) offer to or receive from any creditors a composition or
extension of any of their indebtedness;
(vi) grant a security interest or mortgage in any property
pledged or mortgaged pursuant to this Mortgage;
(vii) suspend, wholly or partially, or liquidate their usual
business;
(viii) die (but only if both Guarantors die) or dissolve, if a
partnership or corporation;
(ix) fail to pay or discharge or bond any mechanic's lien filed
against Premises within sixty (60) days of the date filed;
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and such default shall have continued for a period of fifteen (15)
days (120 days if due to the death of both Guarantors) after written
notice shall have been given to the Mortgagor by the Mortgagee; or
(k) if with respect to Mortgagor or any Guarantor there has been:
(i) commenced of any involuntary proceeding, suit or action (at
law, or in equity, or under any of the provisions of any Bankruptcy
Code or amendments thereto, or any other insolvency act or law, state
or federal, now or hereafter existing) for adjudication as a bankrupt,
reorganization, composition, extension, arrangement, wage earners'
plan, receivership, liquidation, dissolution which is not dismissed
within ninety (90) days from the date initiated, or any similar
proceeding, initiated by or against it;
(ii) made an application by any of them for the appointment, or
the appointment in any jurisdiction, at law or in equity, of any
receiver, conservator, rehabilitator or similar officer or committee
of, or of the property of, any of them;
(iii) Made any tax assessment by the United States or any state
not discharged within thirty (30) days;
(iv) entered a judgment in excess of $250,000 against or issuance
of an order of attachment or an injunction against any of the property
of any of them not satisfied or discharged within thirty (30) days;
Then in any such event,
I. The Mortgagee may declare the entire principal of the Note then
outstanding (if not then due and payable), and all accrued and unpaid interest
thereon, to be due and payable immediately, and upon any such declaration the
principal of the Note and said accrued and unpaid interest shall become and be
immediately due and payable, anything in the Note or in this Mortgage to the
contrary notwithstanding;
II. The Mortgagee personally, or by its agents or attorneys, may enter into
and upon all or any part of the Premises and each and every part thereof; and
having and holding the same, may use, operate, manage and control the Premises
or any part thereof and conduct the business thereof, either personally or by
its superintendents, managers, agents, servants, attorneys or receivers; and
upon every such entry, the Mortgagee, at the expense of the Mortgagor, from time
to time, either by purchase, repairs or construction, may maintain and restore
the Mortgaged Property, whereof it shall become possessed as aforesaid, may
complete the construction of the Improvements and in the course of such
completion may make such changes in the contemplated Improvements as it may deem
desirable and may insure the same; and likewise, from time to time, at the
expense of the Mortgagor, the Mortgagee may make all necessary or proper
repairs, renewals and replacements and such useful alterations, additions,
betterments and improvements
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thereto and thereon as to it may seem advisable; and in every such case the
Mortgagee shall have the right to manage and operate the Mortgaged Property and
to carry on the business thereof and exercise all rights and powers of the
Mortgagor with respect thereto either in the name of the Mortgagor or otherwise
as it shall deem best; and the Mortgagee shall be entitled to collect and
receive all gross receipts, earnings, revenues, rents, issues, profits and
income of the Mortgaged Property and every part thereof, all of which shall for
all purposes constitute property of the Mortgagee; and after deducting the
reasonable expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments and
improvement and amounts necessary to pay for taxes, assessments, insurance and
prior or other proper charges upon the Mortgaged Property or any part thereof,
as well as just and reasonable compensation for the services of the Mortgagee
and for all attorneys, counsel, agents, clerks, servants and other employees by
it properly engaged and employed, the Mortgagee may apply the monies arising as
aforesaid in such manner and at such times as the Mortgagee shall determine in
its discretion to the payment of the indebtedness secured hereby and the
interest thereon, when and as the same shall become payable and/or to the
payment of any other sums required to be paid by the Mortgagor under this
Mortgage or the Documents; and
II. The Mortgagee, with or without entry, personally or by its agents or
attorneys, insofar as applicable, may:
(i) institute proceedings for the complete or partial foreclosure of
this Mortgage; or
(ii) take such steps to protect and enforce its rights whether by
action, suit or proceeding in equity or at law for the specific performance
of any covenant, condition or agreement in the Note, this Mortgage, or the
other Documents or in aid of the execution of any power herein granted, or
for any foreclosure hereunder, or for the enforcement of any other
appropriate legal or equitable remedy or otherwise as the Mortgagee shall
elect.
Section 2.02. (a) The Mortgagee may adjourn from time to time any sale by
it to be made under or by virtue of this Mortgage by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, the Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by the Mortgagee under or
by virtue of this Article II, the Mortgagee, or any officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient instruments,
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. Nevertheless, the Mortgagor, if so
requested by the Mortgagee, shall ratify and confirm any such sale or sales by
executing and delivering to the Mortgagee or to such purchaser or purchasers all
such instruments as may be advisable, in the judgment of the Mortgagee, for the
purpose, and as may be designated in such request. Any such sale or sales made
under or by virtue of this Article II, whether made under the power of
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sale herein granted or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, shall operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of the Mortgagor in and to the properties, interests and rights so
sold, and shall be a perpetual bar both at law and in equity against the
Mortgagor and against any and all persons claiming or who may claim the same, or
any part thereof from, through or under the Mortgagor.
(c) In the event of any sale made under or by virtue of this Article II,
the entire principal of, and interest on, the Note, if not previously due and
payable, and all other sums required to be paid by the Mortgagor pursuant to
this Mortgage, immediately thereupon shall, anything in the Note or in this
Mortgage to the contrary notwithstanding, become due and payable.
(d) The purchase money, proceeds or avails of any sale made under or by
virtue of this Article II, together with any other sums which then may be held
by the Mortgagee under this Mortgage, whether under the provisions of this
Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale, and of
any judicial proceedings wherein the same may be made, including reasonable
compensation to the Mortgagee, its agents and attorneys, and of all
expenses, liabilities and advances made or incurred by the Mortgagee under
this Mortgage, together with interest at the Default Rate on all advances
made by the Mortgagee and all taxes or assessments paid by Mortgagee except
any taxes, assessments or other charges subject to which the Mortgaged
Property shall have been sold.
Second: To the payment of the whole amount then due, owing or unpaid
upon the Note for interest and any balance remaining to be applied to
principal, with interest on the unpaid principal calculated at the Default
Rate from and after the happening of any default and expiration of the
applicable grace period described in clause (a)(i), (ii) or (iii) of
Section 2.01 from the due date of any such payment of principal until the
same is paid.
Third: To the payment of any other sums required to be paid by the
Mortgagor pursuant to any provision of this Mortgage, of the Note, or of
the other Documents, all with interest at the Default Rate, from the date
such sums were or are required to be paid under this Mortgage, the Note or
the other Documents.
Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
(e) Upon any sale made under or by virtue of this Article II, by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, the
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness of the Mortgagor secured by
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this Mortgage the net sales price after deducting therefrom the expenses of the
sale and the costs of the action and any other sums which the Mortgagee is
authorized to deduct under this Mortgage.
Section 2.03. (a) In case an Event of Default beyond the expiration of any
applicable notice, grace and cure periods described in this Article II shall
have happened, then, upon written demand of the Mortgagee, the Mortgagor will
pay to the Mortgagee the whole amount which then shall have become due and
payable on the Note, for principal and interest or both, as the case may be, and
after the happening of said Event of Default will also pay to the Mortgagee
interest at the Default Rate on the then unpaid principal of the Note, and the
sums required to be paid by the Mortgagor pursuant to any provision of this
Mortgage and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation to
the Mortgagee's agents, and attorneys and any expenses incurred by the Mortgagee
hereunder. In the event the Mortgagor shall fail forthwith to pay such amounts
upon such demand, the Mortgagee shall be entitled and empowered to institute
such action or proceedings at law or in equity as may be advised by its counsel
for the collection of the sums so due and unpaid, and may prosecute any such
action or proceedings to judgment or final decree and may enforce any such
judgment or final decree against the Mortgagor and collect out of the property
of the Mortgagor wherever situated, as well as out of the Mortgaged Property, in
any manner provided by law, monies adjudged or decreed to be payable with
interest thereon at the Default Rate.
(b) The Mortgagee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage or any guarantee executed by any Guarantor and
the right of the Mortgagee to recover such judgment shall not be affected by any
entry or sale hereunder, or by the exercise of any other right, power or remedy
for the enforcement of the provisions of this Mortgage, or the foreclosure of
the lien hereof; and in the event of a sale of the Mortgaged Property or any
part thereof and of the application of the proceeds of sale, as in this Mortgage
provided, to the payment of the indebtedness hereby secured, the Mortgagee shall
be entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Note, and to enforce payment of all other charges, payments
and costs due under this Mortgage, and shall be entitled to recover judgment for
any portion of the debt remaining unpaid, with interest thereon at the Default
Rate. In case of proceedings against the Mortgagor in insolvency or bankruptcy
or any proceedings for its reorganization or involving the liquidation of its
assets, then the Mortgagee shall be entitled to prove the whole amount of
principal and interest due upon the Note to the full amount thereof, and all
other payments, charges and costs due under this Mortgage, provided, however,
that in no case shall the Mortgagee receive a greater amount than such principal
and interest and such other payments, charges and costs from the aggregate
amount of the proceeds of the sale of the Mortgaged Property or any part thereof
and the distribution from the estate of the Mortgagor.
(c) No recovery of any judgment by the Mortgagee and no levy of any
execution under any judgment upon the Mortgaged Property or upon any other
property of the Mortgagor
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shall affect in any manner or to any extent, the lien of this Mortgage upon the
Mortgaged Property for the full outstanding amount thereof or any part thereof,
or any liens, rights, powers or remedies of the Mortgagee hereunder, but such
liens, rights, powers and remedies of the Mortgagee shall continue unimpaired as
before.
(d) Any monies thus collected by the Mortgagee under this Section 2.03
shall be applied by the Mortgagee in accordance with the provisions of paragraph
(d) of Section 2.02.
Section 2.04. After the happening of any Event of Default and immediately
upon the commencement of any action, suit or other legal proceedings by the
Mortgagee to obtain judgment for the principal of, or interest on, the Note and
other sums required to be paid by the Mortgagor pursuant to any provisions of
this Mortgage, or of the Documents, or of any nature in aid of the enforcement
of the Note or of this Mortgage, the Mortgagor does hereby consent to the
appointment of a receiver or receivers of the Mortgaged Property or any part
thereof or any business or businesses conducted thereon and of all the earnings,
revenues, rents, issues, profits and income thereof. After the happening of any
Event of Default, or upon the commencement of any proceedings to foreclose this
Mortgage or to enforce the specific performance hereof or in aid thereof or upon
the commencement of any other judicial proceeding to enforce any right of the
Mortgagee, the Mortgagee shall be entitled, as a matter of right, if it shall so
elect, without the giving of notice to any other party and without regard to the
adequacy or inadequacy of any security for the Mortgage indebtedness, forthwith
either before or after declaring the unpaid principal of the Note to be due and
payable, to the appointment of such receiver or receivers.
Section 2.05. Notwithstanding the appointment of any receiver, liquidator
or trustee of the Mortgagor, or of any of its property, or of the Mortgaged
Property or any part thereof, the Mortgagee shall be entitled to retain
possession and control of all property now or hereafter held under this
Mortgage.
Section 2.06. No remedy herein conferred upon or reserved to the Mortgagee
is intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission of the Mortgagee to exercise any right or power accruing
upon any Event of Default shall impair any such rights or power, or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein; and every power and remedy given by this Mortgage to the Mortgagee may
be exercised from time to time as often as may be deemed expedient by the
Mortgagee. Nothing in this Mortgage or in the Note shall affect the obligation
of the Mortgagor to pay the principal of, and interest on, the Note in the
manner and at the time and place therein respectively expressed.
Section 2.07. Neither the Mortgagor or any Guarantor will at any time
insist upon, or plead, or in any manner whatsoever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Mortgage or any guarantee, nor claim, take or
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insist upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisal of the Mortgaged Property, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision herein, or pursuant to the decree, judgment, or order of any court of
competent jurisdiction, and covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to the Mortgagee, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. The Mortgagor and any Guarantors, for themselves
respectively and all who may claim under either of them, waive, to the extent
that they lawfully may, all right to have the Mortgaged Property or any part
thereof marshaled upon any foreclosure hereof.
Section 2.08. During the continuance of any Event of Default the Mortgagor
agrees to pay the fair and reasonable rental value for the use and occupancy of
the Premises or any portion thereof which are in its possession for such period
and, upon default of any such payment, will vacate and surrender possession of
the Premises to the Mortgagee or to a receiver, if any, and in default thereof
may be evicted by any summary action or proceeding for the recovery of
possession of the premises for nonpayment of rent, however designated.
ARTICLE III
MISCELLANEOUS
Section 3.01. All of the grants, covenants, terms, provisions and
conditions herein shall run with the land and shall apply to, bind and inure to
the benefit of, the successors and assigns of the Mortgagor and the successors
and assigns of the Mortgagee. If there be more than one mortgagor, the covenants
and warranties hereof shall be joint and several. As used herein, the singular
shall include the plural as the context requires.
Section 3.02. In the event any one or more of the provisions contained in
this Mortgage or in the Note or in any of the other Documents shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall, at the option of the
Mortgagee, not affect any other provision of this Mortgage, but this Mortgage
shall be construed as if such invalid illegal or unenforceable provision had
never been contained herein or therein.
Section 3.03. All notices hereunder shall be in writing and shall be deemed
to have been sufficiently given or served for all purposes when presented
personally or sent by registered or certified mail to any party hereto at its
titles address above stated, in the case of the Mortgagee, The Roslyn Savings
Bank Attention: Commercial Real Estate Department, with a copy sent to Payne,
Wood & Littlejohn, 290 Broad Hollow Road, Melville, New York 11747, Attention:
Alan C. Polacek, Esq., and in the case of Mortgagor, Attention: Mr. Nourollah
Elghanayan, with a copy sent to Mandel & Resnik, P.C. at 220 East 42nd Street,
New York, New York 10017 Attn: Nicholas J. Kaiser, Esq. or at such other address
of which it shall have notified the party giving such notice in writing. Any
written notice sent by registered or certified mail shall be deemed to
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have been served two (2) business days after the date it was mailed in
accordance with the foregoing provisions. Any notice given by an attorney
representing the Mortgagee or Mortgagor shall constitute notice by such party if
such attorney is in fact, authorized to act on behalf of such party.
Section 3.04. Whenever in this Mortgage the giving of notice by mail or
otherwise is required, the giving of such notice may be waived in writing by the
person or persons entitled to receive such notice.
Section 3.05. This Mortgage, and any instruments made in connection
herewith, may be assigned by the Mortgagee without notice to, or the consent of,
the Mortgagor or any other party.
Section 3.06. The information set forth on the cover hereof is hereby
incorporated herein.
Section 3.07. The Default Rate provided for herein shall continue to accrue
and be paid on any amount to which the Default Rate is applied until said amount
is paid in full.
Section 3.08. This Mortgage shall be construed and enforced according to
the laws of the State of New York.
Section 3.09. Neither this Mortgage nor any provision hereof may be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the Mortgagee.
Section 3.10. This Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code with respect to the fixtures and
items of personal property referred to in this Mortgage, and with respect to all
replacements thereof, substitutions therefor or additions thereto together with
Mortgagor's interest in subdivision maps, surveys, building permits, engineering
and architectural plans and studies, building materials, work in progress and
the like (all of such items sometimes herein referred to as the "Collateral"),
and that a security interest shall attach thereto for the benefit of the
Mortgagee to secure the payment and performance of the Mortgagor's obligations
under the Note beyond the expiration of any notice, grace or cure periods, this
Mortgage, and any Documents executed in connection therewith. The Mortgagor
hereby authorizes the Mortgagee to file continuation financing statements
without the signature of the Mortgagor whenever lawful; otherwise the Mortgagor
agrees to execute such financing and continuation statements as the Mortgagee
may request In the event of a default under the Note, this Mortgage, or any
Documents executed in connection therewith, the Mortgagee may, in addition to
all other rights or remedies it may have in such event, exercise any right or
remedy with respect to the Collateral which it may have as a Secured Party under
the provisions of the Uniform Commercial Code or otherwise, including, without
limitation, Section 9-501(4) of the Uniform Commercial Code, and shall have the
option of proceeding as both real and personal property in accordance with its
rights and remedies in respect of real property, in which event the default
provisions of the Uniform Commercial Code shall not apply. The parties agree
that in the event the Mortgagee elects to proceed with respect to the Collateral
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separately from the real property, ten (10) days notice of the sale of the
Collateral shall be reasonable notice. The reasonable expenses of retaking,
holding, preparing for sale, selling and the like incurred by the Mortgagee
shall include, but not be limited to, reasonable attorneys' fees and legal
expenses incurred by the Mortgagee. The Mortgagor agrees that, without the
written consent of the Mortgagee, the Mortgagor will not remove or permit to be
removed from the Mortgaged Property any of the Collateral except either for
replacement by items of substantially the same utility and value or temporarily
for repair. All replacements, renewals and additions to the Collateral shall be
and become immediately subject to the security interest of this Mortgage and
this agreement and be covered thereby. The Mortgagor shall, from time to time on
request of the Mortgagee, deliver to such Mortgagee an inventory of the
Collateral in reasonable detail. This Mortgage shall be deemed to be a Security
Agreement pursuant to the Uniform Commercial Code of the State in which the
Mortgaged Property or any part thereof is located.
Section 3.11. (a) The Mortgagor represents and warrants to the Mortgagee
that the Premises do not comprise property identified by the Secretary of
Housing and Urban Development as an area having special flood hazards, or to the
contrary, that the Premises have been so identified but that the Premises has
been insured under the National Flood Insurance Act of 1968, as amended by Flood
Disaster Protection Act of 1973.
(b) The Mortgagor covenants and warrants that if the Premises are so
identified by the Secretary of Housing and Urban Development as having special
flood hazards, it will keep the Premises insured against loss by flood hazards
in an amount at least equal to the outstanding principal balance of the Note
secured by this Mortgage, or to the maximum limit of coverage made available
with respect to the particular type of property under the National Flood
Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973,
whichever is less.
Section 3.12. Wherever "attorneys' or counsel fees" are referred to herein,
it shall include such fees whether incurred out of court or in litigation,
including, without limitation, appeals and bankruptcy proceedings.
Section 3.13. Whenever reference is made in this Mortgage to a lease,
lessee, tenancy or tenant, such reference shall be deemed to include a sublease,
sublessee, subtenancy or subtenant, as the case may be.
Section 3.14. In the event the Mortgagee exercises its right to accelerate
all or any part of this obligation or in the event that other charges or fees
may, according to applicable law, be construed to be interest, thereby causing
the interest rate herein to exceed the maximum rate permitted by applicable
laws, then and in either of those events, such interest shall be recalculated
and any excess over the maximum interest permitted by said laws shall be
credited to the then outstanding principal balance to reduce said balance by
that amount. It is the intent of the parties hereto that the Mortgagor, under no
circumstances, shall be required to pay, nor shall the Mortgagee be entitled to
collect, any interest which is in excess of maximum legal rate permitted under
applicable laws or the interest rates stated in the Documents, whichever is
less.
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Section 3.15. Except as otherwise provided in this Mortgage concerning
transfers if the Mortgagor shall sell, transfer, or otherwise dispose of the
Mortgaged Property, or any part thereof without the prior consent in writing of
the Mortgagee, the Mortgagee may, at its option, declare the entire indebtedness
hereby secured to be immediately due and payable, with notice to the Mortgagor
and upon such declaration the entire indebtedness hereby secured shall be
immediately due and payable, anything herein or in any bond, note or obligation
of the Mortgagor to the contrary notwithstanding.
Section 3.16. If the payment of the mortgage indebtedness is now or
hereafter further secured by assignments of leases or rentals, security
agreements, financing statements, mortgages, collateral assignments, pledges,
contracts of guaranty, letters of credit or other additional security documents,
any default past applicable grace periods under the provisions of any such
further security documents shall constitute and be a default under this
Mortgage, and the Mortgagee may, at its option, exhaust any one or more of the
said security documents and the security thereunder as well as the Mortgaged
Property covered by this Mortgage either concurrently or independently and in
such other and further manner as the Mortgagee may elect, and Mortgagee may
apply the proceeds received therefrom upon the Mortgage indebtedness without
waiving or affecting Mortgagee's rights and remedies under this Mortgage
exercised hereunder or whether contained or exercised under any other such
security documents.
Section 3.17. Nothing herein, nor any transaction related hereto, shall be
construed or so operate as to require Mortgagor to pay interest at a greater
rate than shall be lawful. Should any interest or other charges paid by
Mortgagor in connection with the loan evidenced by the Note result in the
computation or earning of interest in excess of the maximum legal rate of
interest which is legally permitted under the laws of the State of New York or,
if applicable, the laws of the United States of America, after taking into
account all provisions of the Note and the Loan Documents, then any and all such
excess shall be, and the same is hereby waived by the Mortgagee, and any and all
such excess shall be automatically credited against and in reduction of the
balance due under the indebtedness secured hereby and any portion which exceeds
the balance due under the Note and secured hereby shall be paid by the Mortgagee
to the Mortgagor. At the maturity of the Note secured hereby (or prior thereto,
in the event of any permitted prepayment, or if the Mortgagee accelerates
payment thereof), if the total amount of interest paid, including any service
fee and any other charge upon the principal, exceeds the maximum legal contract
rate permitted by law, such interest shall be recomputed and any such excess
shall be credited to principal or returned to Mortgagor.
Section 3.18. Nothing contained herein shall create any joint venture,
partnership, agency or trust arrangement between Mortgagor and Mortgagee.
Section 3.19. At reasonable intervals after an Event of Default, but not
more frequently than once during each 12 month period, the Mortgagee may order a
re-appraisal of the Premises by an independent appraiser of its selection, or by
a Mortgagee employee, and Mortgagor agrees to allow access to the Premises to
such independent appraiser or Mortgagee employee, and in the case of an
independent appraiser, to pay to the Mortgagee, within 30 days of billing, such
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appraiser's reasonable fee and expenses.
Section 3.20. This Mortgage secures the Note and all amendments,
replacements, substitutions and extensions thereof.
Section 3.21. The Mortgagee agrees to provide to the Mortgagor partial
releases (or a final release upon full payment of the Note) from the lien of
this Mortgage in accordance with and subject to the following conditions:
A. From time to time, Mortgagor may sell one or more parcels of real
property ("Released Collateral") which comprise part of the Mortgaged Property
without Mortgagee's consent upon prepayment of the Note in any amount equal to
120% of the product of the then outstanding principal balance of the Note
multiplied by a fraction the numerator of which is the appraised value of the
Released Collateral and the denominator of which is the appraised value of the
Mortgaged Property. Notwithstanding anything to the contrary contained herein,
such prepayment shall be allowed without a prepayment fee. Simultaneous with
such prepayment, Mortgagee will (i) assign on a nonrecourse basis to the person
designated by Mortgagor the principal amount of Mortgagee's Mortgage allocable
to the Released Collateral as determined in the immediately preceding sentence
provided Mortgagor pays Mortgagee's reasonable attorney's fees for preparation
of the assignment documents (ii) release and terminate the Assignment of Leases,
Rents and Profits relating to the Released Collateral, (iii) release and
terminate all UCC-1 financing statements relating to the Released Collateral,
(iv) release the Borrower entity which is the fee owner of the Released
Collateral from its obligations under the Note, Mortgage and Environmental
Certificate and Indemnity Agreement and (v) execute such other documents as may
be reasonably requested to evidence and effectuate Mortgagee's release of its
liens on the Released Collateral.
B. If the release requested is for a street or separate drainage area or
common area not in a building lot or for an easement for drainage or drainage
facilities a release shall be provided without any payment by the Mortgagor
provided a deed or easement of dedication to a municipality is then required;
C. No parcel to be released shall be less than the whole of a legal zoning
lot, street or drainage area;
D. No release shall be delivered while the Note or any provision of this
Mortgage is in default beyond the expiration of any applicable notice, grace and
cure periods;
E. All consideration received for releases shall be credited to interest on
the Note and reduction of the principal balance of the Mortgage;
F. Each release requested shall be accompanied by a certified description
from a title company and a guaranteed survey of the portion of such parcel, if
any, remaining subject to this
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Mortgage;
G. The releases shall be in statutory form and shall be recorded by and at
the expense of the Mortgagor.
Section 3.22. INTENTIONALLY DELETED.
Section 3.23. The covenants contained in this Mortgage shall run with the
land and bind the Mortgagor, his successors and assigns and be superior to the
claims of all subsequent owners, encumbrancers, tenants and subtenants of the
Premises, and shall enure to the benefit of the Mortgagee, the personal
representatives, successors and assigns of the Mortgagee and all subsequent
holders of this Mortgage.
Section 3.24. The parties hereto, for and on behalf of themselves and their
successors in interest, agree that should any agreement be hereafter entered
into modifying or changing the terms of this Mortgage in any particular, the
rights of the parties to such agreement shall, pursuant to the terms thereof, be
superior to the rights of the holder of any subordinate lien.
Section 3.25. Mortgagor covenants and warrants that:
(a) Mortgagor will not use the assets of an employee benefits plan, as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as now or hereafter amended ("ERISA"), in the exercise of any of its
obligations or right specified herein or in the Note or in any other
instrument which may be held by Mortgagee as evidence of or security for
the obligations secured or in the performance of any transaction
contemplated hereunder or under the Note or under any other instrument
which may be held by Mortgagee as additional security for the Note;
(b) The Mortgaged Premises do not, and without the written consent of
Mortgagee will not, constitute an asset of such an employee benefit plan;
and
(c) Mortgagor will not sell, convey or transfer the Mortgaged Premises
to a person or entity which could not satisfy the undertakings set forth in
subsections (a) and (b) of this Section regardless of whether any of the
above-described conditions arise by operation of law or otherwise.
Section 3.26 This Mortgage may, by separate future written agreement
between Mortgagor and Mortgagee, be split from time to time into two or more
separate mortgages with an aggregate principal balance equal to the principal
balance of the indebtedness secured by this Mortgage at such time (the "Debt")
each of which separate mortgages shall encumber and continue to constitute a
lien on the Mortgaged Property. If Mortgagor and Mortgagee agree to split this
Mortgage, then the parties shall do any act or execute any additional documents
necessary to implement such splitting of this Mortgage, including a splitter and
modification agreement, severed mortgages and severed notes in the aggregate
principal balance of the Debt,
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all in form and substance reasonably satisfactory to Mortgagor and the title
insurance company insuring this Mortgage (or insuring any severed mortgage
arising from a splitting of this Mortgage), all in furtherance of the provisions
of this paragraph.
Section 3.27 In the event that any payment shall become overdue for a
period in excess of fifteen days, a "late charge" of 4(cents) for every dollar
of any installment so overdue may be charged by the Mortgagee for the purpose of
defraying the expense incident to handling such delinquent payment. Failure to
pay such "late charge" shall be deemed a default under the terms of this
Mortgage.
Section 3.28. This Mortgage may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original; and all such counterparts shall together constitute but one and the
same Mortgage.
Section 3.29. Mortgagee shall have the right after an Event of Default to
approve the management of and the management contract for the Premises.
Mortgagor shall not amend, modify or cancel any approved management contract nor
enter into a new management contract without prior written consent of Mortgagee
not to be unreasonably withheld.
Section 3.30. At Mortgagor's request, upon payment of all sums due under
the Note and Mortgage, Mortgagee shall issue a non-recourse quitclaim assignment
of the Note and this Mortgage to a new lender upon payment by Mortgagor of
Mortgagee's reasonable attorney's fees.
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<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed by the Mortgagor
on the date first above written.
GILPIN REALTY CORP.
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, President
CORAM REALTY LLC
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, Member
ENGINEERS ROAD, LLC
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, Member
HUNTINGTON LLC
By: /s/ Nourollah Elghanayan
-----------------------------------
Nourollah Elghanayan, Member
THE ROSLYN SAVINGS BANK
By: /s/ Jeffrey S. Wall
-----------------------------------
Jeffrey S. Wall, Vice President
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<PAGE>
STATE OF NEW YORK, )
) ss:
COUNTY OF SUFFOLK. )
On the 21st day of July in the year 1998 before me, the undersigned, a
Notary Public in and for said State, personally appeared NOUROLLAH ELGHANAYAN,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is(are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Mary Jeanne Miller
----------------------------------
Notary Public
Mary Jeanne Miller
Notary Public State of New York
No. 30-4877301
Qualified in Nassau County
Commission Expires Nov. 17, 1998
STATE OF NEW YORK, )
) ss:
COUNTY OF SUFFOLK. )
On the 21st day of July in the year 1998 before me, the undersigned, a
Notary Public in and for said State, personally appeared JEFFREY S. WALL,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is(are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Mary Jeanne Miller
----------------------------------
Notary Public
Mary Jeanne Miller
Notary Public State of New York
No. 30-4877301
Qualified in Nassau County
Commission Expires Nov. 17, 1998
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DUPLICATE
ORIGINAL
BANK UNITED
MORTGAGE NOTE
$4,000,000.00 Melville, New York
As of April 19, 1999
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of
BANK UNITED its successors and/or assigns (hereinafter called the "Bank"), at
its offices at 3200 Southwest Freeway, Houston, Texas 77027, or such other place
as Bank may designate in writing,
FOUR MILLION AND 00/100 ($4,000,000.00) DOLLARS
with interest as hereinafter provided.
The rate of interest on this loan is 8.00% per annum which shall continue
in effect from the date hereof to Maturity (as hereafter defined). Interest from
the date hereof to the first day of the next ensuing month will be due and
payable on the date hereof. The monthly payment of principal and interest shall
be $33,457.60 and shall commence June 1, 1999 and continue on the same day of
each and every month thereafter to Maturity.
The term of this loan shall be five (5) years with principal amortization
based on a loan maturing over a twenty (20) year term which began on the date
hereof.
The Maturity of this loan is June 1, 2004, when the entire remaining unpaid
balance of principal and any unpaid interest shall be fully due and payable.
Monthly payments shall be applied first to the payment of interest as
aforesaid and the balance toward reduction of principal. Interest on any past
due amount, whether at maturity or by acceleration, shall be paid until the full
principal balance is actually paid at a rate of five percent per annum in excess
of the above stated interest rate. In no event, however, shall the interest on
this loan be higher than the highest rate of interest permitted under applicable
California or Federal Law.
The obligation to pay interest and principal on this Note as aforesaid is
sometimes referred to hereafter collectively as "Obligation".
Borrower may prepay this Note in whole or in part on any monthly
installment date after June 1, 2001 upon payment of a prepayment premium of 3%
of the amount prepaid which premium shall reduce to 2% on June 1, 2002
and to 1% on June 1, 2003.
Notwithstanding the foregoing restriction, Borrower may prepay this Note,
in whole or in part, on any monthly installment date during the last two months
of the term of the loan
<PAGE>
without premium. If at any time during the term of this loan Bank shall require
a reduction in the loan amount, such reduction shall not be subject to any
prepayment premium.
This Note is secured by a Deed of Trust on premises located at Weakley Road
and Portico Boulevard, Calexico, California known and designated as Block 6 of
the Kloke Tract, Assessors Parcel #058-020-17 on the Imperial County Tax Map.
The Bank, in its reasonable discretion, may accept partial payments of
interest and/or principal. If accepted: (1) such payments shall first be applied
to interest as aforesaid, and the balance, if any, toward reduction of
principal; and (2) acceptance of such partial payment or payments shall not
constitute a waiver of default of any provisions of this Note, the deed of trust
securing it, or any of the documents executed in connection herewith, nor shall
such acceptance effect a modification of this Note nor operate to create any
estoppel against the holder hereof.
The Bank may, at its option, or upon or at any time after default in the
prompt payment of Obligation or of any other liability of the undersigned,
whether due by acceleration as hereinabove provided or otherwise, proceed to
enforce payment of the same and exercise any of, or all of the rights and
remedies afforded the Bank by applicable law or any document executed in
connection with Obligation or otherwise.
The undersigned agrees that whenever an attorney is used to enforce,
declare or adjudicate any rights or obligations under this note or collect any
amounts due thereunder or with respect to any security securing the same,
whether by suit or by any other means whatsoever, the undersigned shall be
obligated in addition to pay the Bank's reasonable attorneys' fees, costs and
disbursements.
The rights and remedies provided for in this Note, any security agreement,
any guaranty of payment of liabilities, the deed of trust, the assignment of
leases, or other instruments or agreements executed by the undersigned or any
guarantors pertaining to either this Note or any guaranty securing this Note, or
in any other document or agreement executed in connection with this Note, are
cumulative and not exclusive, and the Bank or any subsequent holder of the Note
may proceed against undersigned, any guarantors, of the Note or any other
guaranty, or may proceed against any other person or entity, or with respect to
any pledged property, all in pursuance of any remedy afforded the Bank or any
subsequent holder of the Note, either by statute, contractually, or otherwise,
at any time, in any order, either simultaneously or otherwise until the Note and
all amounts due thereunder are fully paid and satisfied. It is understood and
agreed that the undersigned, and the guarantors and each of them, remain and are
at all times jointly and severally liable for the Note and all amounts due
thereunder (except as guarantors' liability is limited pursuant to the guaranty)
until the Note and all amounts due thereunder are fully paid and satisfied,
regardless of any recoveries from sale or disposition of collateral or pendency
of proceedings or completion of proceedings to accomplish the same.
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<PAGE>
The undersigned waives presentation, protest, demand for payment, notice of
default or non-payment to the undersigned, or any other party liable for or upon
any of said Obligations. The Bank and the undersigned, in any litigation
(whether or not arising out of or relating to the Note or said collateral
security for the repayment thereof) in which Bank and any of them shall be
adverse parties, waive trial by jury and the undersigned, in addition, waive the
right to interpose any defense based upon any Statute of Limitations or any
claim of laches and any set-off or counter claim of any nature or description.
If the undersigned is a partnership, the agreement herein contained shall
remain in force and applicable, notwithstanding any changes in the individuals
composing the partnership, and the term "undersigned", as used herein, shall
include any alternate or successor partnerships, but any predecessor partnership
and their partners shall not thereby be released from any liability. If this
Note is signed by more than one party, the terms "undersigned", as used herein,
shall mean the "undersigned and each of them" and each undertaking herein
contained shall be their joint and several undertaking, provided, however, that
in the phrases "of the undersigned", "by the undersigned", "against the
undersigned", "for the undersigned", "to the undersigned", and "on the
undersigned", the term "undersigned" shall mean the "undersigned or any of
them."
The Bank may release, exchange, sell or surrender any of the mortgaged or
pledged property belonging to any of the undersigned parties hereto or any
guarantors of this Note and it may renew, extend, modify, accelerate,
compromise, settle or release any of the liabilities of any of them and may make
additional advances or extensions of credit to any of them or release or fail to
set off any deposit account or credit of any of them or grant other indulgences
to any of them, all from time to time, before or after maturity hereof, with or
without further notice to or assent from, and without in any way affecting or
releasing the liability of, any of the other parties hereto.
If the time for payment of this Note shall be extended by any law relating
to obligations payable on Sunday or holidays, such extended time shall be
included in the computation of interest or discount.
Any provision hereof which may prove unenforceable under any law shall not
affect the validity of any other provision hereof.
No provision of this note (or any documents executed in connection
therewith) may be terminated, changed or waived orally, all such modifications
shall be in writing and duly executed by the party against whom enforcement is
sought.
This Note may be executed in counterparts each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
partially executed signature page of any counterpart of this Note may be
attached to any other partially executed counterpart of this note without
impairing the legal effect of the signature(s) on such signature page.
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<PAGE>
This Note shall be governed by and construed in accordance with the laws of
the State of California.
CALEXICO TISSUE COMPANY LLC
DUPLICATE By: American Tissue Holdings, Inc.,
ORIGINAL Member
By: /s/ Nourollah Elghanayan
------------------------------------
Nourollah Elghanayan, Chairman
STATE OF NEW YORK)
ss:
COUNTY OF SUFFOLK)
On this 15th day of April, 1999 before me Robert Joseph Knopf personally
appeared NOUROLLAH ELGHANAYAN, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
/s/Robert Joseph Knopf
----------------------
Notary Public
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30, 2000
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<PAGE>
Record and return to:
PAYNE, WOOD & LITTLEJOHN
290 BROAD HOLLOW ROAD
MELVILLE NY 11747
ATTN: Alan C. Polacek, Esq.
Index This Instrument as:
(1) Deed of Trust
(2) Security Agreement and Fixture Filing
================================================================================
THIS DEED OF TRUST IS FILED AS A FIXTURE FILING AND COVERS GOODS WHICH ARE, AND
GOODS WHICH ARE TO BECOME, FIXTURES ON THE MORTGAGED PROPERTY (AS DEFINED
HEREIN). THIS FIXTURE FILING IS TO BE RECORDED IN THE REAL ESTATE RECORDS.
DEED OF TRUST
Date: As of April 19, 1999
Mortgagor: CALEXICO TISSUE COMPANY LLC, a New York limited
liability company
Address: 135 Engineers Road Hauppauge, New York 11788
Mortgagee: BANK UNITED
Address: 3200 Southwest Freeway Houston, Texas 77027
Trustee: COMMONWEALTH LAND TITLE INSURANCE COMPANY
Address: 1250 Main Street El Centro, California 92243
Mortgage Amount: $ 4,000,000
Location of Weakley Road and Portico Boulevard, Calexico,
Premises: Imperial County, California
Block 6 of the Kloke Tract Assessor's Parcel #058-020-17
================================================================================
<PAGE>
RECITAL
The Mortgagor is the owner of the Premises described in Schedule A hereto.
The Mortgagor has substantial improvements on the Premises and, simultaneously
with the execution of this mortgage and deed of Trust has borrowed the sum of
FOUR MILLION AND 00/100 ($4,000,000.00) DOLLARS (hereafter the "Mortgage
Amount"). The Mortgagor has executed and delivered to Mortgagee a note for
$4,000,000.00 dated the date hereof. The said note, together with any
modifications or amendments thereto are hereinafter collectively referred to as
the "Note".
The Mortgagor desires to irrevocably grant, transfer and assign to Trustee
in trust with power of sale, the Mortgaged Property for the purpose of securing
performance of each agreement contained herein and payment of the Note and to
protect the security of this Deed of Trust, The Mortgagor therefore agrees:
CERTAIN DEFINITIONS
The Mortgagor and the Mortgagee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified, such definitions to be applicable equally to the singular and the
plural forms of such terms:
"Chattels" means all fixtures, articles of personal property now or
hereafter owned by the Mortgagor and attached to or used in connection with said
Premises, including but not limited to all partitions, furnaces, boilers, oil
burners, radiators and piping, coal stokers, plumbing and bathroom fixtures,
refrigeration, air conditioning and sprinkler systems, or other fire prevention
or extinguishing apparatus and materials, wash-tubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, kitchen cabinets, incinerators, plants and shrubbery, and all other
equipment and machinery, appliances, fittings and fixtures of every kind in or
used in the operation of the buildings standing on said Premises, all of which
the Mortgagor represents that it owns, together with any and all replacements
thereof and additions thereto.
"Default Rate" means at a rate equal to five percentum (5%) per annum in
excess of the current Note Rate as described in the Note, but in no event higher
than the maximum rate allowed by applicable law.
"Documents" means the Note (as hereafter defined), Assignment of Leases,
Rents and Profits of even date between Mortgagor and Mortgagee, this deed of
trust, and all other documents further evidencing and/or securing the loan
evidenced by the Note and this Mortgage.
"Events of Default" means the events and circumstances described as such in
Section
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<PAGE>
2.01 hereof.
"Guarantor" means any person or entity which has guaranteed to Mortgagee
the prompt and full payment of the sums due Mortgagee under the Note and
Documents.
"Improvements" means all improvements, structures or buildings, and
replacements and alterations thereof, erected or to be erected or now or
hereafter located upon the Premises including all plant equipment, apparatus,
machinery and fixtures of every kind and nature whatsoever owned by Mortgagor
forming part of said improvements, structures or buildings.
"Mortgage" means this deed of trust.
"Mortgage Amount" means FOUR MILLION AND 00/100 ($4,000,000.00) DOLLARS.
"Mortgagor" means Calexico Tissue Company LLC, a New York limited liability
company.
"Mortgagee" means Bank United, a federal savings bank, its successors
and/or assigns.
"Note" means the note of even date from Mortgagor to Mortgagee.
"Note Rate" means the rate of interest payable under the Note from time to
time during the term thereof.
"Premises" means the Premises described in Schedule A including all of the
easements, rights, privileges and appurtenances thereunto belonging or in anyway
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of the Mortgagor therein and in and to the strips and gores, streets,
and ways adjacent thereto, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
"Trustee" means Commonwealth Land Title Insurance Company.
All terms of this Mortgage which are not defined above have the meaning set
forth in this Mortgage or the Documents.
GRANTING CLAUSE
NOW THEREFORE, the Mortgagor, in order to secure the payment of both the
Mortgage Amount and the interest, default interest, late charges, advances,
reimbursements, commitment fees and any other sums payable under the Note, this
Mortgage and the Documents and the performance and observance of all the
provisions hereof and of the Note
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<PAGE>
and the Documents, hereby irrevocably gives, grants, bargains, sells, warrants,
aliens, demises, releases, conveys, assigns, transfers, mortgages, hypothecates,
deposits, pledges, sets over and confirms unto the Trustee in trust for the
benefit of Mortgagee, with power of sale and right of entry and possession and
with mortgage covenants, all its estate, right, title and interest in, to and
under any and all of the following described property (the "Mortgaged Property")
whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels in which a security agreement pursuant to the
Uniform Commercial Code is granted to Mortgagee;
(iv) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation awards and any unearned
premiums accrued, accruing or to accrue under any and all insurance
policies now or hereafter obtained by the Mortgagor and real estate tax and
assessment refunds and credits at any time accruing to the benefit of the
Mortgagor or the Mortgaged Property, even if relating to taxes and
assessments payable for a period or periods prior to the date hereof;
(v) all leases of the Premises or any part thereof now or hereafter
entered into and all right, title and interest of the Mortgagor thereunder;
and including, without limitation, the Mortgagor's right, if any, to cash
or securities deposited thereunder whether or not same was deposited to
secure performance by the lessees of their obligations thereunder,
including, further, the right upon the happening of an Event of Default, to
receive and collect the rents and other charges thereunder (all of which
leases are assigned to the Mortgagee as further security hereunder pursuant
to a separate Assignment of Rents, Leases and Profits of even date intended
to be recorded immediately following the recordation of this Mortgage, and
which is incorporated herein by reference);
(vi) all utility or municipal deposits made by or on behalf of
Mortgagor or made in connection with the Premises;
(vii) all plans, drawings, specifications, site plans, subdivision
maps, sketches, samples, contracts and agreements, however characterized
from time to time prepared for use in connection with the development of
the Premises and the construction of the Improvements;
(viii) all contracts, agreements and understandings now or hereafter
entered into, relating to or involving the performance of any work,
rendering of any services, and supply of any materials or the conduct of
operations in and the management of the Premises including, without
limitation, construction contracts, architect agreements, management
-4-
<PAGE>
agreements, options and other agreements, however characterized, affecting
the Premises and/or the Improvements or the public improvements required to
be installed under the terms of governmental approvals relating to the
subdivision and/or approved site plan in which the Premises are a part; and
(ix) any and all permits, certificates, approvals and authorizations,
however characterized, issued or in any way furnished whether necessary or
not, for the operation and use of the Premises and/or the Improvements
and/or Chattels including, without limitation, building permits,
environmental certificates, certificates of operation, certificates of
occupancy and/or completion, licenses, warranties and guarantees;
For the purpose of securing performance of each agreement of Mortgagor
contained herein and payment of the indebtedness evidenced by the Note and to
protect the security of this Mortgage, TO HAVE AND TO HOLD unto the Trustee in
trust for the Mortgagee, their successors and assigns forever. Provided always
that if Mortgagor shall pay or cause to be paid the entire indebtedness
evidenced by the Note as and when the same shall become due and payable and
shall observe, perform and discharge the obligations, contained in the Documents
then the estate and rights granted by Mortgagor shall cease, terminate and
become void, and shall be released or reconveyed by Mortgagee, at the cost and
expense of Mortgagor, and in case of failure of Mortgagee to so release or
reconvey, all claims for statutory penalties are hereby waived.
ARTICLE I
PARTICULAR COVENANTS, WARRANTIES AND
REPRESENTATIONS OF THE MORTGAGOR
The Mortgagor covenants, warrants, represents and agrees as follows:
Section 1.01. The Mortgagor warrants that it has a good and marketable
title to an indefeasible fee estate in the Premises subject in all cases to no
lien, charge or encumbrance except such as are listed as exceptions to title in
the title policy insuring the lien of this Mortgage. The Mortgagor further
warrants that it owns the Chattels free and clear of liens and claims; and that
this Mortgage is and will remain a valid and enforceable first deed of trust on
the Mortgaged Property, subject only to the exceptions set forth above. The
Mortgagor has full power and lawful authority to mortgage the Mortgaged Property
in the manner and form herein done or intended hereafter to be done. The
Mortgagor will preserve such title, and will forever warrant and defend the
validity and priority of this deed of trust against the claims of all persons
and parties whomsoever. The Mortgagor is a limited liability company organized
under the laws of the State of New York with full power and authority to conduct
the business in which it is engaged, own its property and consummate the
transactions contemplated hereby.
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<PAGE>
Section 1.02. The Mortgagor will, at the cost of the Mortgagor, and without
expense to the Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as the Mortgagee shall from time to time
reasonably require, for the better assuring, conveying, assigning, transferring
and confirming unto the Mortgagee the property and rights hereby conveyed,
mortgaged or assigned or intended now or hereafter so to be, or which the
Mortgagor may be or may hereafter become bound to convey, mortgage or assign to
the Mortgagee or for carrying out the intention or facilitating the performance
of the terms of this Mortgage, and for filing, registering or recording this
Mortgage and, on demand, will execute and deliver, and hereby authorizes the
Mortgagee to execute in the name of the Mortgagor to the extent it may lawfully
do so, in the event of the failure or refusal of the Mortgagor so to do, one or
more financing statements, chattel mortgages or comparable security instruments,
and renewals thereof to evidence more effectively the lien hereof upon the
Chattels.
Section 1.03. (a) The Mortgagor forthwith upon the execution and delivery
of this Mortgage, and thereafter from time to time, will cause this Mortgage,
and any security instrument creating a lien or evidencing the lien hereof upon
the Chattels and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully to protect the lien hereof
upon, and the interest of the Mortgagee in, the Mortgaged Property.
(b) The Mortgagor will pay all filing, registration, imposts, taxes and
recording fees, and all expenses incident to the execution and acknowledgment of
this Mortgage, any mortgage or deed of trust supplemental hereto, any security
instrument with respect to the Chattels, and any instrument of further
assurance, and all federal, state, county and municipal stamp taxes and other
taxes, duties, imposts, assessments and charges arising out of or in connection
with the execution, delivery and recording of the Note, this Mortgage, any
mortgage or deed of trust supplemental hereto, any security instrument with
respect to the Chattels or any instrument of further assurance.
Section 1.04. The Mortgagor will pay when due the principal and interest
and all other sums to become due in respect of the Note at the time and place
and in the manner specified in the Note according to the true intent and meaning
thereof and without offset or counterclaim, all in any coin or currency of the
United States of America which at the time of such payment shall be legal tender
for the payment of public and private debts.
Section 1.05. The Mortgagor will, do all things necessary to preserve and
keep in full force and effect its franchises, rights and privileges under the
laws of the States of New York and California and will comply with all
regulations, rules, ordinances, statutes, orders and decrees of any governmental
authority or court and applicable to the Mortgagor or to the Mortgaged Property
or any part thereof.
Section 1.06. All rights, title and interest of the Mortgagor in and to all
extensions,
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<PAGE>
improvements, betterments, renewals, substitutes and replacements of, and all
additions and appurtenances to, the Mortgaged Property, hereafter acquired by,
or released to, the Mortgagor or constructed, assembled or placed by the
Mortgagor on the Premises, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case, without any
further mortgage, conveyance, assignment or other act by the Mortgagor, shall
become subject to the lien of this Mortgage as fully and completely, and with
the same effect, as though now owned by the Mortgagor and specifically described
in the granting clause hereof, but at any and all times the Mortgagor will
execute and deliver to the Mortgagee any and all such further assurances,
mortgages, conveyances or assignments thereof as the Mortgagee may reasonably
require for the purpose of expressly and specifically subjecting the same to the
lien of this Mortgage.
Section 1.07. (a) The Mortgagor, from time to time when the same shall
become due and payable, will pay and discharge all taxes of every kind and
nature (including real and personal property taxes and income, franchise,
withholding, profits and gross receipts taxes), all general and special
assessments, levies, permits, inspection and license fees, all water and sewer
rents and charges, and all other public charges whether of a like or different
nature, imposed upon or assessed against it or the Mortgaged Property or any
part thereof or upon the revenues, rents, issues, income and profits of the
Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. The Mortgagor will deliver to the Mortgagee receipts evidencing the
payment of all such taxes, assessments, levies, fees, rents and other public
charges imposed upon or assessed against it or the Mortgaged Property or the
revenues, rents, issues, income or profits thereof within thirty (30) days from
the date due. Mortgagor will in addition reimburse Mortgagee for the expense
incurred in connection with a tax service contract to be entered between
Mortgagee and the tax service company as pertains to the Premises. Such fee
shall be paid at closing. The Mortgagee may, at its option, to be exercised, by
thirty (30) days written notice to the Mortgagor at any time after an Event of
Default, require the deposit by the Mortgagor, at the time of each payment of an
installment of interest or principal under the Note, of an additional amount
sufficient to discharge the obligations under this subsection (a). The
determination of the amount so payable and of the fractional part thereof to be
deposited with the Mortgagee, so that the aggregate of such deposit shall be
sufficient for this purpose, shall be made by the Mortgagee in its sole
discretion. Such amounts shall be held by the Mortgagee without interest and
applied to the payment of the obligations in respect to which such amounts were
deposited or, at the option of the Mortgagee, to the payment of said obligations
in such order or priority as the Mortgagee shall determine, on or before the
respective dates on which the same or any of them would become delinquent. If
one month prior to the due date of any of the aforementioned obligations the
amounts then on deposit therefor shall be insufficient for the payment of such
obligation in full, the Mortgagor within ten (10) days after demand shall
deposit the amount of the deficiency with the Mortgagee. The Mortgagee shall not
be required to segregate the amounts deposited with it under this Section 1.07,
but may commingle same with any other funds held by it. Nothing herein contained
shall be deemed to affect any right or remedy of the Mortgagee under any
provisions of this Mortgage or of
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<PAGE>
any statute or rule of law to pay any such amount and to add the amount so paid
together with interest at the Note Rate to the indebtedness hereby secured.
(b) The Mortgagor will pay, from time to time when the same shall become
due, all lawful claims and demands of mechanics, materialmen, laborers, and
others which, if unpaid, might result in, or permit the creation of, a lien on
the Mortgaged Property or any part thereof, or on the revenues, rents, issues,
income and profits arising therefrom and in general will do or cause to be done
everything necessary so that the lien hereof shall be fully preserved, at the
cost of the Mortgagor, without expense to the Mortgagee.
(c) Nothing in this Section 1.07 shall require the payment or discharge of
any obligation imposed upon the Mortgagor by this Section so long as the
Mortgagor shall in good faith and at its own expense contest the same or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection thereof or other realization thereon and the sale or forfeiture
of the Premises or any part thereof to satisfy the same; provided that during
such contest the Mortgagor shall, at the option of the Mortgagee, provide
security reasonably satisfactory to the Mortgagee, assuring the discharge of the
Mortgagor's obligation hereunder and of any additional charge, penalty or
expense arising from or incurred as a result of such contest; and provided,
further, that if at any time payment of any obligation imposed upon the
Mortgagor by subsection (a) of this Section shall become necessary to prevent
the delivery of a tax deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of nonpayment, then the Mortgagor shall
pay the same in sufficient time to prevent the delivery of such tax deed or
other similar instrument.
Section 1.08. The Mortgagor will pay all taxes except income, franchise,
inheritance, estate and gift taxes, imposed on the Mortgagee by reason of its
ownership of the Note or this Mortgage.
Section 1.09. (a) The Mortgagor will maintain public liability insurance in
amounts equal to at least $2,000,000.00 with respect to the Mortgaged Property
and all risk property insurance. Mortgagor shall also carry, by way of
endorsement rental loss of income and business interruption (12 month minimum)
insurance in a sum equal to 100% of its annual rent roll, and will keep the
Improvements and Chattels insured against loss by fire, casualty and such other
hazards as may be required by similar lenders on similar properties for the
benefit of the Mortgagee. Such insurance shall be written in forms, amounts, and
by companies licensed in the state where the property is located which companies
must have at least a Best Rating of A-VII and which are otherwise satisfactory
to the Mortgagee. In no event, however, shall property, all-risk or physical
damage insurance be less than the full replacement cost of the property insured.
Mortgagee and its successors and assigns, as their interests may appear, shall
be endorsed on such policy as first mortgagee and as to liability insurance
shall be named as an additional insured. The policies shall by their terms be
noncancellable and not subject to change without at least thirty (30) days prior
written notice to the Mortgagee and losses thereunder shall be payable to the
Mortgagee pursuant to the
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<PAGE>
standard mortgagee endorsement. The policy or policies of such insurance or
certificates of same, shall be delivered to the Mortgagee on or before closing.
The Mortgagor shall give the Mortgagee prompt notice of any loss covered by such
insurance and the Mortgagee shall have the right to join the Mortgagor in
adjusting any loss in excess of $50,000.00. Renewals of each required policy of
insurance shall be delivered to Mortgagee at least ten (10) days prior to
expiration.
(b) The Mortgagor shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 1.09 unless the Mortgagee has approved the insurance company such
approval not to be unreasonably withheld, and the form and content of the
insurance policy, including, without limitation, the naming thereon of the
Mortgagee as a named insured with loss payable to the Mortgagee under a standard
mortgage endorsement of the character above described.
(c) Any and all insurance proceeds hereunder and condemnation proceeds
(under Section 1.13) will be paid to Mortgagee and Mortgagee may, within its
discretion, apply the proceeds toward repayment of the Note or toward the repair
of the Premises. Provided, however, if: (i) Mortgagor is not then and has never
been, in default of any term or provision contained in the Documents; (ii) no
more than 25% of the net rentable square footage of the Premises has been
damaged; and (iii) the insurance proceeds are less than $1,000,000; then
Mortgagee shall pay such proceeds to Mortgagor, from time to time, for the sole
purpose of repairing or replacing the damaged portion of the Premises. Mortgagor
shall be required to provide Mortgagee with good and sufficient documentation
and information necessary and required by Mortgagee to verify and confirm the
exact nature and extent of the damage or destruction to the Premises and the
amount of funds properly expended to repair or replace same. Any proceeds
(insurance and condemnation) not paid to repair or replace any such damaged or
destroyed portion of the Premises shall be applied to the last maturing
installments of principal due and owing under the Note without prepayment
premium (but such application shall not reduce the Guarantor's guaranteed
portion of the loan as set forth under the Limited Guaranty of Payment of even
date herewith).
(d) The foregoing insurance may be written on a blanket policy.
Section 1.10. If the Mortgagor or any party under any of the Documents
shall fail to perform any of the covenants contained in this Mortgage, or any
covenant contained in the Note, the assignment of leases, if any, or the other
Documents beyond applicable notice and grace periods, the Mortgagee may make
advances and/or disbursements to perform the same, and all sums so advanced
and/or disbursed shall be a lien upon the Mortgaged Property and shall be
secured hereby. The Mortgagor will repay on demand all sums so advanced and/or
disbursed with interest at the Default Rate. The provisions of this Section 1.10
shall not prevent any default in the observance of any covenant contained in
this Mortgage, or contained in the Note, the assignment of leases, if any, or
the other Documents from constituting a default or an Event of Default.
-9-
<PAGE>
Property or any part thereof in any manner or make any change in its use which
will in any way materially increase any risk of fire or other hazards arising
out of construction or operation of the Mortgaged Property. The Mortgagor will,
at all times, maintain the Mortgaged Property in good operating order and
condition and will promptly make, from time to time, all repairs, renewals,
replacements, additions and improvements in connection therewith which are
needful or desirable to such end. The Improvements shall not be removed,
demolished or substantially altered, nor shall any Chattels be removed without
the prior written consent of the Mortgagee, except where appropriate
replacements free of superior title, liens and claims are immediately made of
value at least equal to the value of the Chattels removed.
(b) The Mortgagor will keep and maintain or cause to be kept and maintained
the Mortgaged Property and the sidewalks and curbs abutting the same in good
order and condition and in a rentable and tenantable state of repair and will
make or cause to be made, as and when the same shall become necessary, all
structural and nonstructural, exterior and interior, ordinary and extraordinary,
foreseen and unforeseen repairs, renewals and replacements necessary to that
end. In the event that the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or any other casualty, or in the event of a taking of
a portion of the Mortgaged Property as a result of any exercise of the power of
eminent domain, the Mortgagor shall promptly restore, replace, rebuild, or alter
the same as nearly as possible to the condition they were in immediately prior
to such fire, other casualty or taking, and shall take such other additional
actions and measures as shall be necessary to avoid any default or forfeiture
under any lease or any other applicable agreement. Although damage to or
destruction of the Mortgaged Property, or any portion thereof, shall not of
itself constitute a default hereunder except as otherwise provided herein, the
failure of the Mortgagor to restore, replace, rebuild or alter the same, as
hereinabove provided, shall constitute a default hereunder regardless of the
availability of insurance proceeds or condemnation awards for such purpose.
(c) The Mortgagor will promptly comply, or cause compliance with all
present and future laws, ordinances, rules, regulations and other requirements
of all governmental authorities whatsoever having jurisdiction of or with
respect to the Mortgaged Property or any portion thereof or the use and
occupation thereof.
(d) The Mortgagor will not, without the prior written consent of the
Mortgagee, initiate, join in, or consent to any change in any private
restrictive covenant, zoning ordinance, or other public or private restrictions
limiting or defining the uses which may be made of the Premises or any part
thereof.
Section 1.13. The Mortgagor, immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Premises or any
portion thereof, will notify the Mortgagee of the pendency of such proceedings.
The Mortgagee may participate in any such proceedings and the Mortgagor from
time to time will deliver to the Mortgagee all instruments requested by it to
permit such participation. In the event of such
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condemnation proceedings, the award or compensation payable is hereby assigned
to and shall be paid to the Mortgagee up to the Mortgage Amount together with
accrued interest, late charges and disbursements made by Mortgagor and secured
by this Mortgage. The Mortgagee shall be under no obligation to question the
amount of any such award or compensation and may accept the same in the amount
in which the same shall be paid. In any such condemnation proceedings the
Mortgagee may be represented by counsel selected by the Mortgagee but the
Mortgagor may appear by its counsel to contest the amount of the condemnation
award. The proceeds of any award or compensation so received shall, be applied
either, as provided for under Section 1.09 (c) to prepayment of the Note without
prepayment premium or be paid over to the Mortgagor for restoration of the
Improvements. The Mortgagee shall not be limited to the interest paid on the
proceeds of any award or compensation, but shall be entitled to the payment of
interest by the Mortgagor at the rates provided for herein or in the Note.
Section 1.14. (a) The Mortgagor will not, without the prior written consent
and approval of the Mortgagee in each instance, (i) execute an assignment of the
rents from the Mortgaged Property or any part thereof, (ii) in any other manner
impair the value of the Mortgaged Property or the security of the Mortgage.
Mortgagor will not accept prepayments of any installments of rents to become due
under such leases, except prepayments in the nature of security for the
performance of the lessees thereunder, without obtaining in each instance the
prior written consent of Mortgagee. Mortgagor will (i) notify Mortgagee of the
terms of any new lease or modification within thirty (30) days of the execution
of any such lease or modification; and (ii) will provide Mortgagee with a copy
of the same within thirty (30) days of its execution.
(b) The Mortgagor will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or any part thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will do all
things necessary to compel performance by the lessee under each lease of all
obligations, covenants, and agreements by such lessee to be performed
thereunder. If any of such leases provide for the giving by the lessee of
certificates with respect to the status of such leases, the Mortgagor shall
exercise its right to request such certificates within thirty (30) days of any
demand therefor by the Mortgagee. The Mortgagor shall promptly notify the
Mortgagee of (i) the commencement of any action or proceeding by any lessee, the
purpose of which shall be the cancellation of any lease or diminution or offset
against the rent payable under any such lease, or (ii) the interposition by any
lessee of any defense in any action or proceeding brought by the Mortgagor
against such lessee, or (iii) a written notice received by the Mortgagor from
any lessee claiming constructive eviction, and will cause a copy of any process,
pleading or notice received by the Mortgagor in reference to any such action,
defense or claim to be promptly delivered to the Mortgagee.
(c) The Mortgagor shall furnish to the Mortgagee, within thirty (30) days
of the expiration of the preceding fiscal year (or more often upon Mortgagee's
request) a written
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Section 1.11. (a) The Mortgagor will keep adequate records and books of
account and will permit the Mortgagee, by its agents, accountants and attorneys,
to visit and inspect the Premises and examine its records and books of account
and to discuss its affairs, finances and accounts with the Mortgagor, at such
reasonable times as may be requested by the Mortgagee.
(b) The Mortgagor will at its own cost and expense deliver to the Mortgagee
with reasonable promptness, but in no event more than ninety (90) days after the
end of each quarter and annually within ninety (90) days of the end of each
fiscal year of the term hereof, financial statements, a balance sheet and
statement of profit and loss for Mortgagor, American Tissue Corporation and each
Guarantor, setting forth in each case, in comparative form, figures for the
preceding year prepared by certified public accountants reasonably satisfactory
to Mortgagee. Such statements shall be in such form as acceptable to Mortgagee
and shall contain such information as is required under generally accepted
accounting principles consistently applied. Throughout the term of this
Mortgage, the Mortgagor with reasonable promptness will deliver to the Mortgagee
such other financial information with respect to the Mortgagor, American Tissue
Corporation and each Guarantor as the Mortgagee may reasonably request from time
to time. All financial statements of the Mortgagor and American Tissue
Corporation shall be delivered in duplicate, and shall be accompanied by the
certificate of the Mortgagor dated within five (5) days of the delivery of such
statements to the Mortgagee, stating that to the best of its knowledge it knows
of no Event of Default, nor of any default which after notice or lapse of time
or both would constitute an Event of Default, which has occurred and is
continuing, or if any such default or Event of Default has occurred or is
continuing, specifying the nature and the period of existence thereof, and what
action the Mortgagor has taken or proposes to take with respect thereto, and,
except as otherwise specified, stating that the Mortgagor has fulfilled all its
obligations under this Mortgage and the Documents which are required to be
fulfilled on or prior to the date of such certificate.
(c) The Mortgagor, within thirty (30) days upon request by the Mortgagee,
will furnish a written statement duly acknowledged of the amount due whether for
principal or interest on this Mortgage and whether to the best of its knowledge
any offsets or defenses exist against the Mortgage Amount and, if any are
alleged to exist, the nature of each such offset or defense shall be set forth
in full detail.
(d) The Mortgagor, within ninety (90) days of the end of each quarter, will
furnish a written statement duly acknowledged setting forth the monthly base
rent and indicating thereon the date of and amount of each item of rent received
and statements of operating income and expenses for the Mortgaged Property as
well as quarterly financial statements and balance sheets for itself and
American Tissue Company (as to Mortgagor such quarterly statements may be
management prepared).
Section 1.12. (a) The Mortgagor will not threaten, commit, permit or suffer
any waste to occur on or to the Mortgaged Property, or any part thereof, or
alter the Mortgaged
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statement containing a schedule of all leases of all or any part of the
Premises, the names of the respective lessees, the terms of their respective
leases, the space occupied and the rentals payable thereunder, and, if also
requested, true copies of all such leases.
(d) Mortgagor shall not and shall have no right to permit the holder of any
subordinate mortgage or deed of trust or other subordinate lien, whether or not
consented to by Mortgagee, to terminate any lease of all or a portion of the
Premises whether or not such lease is subordinate (whether by law or the terms
of such lease or a separate agreement) to the lien of this Mortgage without
first obtaining the prior written consent of Mortgagee. The holder of any
subordinate mortgage or deed of trust or other subordinate lien shall have no
such right, whether by foreclosure of its mortgage or lien or by execution of a
power of sale or otherwise, to terminate any such lease, whether or not
permitted to do so by Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective and void.
Section 1.15. The Mortgagor, which has simultaneously herewith executed an
assignment of leases, rents and profits which is incorporated herein by
reference, agrees to comply with the provisions thereof.
Section 1.16. To the extent not so provided by applicable law each lease of
the Premises, or any part thereof shall provide that, in the event of the
enforcement by the Mortgagee of the remedies provided for by law or by this
Mortgage, the lessee thereunder will, upon request of any person succeeding to
the interest of the Mortgagor as a result of such enforcement, automatically
become the lessee of said successor in interest, without change in the terms or
other provisions of such lease, provided, however, that said successor in
interest shall not be bound by (i) any payment of rent or additional rent for
more than one month in advance, except prepayments in the nature of security for
the performance by said lessee of its obligations under said lease, (ii) any
material amendment or material modification of the lease made without the
consent of the Mortgagee or such successor in interest, or (iii) any work
required to be done by the Mortgagor pursuant to the terms of said lease. Each
such lease shall also provide that, upon request by said successor in interest,
such lessee shall execute and deliver an instrument or instruments confirming
such attornment.
Section 1.17. The Mortgagor agrees that if any action or proceeding be
commenced, excepting an action to foreclose this Mortgage or to collect the
indebtedness hereby secured, to which action or proceeding the Mortgagee is a
party by reason of the execution of this Mortgage or the Note which it secures,
or in which it becomes necessary to defend or uphold the lien of this Mortgage,
all sums paid by the Mortgagee for the expense of any litigation to prosecute or
defend the transaction and the rights and lien created hereby (including,
without limitation, reasonable attorneys' fees) shall be paid by the Mortgagor
together with interest thereon from the date of payment by the Mortgagee at the
Default Rate. All such sums paid and the interest thereon shall be a lien upon
the Mortgaged Property, and shall be secured hereby.
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Section 1.18. The Mortgagor agrees that in the event of the passage after
the date of this Mortgage of any law deducting any lien from the value of land
for the purpose of taxation, or changing in any way the laws now in force for
the taxation of mortgages or debts secured by a mortgage or deed of trust, or
the manner of the collection of any such taxes, so as to impose upon Mortgagee
any tax that previously would have been payable by Mortgagor, the whole of the
principal sum secured by this Mortgage, together with interest due thereon,
shall at the option of the Mortgagee, without notice to any party, become
immediately due and payable.
Section 1.19. The Mortgaged Property will be provided with adequate water,
sewer and other utility facilities at all times, in compliance with all
applicable laws and regulations.
Section 1.20. The Mortgagor shall not without first obtaining the written
consent of Mortgagee:
(a) except as permitted herein, sell, assign, lease, convey, mortgage
(except the two subordinated deeds of trust held by the Community Redevelopment
Agency of the City of Calexico), pledge, hypothecate, make the subject of any
security interest, exchange, subdivide or permit to be divided into multiple
condominium or cooperative units, or in any other manner whatsoever, transfer or
encumber all or part of, or any interest in, or any of the rents derived from,
or control of, the Mortgage Property, or suffer or permit any of the foregoing
to occur, whether by operation of law or otherwise;
(b) except as permitted herein, effectuate or permit a reduction in the
ownership interests in Mortgagor held by any principal(s) of Mortgagor;
(c) effectuate or permit a closing of any public or private offering of
more than 49% of the ownership interests in Mortgagor or in any entity directly
or indirectly owning any interest in Mortgagor or the Mortgaged Property;
(d) effectuate or permit a transfer of the controlling interest in
Mortgagor.
"Transfer of the controlling interest in Mortgagor" includes, without
limitation, the following:
(i) the sale, assignment, issuance, redemption, diminution or pledge,
whether through a single transaction or a series of transactions, of more
than 49% of the direct or indirect ownership interest of or change in the
principals in Mortgagor or of any entity that directly or indirectly owns
or controls Mortgagor;
(ii) the modification of any organizational documents of Mortgagor or
of any entity that directly or indirectly owns or controls Mortgagor, if
the effect of such modification is to transfer more than 49% of the
ownership or control of such entity or to limit the liability of Mortgagor
of any entity that directly or indirectly owns or
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controls Mortgagor;
(iii) the dissolution or termination, whether by operation of law or
otherwise, of Mortgagor or of any entity that directly or indirectly owns
or controls Mortgagor;
(iv) any other transaction or series of transactions by which any
person(s) other than the principal(s) of Mortgagor obtain more than 49% of
the ownership or control of Mortgagor or the Mortgaged Property; or
(e) enter into any transaction with any director, officer, employee or
principal of Mortgagor
Nothing in this Section shall, however, prohibit the entering into of
leases that comply with this Mortgage, the Assignment of Leases, Rents and
Profits and any other applicable Documents. This paragraph shall apply to each
and every such transaction regardless of whether Mortgagee has consented to or
waived by action or inaction its rights hereunder with respect to any such prior
transaction.
Further, nothing in this Section shall, however, prohibit transfers to or
among members of the immediate family (spouses, children and grandchildren) of a
principal of Mortgagor or trust created for the benefit of such family members,
made in connection with bona fide estate planning of such principal or a
transfer of the Premises or interest in Mortgagor to (i) an entity at least 51 %
owned by the existing principals of Mortgagor or (ii) an entity wholly owned by
Mortgagor.
Section 1.21. INTENTIONALLY DELETED.
Section 1.22. The Mortgagor will promptly perform and observe, or cause to
be performed or observed, all of the terms, covenants and conditions of all
instruments of record affecting the Mortgaged Property, noncompliance with which
shall affect the security of this Mortgage, or shall impose any duty or
obligation upon the Mortgagor or any lessee or other occupant of the Mortgaged
Property or any part thereof, and the Mortgagor shall do or cause to be done all
things necessary to preserve intact and unimpaired any and all easements,
appurtenances and other interests and rights in favor of or constituting any
portion of the Mortgaged Property.
Section 1.23. INTENTIONALLY DELETED.
Section 1.24. The Mortgagee and its authorized representatives shall have
the right at all reasonable times during usual business hours to enter upon and
inspect all portions of the Mortgaged Property. Mortgagee will use its best
efforts not to unreasonably interfere with Mortgagor's business operations
during such inspection.
Section 1.25. (i) Mortgagor represents and warrants that except as
disclosed in the
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Phase I Environmental Audit copies of which have been reviewed by Mortgagee and
upon the best of Mortgagor's knowledge after due inquiry and investigation: (1)
there has been no release, discharge or deposit of a Hazardous Substance as
defined (a) by either Section 9601(14) of Title 42 of the United States Code,
(including, but not limited to urea formaldehyde foam insulation, asbestos in
any form, di-electric fluids containing more than 50 ppm of polychlorinated
biphynls) or (b) by any environmentally related statute enacted by the State of
California; or any other material hazardous to the health and safety of users of
Premises or those properties adjacent thereto (collectively called "Hazardous
Substances"); (2) Premises are not subject to any order prohibiting such
release, discharge or deposit of or directing cleanup of or, payment of cleanup
costs of Hazardous Substance issued by any governmental agency; (3) Premises are
in full compliance with all laws and governmental regulations governing
Hazardous Substances.
(ii) The Mortgagor covenants that the Mortgaged Property will be kept free
of Hazardous Substances during the term of this Mortgage and that if a release
occurs or there is reasonable cause therefor Mortgagor will periodically conduct
such tests and investigations for the presence of Hazardous Substances using
such engineers, or other experts, as Mortgagee may reasonably request, except
that Mortgagor shall be permitted to maintain for general housekeeping purposes
only certain products containing Hazardous Substances, provided that such
substances are used and stored in accordance with Hazardous Substance laws.
(iii) Mortgagor has no knowledge of and has received no notice of, any
litigation, administrative enforcement or regulatory actions or proceedings, or
any inquiry by any governmental authority, against Mortgagor or any other
person, nor has any settlement been reached by or with any party or parties,
public or private, alleging the presence or threatened presence of any Hazardous
Substances or the violation of any Hazardous Substances laws on, from, under or
in any portion of the Premises.
(iv) Mortgagor has obtained all certificates, permits, licenses, approvals
and authorizations necessary for the lawful construction, occupancy, use and
operation of the Premises and Improvements for the purposes for which they are
currently being used, including, but not limited to, any certificates, permits,
licenses, approvals and authorizations required by any federal, state, county,
regional or local authority whose jurisdiction includes, in whole or in part,
environmental protection or matters pertaining to health, safety and welfare.
Mortgagor has no knowledge of, and has received no notice of, any litigation or
other regulatory, administrative, judicial or legal proceedings which (i)
challenge the issuance of any of the certificates, permits, licenses, approvals
and authorizations obtained for the Premises and Improvements, or (ii) allege
non-compliance by Mortgagor or the Premises and Improvements with any law,
regulation, rule or ordinance which has a material effect on the operation,
occupancy, leasing or use of the Premises and Improvements for the purposes for
which they are currently being used.
(v) Each tenant of the Premises has obtained all certificates, permits,
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licenses, approvals and authorizations necessary for the lawful occupancy, use
and operation of its demised premises for the purposes for which it is currently
being used, including, but not limited to, any certificates, permits, licenses,
approvals and authorizations required by any federal, state, county, regional or
local authority whose jurisdiction includes, in whole or in part, environmental
protection or matters pertaining to health, safety and welfare. Mortgagor has no
knowledge of, and has received no notice of, any litigation or other regulatory,
administrative, judicial or legal proceedings which challenge the issuance of
any of the certificates, permits, licenses, approvals and authorizations
obtained by a tenant for its demised premises with any law, regulation, rule or
ordinance which has a material effect on the operation, occupancy, leasing or
use of the demised premises for the purposes for which it is currently being
used.
(vi) No waste or waste waters have been, or are being, treated, stored or
disposed of on the Premises, and no threatened damage to the environment
(including, but not limited to, ambient, air, surface water, groundwater, land
surface and subsurface) exists at the Premises.
(vii) No emission of air contaminants or pollutants has emanated or is
emanating from the Premises.
(viii) All surface water drains servicing the Premises have been
constructed in accordance with all applicable laws and ordinances and have been
properly connected to public or private storm or sanitary sewer lines which
either dispose of such water on site or carry such water off the Premises, and
such connection has been approved by all necessary parties and governmental
authorities.
(ix) All garbage, trash and other solid waste from or relating to the
Premises are and will be collected on a regular basis by the local municipality
or an independent commercial waste disposal company.
(x) Mortgagor shall keep and maintain the Premises in compliance with any
and all laws relating to Hazardous Substances and all other federal, state and
local laws, ordinances and regulations relating to industrial hygiene or to the
environmental conditions on, under or about the Premises. Mortgagor shall not
permit Hazardous Substances use at, to, from, in, under or about the Premises
other than as permitted under paragraph (ii) of this Section. Mortgagor shall
institute and implement diligently a program designed to cause all of its
tenants and all of Mortgagor's and its tenants' employees, agents, contractors
and subcontractors and any other person lawfully occupying or present on the
Premises to comply with all laws relating to Hazardous Substances. Mortgagor
shall enforce all rights and remedies available to it under the leases of the
Premises, under applicable laws relating to Hazardous Substances and under all
other applicable laws, ordinances, rules, regulations and others (including, but
not limited to, under common law principles for liability resulting from
nuisance, negligence, strict liability in tort and waste) which provide a cause
of action or other basis for recovery of damages, for indemnification, for the
disclosure of information,
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or for injunctive relief, in the event of Hazardous Substances use or other
activities which do or may result in any loss of value of, lost use of or other
loss, damage or waste to the Premises.
(xi) Mortgagor shall immediately notify Mortgagee in writing of (i) any and
all enforcement, cleanup, removal or other governmental or regulatory actions,
or litigation (whether public or private) relating to the Premises instituted,
contemplated or threatened pursuant to any Hazardous Substances laws or common
law principles, and of any notices received by Mortgagor with respect to the
foregoing; (ii) Mortgagor's discovery of any claim made or threatened by any
third party or governmental agency against Mortgagor or the Premises relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
any Hazardous Substances (the matters set forth in (i) and (ii) of this
subparagraph are hereinafter collectively referred to as "Hazardous Materials
Claims"). Mortgagor shall immediately deliver to Mortgagee copies of all notices
and legal documents relating to Hazardous Materials Claims. Mortgagee shall have
the right to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys' fees in connection therewith paid
by Mortgagor.
(xii) Subject to Mortgagor's right to contest in good faith and diligently
prosecute such contest, Mortgagor shall promptly comply, at Mortgagor's sole
cost and expense, with all requirements of any federal, state, county, local or
regional authority or court decree or order, as to the removal, treatment,
cleanup, disposal or regulation of Hazardous Substances and shall provide
Mortgagee with satisfactory evidence of such compliance. Mortgagor shall provide
Mortgagee with a bond, letter of credit or similar financial assurance
evidencing to Mortgagee's reasonable satisfaction that the necessary funds are
available to pay the cost of compliance with such requirements of any federal,
State, county, local or regional authority or court decree or order.
(xiii) Mortgagor shall not cause or suffer any liens to be recorded against
the Premises as a consequence of, or in any way related to, the presence or
disposal of Hazardous Substances in or about the Premises, including but not
limited to any federal, state or local so-called "Superfund" lien relating to
such matters.
(xiv) Mortgagor at all times shall defend, indemnify and hold Mortgagee
harmless from and against any and all liabilities (including strict liability)
(including by reason of Mortgagee's own ordinary, but not gross negligence or
willful misconduct), suits, causes of action, damages to property or
individuals, claims, demands, penalties, fines, damages (including but not
limited to interest, penalties, fines and monetary sanctions), losses, costs and
expenses (including but not limited to reasonable attorneys' fees and expenses),
and remediation and cleanup costs (collectively "Liabilities") that may now or
in the future be incurred or suffered by Mortgagee (including by reason of
Mortgagee's own ordinary, but not gross negligence or willful misconduct)
because of, resulting from, in connection with or arising in any manner
whatsoever out of the breach of any warranty or
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covenant, or the inaccuracy of any representation of Mortgagor contained or
referred to in this Section or that may be asserted as a direct or indirect
result of the presence of any Hazardous Substances on, in or under the Premises,
or any Hazardous Substances use on, at or from the Premises. Such Liabilities
shall also include, without limitation: (i) injury to or death of any person;
(ii) damage to or loss of the use of any property; (iii) the cost of any
demolition and rebuilding of any improvements on the Premises, repair or
remediation and the preparation for and completion of any activity required by
any federal, state, local, county or regional authority or court order or
decree; (iv) any lawsuit brought or threatened, good faith settlement reached,
or governmental order relating to the presence, disposal, release or threatened
release of any Hazardous Substances and (v) the imposition and removal of any
lien on the Premises arising from the activity of Mortgagor or Mortgagor's
predecessors in interest on the Premises or from the existence of Hazardous
Substances upon the Premises or Hazardous Substances use at, on or upon the
Premises, or the violation of any Hazardous Substances law. Any amounts expended
by Mortgagee in connection with any Liabilities, together with interest thereon
at the Default Rate shall be secured by this Mortgage and shall have the same
priority of collection as the principal indebtedness secured hereby until
Mortgagor reimburses Mortgagee pursuant to this indemnity.
(xv) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, this covenant to defend, indemnify and hold
Mortgagee harmless shall survive repayment of all indebtedness secured by this
Mortgage, transfer of the Premises by Mortgagor (including but not limited to
foreclosure sale of the Premises or delivery of a deed in lieu of foreclosure)
and assignment, assumption, modification, amendment, cancellation, release,
termination or discharge of the Note, and shall not be subject to any
anti-deficiency laws. The Mortgagee, for itself, its employees, agents, officers
and directors, hereby expressly agrees and acknowledges that the
indemnification, defend, protect and hold harmless provisions contained in this
Mortgage are limited to those conditions existing on or prior to the earlier of
(i) acquisition of title to the Premises after a foreclosure of this Mortgage or
transfer in lieu of foreclosure by Mortgagee, its successors or assigns (ii)
Mortgagee, its successors or successors or assigns becoming a mortgagee in
possession or (iii) the appointment of a receiver, and in no event shall any
indemnification, defend, protect or hold harmless provision extend to or include
the willful misconduct or gross negligence of Mortgagee, its successors,
assigns, employees, officers and directors. Anything in this Mortgage or the
Documents to the contrary notwithstanding, Mortgagor, except for the obligation
to defend itself in the event Mortgagor is named in any action, shall have no
liability to indemnify Mortgagee for any environmental conditions or events on
the Premises occurring or arising: (i) after Mortgagor's payment of the loan in
full and the discharge of record of the Documents; or, (ii) after the date on
which Mortgagor, with the consent of or as a result of the actions of Mortgagee,
no longer has fee title to the Premises (the transfer to Trustee by reason of
this deed of trust shall not be deemed divestiture of fee title from Mortgagor
for the purposes of this Section 1.25(xv)); or, (iii) during any period in which
Mortgagor, with the consent of or a result of the actions Mortgagee, does not
have possession and control of the Premises.
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(xvi) Notwithstanding anything to the contrary set forth in this section or
elsewhere in this Mortgage, any information provided to Mortgagee hereunder is
to allow Mortgagee to protect Mortgagee's security interest in the Premises and
is not intended to create any obligations upon Mortgagee with respect to the
operation or ownership of the Premises. Any rights, authority or approvals
granted to Mortgagee by Mortgagor or actions taken by Mortgagee under this
section are solely to protect Mortgagee's security interest in the Premises and
are not intended to create any obligations upon Mortgagee with respect to the
operation or ownership of the Premises.
(xvii) Mortgagor hereby grants to Mortgagee a permanent license for
ingress, egress and inspection for the purpose of entering upon the Premises for
making such inspections and tests as Mortgagee may deem necessary to determine
whether there is compliance with all environmental laws and regulations,
including those pertaining to wetlands.
(xviii) Mortgagee may retain for cause, at Mortgagor's sole cost and
expense, an environmental engineer or consultant (the "Engineer") to conduct
such investigations and tests as provided under subsection (xvii) above. The
engineer shall deliver the results of investigations and tests to Mortgagor and
to Mortgagee. Such results shall be kept confidential by both Mortgagor and
Mortgagee unless Mortgagee is legally compelled or required to disclose such
results or disclosure is reasonably required in order to pursue rights or
remedies provided herein or at law. Mortgagor shall promptly pay the cost of
such investigations and tests upon receipt of the Engineer's bill therefor. If
Mortgagor fails to pay said bills, Mortgagee may pay such bill, and until
reimbursed by Mortgagor, the amount of said payment shall be secured by this
Mortgage and shall accrue interest at the Default Rate until the date paid.
The Mortgagor unconditionally agrees that should the representations and
warranties made under this Section 1.25 be untrue, or should the Mortgagor
breach any provision of the Certificate and Indemnification regarding Hazardous
Substances between Mortgagor and Mortgagee of even date herewith or should
Mortgagor breach the obligation not to release, discharge or deposit Hazardous
Substances on the Premises, Mortgagor will unconditionally indemnify and hold
Mortgagee harmless from and on account of any claim, judgment, cleanup order, or
related expenses (including but not limited to reasonable attorneys' fees and
disbursements incurred by Mortgagee in defending any action, judgment or cleanup
order) in connection with any release, discharge or deposit of any Hazardous
Substances.
Section 1.26. The Mortgagor affirms that all information, reports, papers
and data given to Mortgagee with respect to any of the Premises or Mortgagor are
accurate in all material respects, and there has been no material adverse change
in any condition or fact stated therein.
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ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. If one or more of the following Events of Default shall
happen, that is to say:
(a) if (i) a default shall be made in the payment of any interest on
the Note, when and as the same shall become due and payable, and such
default shall have continued for a period of ten (10) days, or (ii) default
shall be made in any payment of the principal on the Note, when and as the
same shall become due and payable, and such default shall have continued
for a period of ten (10) days (whether at maturity or by acceleration or
otherwise), in each case, as in the Note and this Mortgage provided or,
(iii) default shall be made in the payment of any tax required by Section
1.07 to be paid and said default shall have continued for a period of
thirty (30) days, or (iv) default shall be made in the due observance or
performance of any covenant or agreement on the part of the Mortgagor
contained in Sections 1.01, 1.14, 1.21, 1.22, 1.25 or 3.11 hereof (for the
purposes of this clause, and for subparagraph (b) below, if any
representation made in Sections 1.01 and 1.25 shall be incorrect, it shall
be deemed to be a default) and such default shall have continued for a
period of more than thirty (30) days after written notice thereof shall
have been given to the Mortgagor by the Mortgagee; or
(b) if default shall be made in the due observance or performance of
any other covenant or agreement on the part of the Mortgagor contained
herein and such default shall have continued for a period of thirty (30)
days after written notice thereof shall have been given to the Mortgagor by
the Mortgagee; or
(c) if default shall be made in the due observance or performance of
the covenants or agreements on the part of the Mortgagor contained in
Sections 1.09 or 1.20 hereof, which shall be unremedied for a period of
more than twenty (20) days after written notice thereof shall have been
given to the Mortgagor by the Mortgagee; or
(d) if any other Event of Default shall occur under the Note or the
Documents not specifically referred to above, or if any such Documents
shall not contain "Events of Default" and default shall be made in the due
observance, performance or fulfillment of any other covenant or condition
on the part of the Mortgagor or borrower contained in any such Document,
and such default shall have continued for a period of thirty (30) days
after written notice thereof shall have been given to the Mortgagor by the
Mortgagee or if such default is by its nature not susceptible of curing
within such thirty (30) day period if Mortgagor does not commence curing
the default within such period and does not diligently pursue such curing
to a successful conclusion; or
(e) if any proceedings are commenced for the condemnation of any part
of the Mortgaged Premises, which condemnation would have, in the opinion of
the Mortgagee, a
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material adverse effect on the value of the remaining security hereunder;
or
(f) if any easement over, across or under or otherwise affecting the
Mortgaged Property or any portion thereof shall be granted without the
Mortgagee's prior written consent not to be unreasonably withheld; or
(g) if there occur any other event, which if unremedied, would require
a change in the survey delivered to Mortgagee at time of closing; or
(h) if the holder of or any lien or encumbrance on the Mortgaged
Property, or any part thereof, institutes foreclosure or other proceedings
for the enforcement of its remedies thereunder, which foreclosure or other
proceedings are not discharged (without affecting the Mortgaged Property)
or bonded within thirty (30) days from the institution thereof (this
subsection (h) shall not be construed to imply that the Mortgagee consents
to any junior lien or encumbrance but Mortgagee acknowledges that there are
two subordinated deeds of trust on the Premises held by the Community
Redevelopment Agency of the City of Calexico); or
(i) if there should occur any material adverse change in financial
conditions of Mortgagor, American Tissue Corporation or any Guarantor which
remains unremedied for a period of thirty (30) days which in Mortgagee's
judgment, reasonably exercised would adversely impact mortgagor's ability
to pay the Note; or
(j) if Mortgagor or any Guarantor shall:
(i) default in respect of payment of interest ("basic or
default") or principal or default in payment of any other liabilities,
obligations or agreements (present or future, absolute or contingent,
secured or unsecured, matured or unmatured, several or joint, original
or acquired) of any of them to or with Mortgagee;
(ii) declare voluntary insolvency, as defined in the Bankruptcy
Code, as amended;
(iii) assign their assets including assignments for the benefit
of creditors;
(iv) appoint a committee of any creditors or liquidating agent;
(v) offer to or receive from any creditors a composition or
extension of any of their indebtedness;
(vi) grant a security interest, deed of trust or mortgage in any
property pledged or mortgaged pursuant to this Mortgage;
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(vii) suspend, wholly or partially, or liquidate their usual
business;
(viii) die (as to both Guarantors) if an individual or dissolve,
if a partnership, limited liability company or corporation;
(ix) fail to pay bond or discharge any mechanic's lien filed
against Premises within thirty (30) days of the date filed;
and such default shall have continued for a period of thirty (30) days
(90 days if due to the death of both Guarantors) after written notice shall
have been given to the Mortgagor by the Mortgagee; or
(l) if with respect to Mortgagor or any Guarantor there has been:
(i) commenced any involuntary proceeding, suit or action (at law,
or in equity, or under any of the provisions of any Bankruptcy Code or
amendments thereto, or any other insolvency act or law, state or
federal, now or hereafter existing) for adjudication as a bankrupt,
reorganization, composition, extension, arrangement, wage earners'
plan, receivership, liquidation, dissolution which is not dismissed
within thirty (30) days from the date initiated, or any similar
proceeding, initiated by or against it;
(ii) made an application by any of them for the appointment, or
the appointment in any jurisdiction, at law or in equity, of any
receiver, conservator, rehabilitator or similar officer or committee
of, or of the property of, any of them;
(iii) Made any tax assessment by the United States or any state
not discharged within thirty (30) days;
(iv) entered a judgment in excess of $500,000.00 against or
issuance of an order of attachment or an injunction against any of the
property of any of them not satisfied or discharged within thirty (30)
days;
Then in any such event,
I. The Mortgagee may declare the entire principal of the Note then
outstanding (if not then due and payable), and all accrued and unpaid interest
thereon, to be due and payable immediately, and upon any such declaration the
principal of the Note and said accrued and unpaid interest shall become and be
immediately due and payable, anything in the Note or in this Mortgage to the
contrary notwithstanding;
II. The Mortgagee personally, or by its agents or attorneys, may enter into
and upon all or any part of the Premises and each and every part thereof, and
may exclude the Mortgagor, its agents and servants wholly therefrom; and having
and holding the same, may
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use, operate, manage and control the Premises or any part thereof and conduct
the business thereof, either personally or by its superintendents, managers,
agents, servants, attorneys or receivers; and upon every such entry, the
Mortgagee, at the expense of the Mortgagor, from time to time, either by
purchase, repairs or construction, may maintain and restore the Mortgaged
Property, whereof it shall become possessed as aforesaid, may complete the
construction of the Improvements and in the course of such completion may make
such changes in the contemplated Improvements as it may deem desirable and may
insure the same; and likewise, from time to time, at the expense of the
Mortgagor, the Mortgagee may make all necessary or proper repairs, renewals and
replacements and such useful alterations, additions, betterments and
improvements thereto and thereon as to it may seem advisable; and in every such
case the Mortgagee shall have the right to manage and operate the Mortgaged
Property and to carry on the business thereof and exercise all rights and powers
of the Mortgagor with respect thereto either in the name of the Mortgagor or
otherwise as it shall deem best; and the Mortgagee shall be entitled to collect
and receive all gross receipts, earnings, revenues, rents, issues, profits and
income of the Mortgaged Property and every part thereof, all of which shall for
all purposes constitute property of the Mortgagee; and after deducting the
expenses of conducting the business thereof and of all maintenance, repairs,
renewals, replacements, alterations, additions, betterments and improvement and
amounts necessary to pay for taxes, assessments, insurance and prior or other
proper charges upon the Mortgaged Property or any part thereof, as well as just
and reasonable compensation for the services of the Mortgagee and for all
attorneys, counsel, agents, clerks, servants and other employees by it properly
engaged and employed, the Mortgagee may apply the monies arising as aforesaid in
such manner and at such times as the Mortgagee shall determine in its discretion
to the payment of the indebtedness secured hereby and the interest thereon, when
and as the same shall become payable and/or to the payment of any other sums
required to be paid by the Mortgagor under this Mortgage or the Documents; and
III. The Trustee and/or Mortgagee, with or without entry, personally or by
its agents or attorneys, insofar as applicable, may:
(i) institute proceedings for the complete or partial foreclosure of
this Mortgage;
(ii) take such steps to protect and enforce its rights whether by
action, suit or proceeding in equity or at law for the specific performance
of any covenant, condition or agreement in the Note, this Mortgage, or the
other Documents or in aid of the execution of any power herein granted, or
for any foreclosure hereunder, or for the enforcement of any other
appropriate legal or equitable remedy or otherwise as the Mortgagee shall
elect; or
(iii) sell the Mortgaged Property or any part thereof to the extent
permitted and pursuant to the procedure provided by law, and all the
estate, right, title and interest, claim or demand therein at one or more
sales as an entity or in parcels and at such time and place upon such terms
and after such notice thereof as may be required or permitted by law.
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Section 2.02. (a) The Mortgagee may adjourn from time to time any sale by
it to be made under or by virtue of this Mortgage by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, the Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by the Mortgagee under or
by virtue of this Article II, the Trustee or Mortgagee, or any officer of any
court empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient instruments,
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. The Mortgagor, if so requested by the
Mortgagee, shall ratify and confirm any such sale or sales by executing and
delivering to the Mortgagee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of the Mortgagee, for the
purpose, and as may be designated in such request. Any such sale or sales made
under or by virtue of this Article II, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
the Mortgagor in and to the properties, interests and rights so sold, and shall
be a perpetual bar both at law and in equity against the Mortgagor and against
any and all persons claiming or who may claim the same, or any part thereof
from, through or under the Mortgagor.
(c) In the event of any sale made under or by virtue of this Article II
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale), the
entire principal of, and interest on, the Note, if not previously due and
payable, and all other sums required to be paid by the Mortgagor pursuant to
this Mortgage, immediately thereupon shall, anything in the Note or in this
Mortgage to the contrary notwithstanding, become due and payable.
(d) The purchase money, proceeds or avails of any sale made under or by
virtue of this Article II, together with any other sums which then may be held
by the Mortgagee under this Mortgage, whether under the provisions of this
Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale, and of
any judicial proceedings wherein the same may be made, including reasonable
compensation to the Mortgagee, its agents and attorneys, and of all
expenses, liabilities and advances made or incurred by the Mortgagee under
this Mortgage, together with interest at the Default Rate on all advances
made by the Mortgagee and all taxes or assessments paid by Mortgagee except
any taxes, assessments or other charges subject to which the Mortgaged
Property shall have been sold.
Second: To the payment of the whole amount then due, owing or unpaid
upon the Note for interest and any balance remaining to be applied to
principal, with interest on
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the unpaid principal calculated at the Default Rate from and after the
happening of any default described in clause (a)(i), (ii) or (iii) of
Section 2.01 from the due date of any such payment of principal until the
same is paid.
Third: To the payment of any other sums required to be paid by the
Mortgagor pursuant to any provision of this Mortgage, of the Note, or of
the other Documents, all with interest at the Default Rate, from the date
such sums were or are required to be paid under this Mortgage, the Note or
the other Documents.
Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
(e) Upon any sale made under or by virtue of this Article II, by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, the
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness of the Mortgagor secured by this Mortgage the
net sales price after deducting therefrom the expenses of the sale and the costs
of the action and any other sums which the Mortgagee is authorized to deduct
under this Mortgage.
Section 2.03. (a) In case an Event of Default described in this Article II
shall have happened, then, upon written demand of the Mortgagee, the Mortgagor
will pay to the Mortgagee the whole amount which then shall have become due and
payable on the Note, for principal and interest or both, as the case may be, and
after the happening of said Event of Default will also pay to the Mortgagee
interest at the Default Rate on the then unpaid principal of the Note, and the
sums required to be paid by the Mortgagor pursuant to any provision of this
Mortgage and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation to
the Mortgagee, its agents, and attorneys and any expenses incurred by the
Mortgagee hereunder. In the event the Mortgagor shall fail forthwith to pay such
amounts upon such demand, the Mortgagee shall be entitled and empowered to
institute such action or proceedings at law or in equity as may be advised by
its counsel for the collection of the sums so due and unpaid, and may prosecute
any such action or proceedings to judgment or final decree and may enforce any
such judgment or final decree against the Mortgagor and collect out of the
property of the Mortgagor wherever situated, as well as out of the Mortgaged
Property, in any manner provided by law, monies adjudged or decreed to be
payable with interest thereon at the Default Rate.
(b) The Mortgagee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage or any guarantee executed by any Guarantor and
the right of the Mortgagee to recover such judgment shall not be affected by any
entry or sale hereunder, or by the exercise of any other right, power or remedy
for the enforcement of the provisions of this Mortgage, or the foreclosure of
the lien hereof; and in the event of a sale of the Mortgaged Property or any
part thereof and of the application of the proceeds of sale, as in this Mortgage
provided, to the
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payment of the indebtedness hereby secured, the Mortgagee shall be entitled to
enforce payment of, and to receive all amounts then remaining due and unpaid
upon, the Note, and to enforce payment of all other charges, payments and costs
due under this Mortgage, and shall be entitled to recover judgment for any
portion of the debt remaining unpaid, with interest thereon at the Default Rate.
In case of proceedings against the Mortgagor in insolvency or bankruptcy or any
proceedings for its reorganization or involving the liquidation of its assets,
then the Mortgagee shall be entitled to prove the whole amount of principal and
interest due upon the Note to the full amount thereof, and all other payments,
charges and costs due under this Mortgage, provided, however, that in no case
shall the Mortgagee receive a greater amount than such principal and interest
and such other payments, charges and costs from the aggregate amount of the
proceeds of the sale of the Mortgaged Property or any part thereof and the
distribution from the estate of the Mortgagor.
(c) No recovery of any judgment by the Mortgagee and no levy of any
execution under any judgment upon the Mortgaged Property or upon any other
property of the Mortgagor shall affect in any manner or to any extent, the lien
of this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of the Mortgagee hereunder, but such liens, rights,
powers and remedies of the Mortgagee shall continue unimpaired as before.
(d) Any monies thus collected by the Mortgagee under this Section 2.03
shall be applied by the Mortgagee in accordance with the provisions of paragraph
(d) of Section 2.02.
Section 2.04. After the happening of any Event of Default and immediately
upon the commencement of any action, suit or other legal proceedings by the
Mortgagee to obtain judgment for the principal of, or interest on, the Note and
other sums required to be paid by the Mortgagor pursuant to any provisions of
this Mortgage, or of the Documents, or of any nature in aid of the enforcement
of the Note or of this Mortgage, the Mortgagor does hereby consent to the
appointment of a receiver or receivers of the Mortgaged Property or any part
thereof or any business or businesses conducted thereon and of all the earnings,
revenues, rents, issues, profits and income thereof. After the happening of any
Event of Default, or upon the commencement of any proceedings to foreclose this
Mortgage or to enforce the specific performance hereof or in aid thereof or upon
the commencement of any other judicial proceeding to enforce any right of the
Mortgagee, the Mortgagee shall be entitled, as a matter of right, if it shall so
elect, without the giving of notice to any other party and without regard to the
adequacy or inadequacy of any security for the Mortgage indebtedness, forthwith
either before or after declaring the unpaid principal of the Note to be due and
payable, to the appointment of such receiver or receivers.
Section 2.05. Notwithstanding the appointment of any receiver, liquidator
or trustee of the Mortgagor, or of any of its property, or of the Mortgaged
Property or any part thereof, the Mortgagee shall be entitled to retain
possession and control of all property now or hereafter held under this
Mortgage.
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Section 2.06. No remedy herein conferred upon or reserved to the Mortgagee
is intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission of the Mortgagee to exercise any right or power accruing
upon any Event of Default shall impair any such rights or power, or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein; and every power and remedy given by this Mortgage to the Mortgagee may
be exercised from time to time as often as may be deemed expedient by the
Mortgagee. Nothing in this Mortgage or in the Note shall affect the obligation
of the Mortgagor to pay the principal of, and interest on, the Note in the
manner and at the time and place therein respectively expressed.
Section 2.07. Neither the Mortgagor or any Guarantor will at any time
insist upon, or plead, or in any manner whatsoever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Mortgage or any guarantee, nor claim, take or
insist upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisal of the Mortgaged Property, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision herein, or pursuant to the decree, judgment, or order of any court of
competent jurisdiction, and covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to the Mortgagee, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. The Mortgagor and any Guarantors, for themselves
respectively and all who may claim under either of them, waive, to the extent
that they lawfully may, all right to have the Mortgaged Property or any part
thereof marshaled upon any foreclosure hereof.
Section 2.08. During the continuance of any Event of Default and pending
the exercise by the Mortgagee of its right to exclude the Mortgagor from all or
any part of the Premises, the Mortgagor agrees to pay the fair and reasonable
rental value for the use and occupancy of the Premises or any portion thereof
which are in its possession for such period and, upon default of any such
payment, will vacate and surrender possession of the Premises to the Mortgagee
or to a receiver, if any, and in default thereof may be evicted by any summary
action or proceeding for the recovery of possession of the premises for
nonpayment of rent, however designated.
Section 2.09. Upon the foreclosure of the Mortgage, no assigned lease shall
be destroyed or terminated by application of the doctrine of merger or as a
matter of law unless Mortgagee or any purchaser at such foreclosure sale so
elects. No act by or on behalf of Mortgagee or any such purchaser shall
constitute a termination of any assigned or subordinate lease unless Mortgagee
or such purchaser gives written notice thereof to the applicable tenant or
subtenant.
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ARTICLE III
MISCELLANEOUS
Section 3.01. All of the grants, covenants, terms, provisions and
conditions herein shall run with the land and shall apply to, bind and inure to
the benefit of, the successors and assigns of the Mortgagor and the successors
and assigns of the Mortgagee. If there be more than one mortgagor, the covenants
and warranties hereof shall be joint and several. As used herein, the singular
shall include the plural as the context requires.
Section 3.02. In the event any one or more of the provisions contained in
this Mortgage or in the Note or in any of the other Documents shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceabiity shall, at the option of the Mortgagee,
not affect any other provision of this Mortgage, but this Mortgage shall be
construed as if such invalid illegal or unenforceable provision had never been
contained herein or therein.
Section 3.03. All notices hereunder shall be in writing and shall be deemed
to have been sufficiently given or served for all purposes when presented
personally or sent by registered or certified mail to any party hereto at its
address above stated, in the case of the Mortgagee, Attention: Rick D.
McKinnerney, National Lending, with a copy sent to Payne, Wood & Littlejohn, 290
Broad Hollow Road, Melville, New York 11747, Attention: Alan C. Polacek, Esq.,
and in the case of Mortgagor, Attention: Mr. Nourollah Elghanayan, with a copy
sent to Mandel & Resnik P.C. at 220 East 42nd Street, New York, New York 10017
attn: Nicholas J. Kaiser, Esq. or at such other address of which it shall have
notified the party giving such notice in writing. Any written notice sent by
registered or certified mail shall be deemed to have been served two (2)
business days after the date it was mailed in accordance with the foregoing
provisions.
Section 3.04. Whenever in this Mortgage the giving of notice by mail or
otherwise is required, the giving of such notice may be waived in writing by the
person or persons entitled to receive such notice.
Section 3.05. This Mortgage, and any instruments made in connection
herewith, may be assigned by the Mortgagee without notice to, or the consent of,
the Mortgagor or any other party.
Section 3.06. The information set forth on the cover hereof is hereby
incorporated herein.
Section 3.07. The Default Rate provided for herein shall continue to accrue
and be paid on any amount to which the Default Rate is applied until said amount
is paid in full.
Section 3.08. This Mortgage shall be construed and enforced according to
the laws of the
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State of California.
Section 3.09. Neither this Mortgage nor any provision hereof may be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the Mortgagee.
Section 3.10. This Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code with respect to the fixtures and
items of personal property referred to in this Mortgage, and with respect to all
replacements thereof, substitutions therefor or additions thereto together with
Mortgagor's interest in subdivision maps, surveys, building permits, engineering
and architectural plans and studies, building materials, work in progress and
the like (all of such items sometimes herein referred to as the "Collateral"),
and that a security interest shall attach thereto for the benefit of the
Mortgagee to secure the payment and performance of the Mortgagor's obligations
under the Note, this Mortgage, and any Documents executed in connection
therewith. The Mortgagor hereby authorizes the Mortgagee to file continuation
financing statements without the signature of the Mortgagor whenever lawful;
otherwise the Mortgagor agrees to execute such financing and continuation
statements as the Mortgagee may request. In the event of a default under the
Note, this Mortgage, or any Documents executed in connection therewith, the
Mortgagee may, in addition to all other rights or remedies it may have in such
event, exercise any right or remedy with respect to the Collateral which it may
have as a Secured Party under the provisions of the Uniform Commercial Code or
otherwise, and shall have the option of proceeding as to both real and personal
property in accordance with its rights and remedies in respect of real property,
in which event the default provisions of the Uniform Commercial Code shall not
apply. The parties agree that in the event the Mortgagee elects to proceed with
respect to the Collateral separately from the real property, thirty (30) days
notice of the sale of the Collateral shall be reasonable notice. The reasonable
expenses of retaking, holding, preparing for sale, selling and the like incurred
by the Mortgagee shall include, but not be limited to, reasonable attorneys'
fees and legal expenses incurred by the Mortgagee. The Mortgagor agrees that,
without the written consent of the Mortgagee, the Mortgagor will not remove or
permit to be removed from the Mortgaged Property any of the Collateral except
either for replacement by items of substantially the same utility and value or
temporarily for repair. All replacements, renewals and additions to the
Collateral shall be and become immediately subject to the security interest of
this Mortgage and this agreement and be covered thereby. The Mortgagor shall,
from time to time on request of the Mortgagee, deliver to such Mortgagee an
inventory of the Collateral in reasonable detail. This Mortgage shall be deemed
to be a Security Agreement pursuant to the Uniform Commercial Code of the State
in which the Mortgaged Property or any part thereof is located.
Section 3.11. (a) The Mortgagor represents and warrants to the Mortgagee
that the Premises do not comprise property identified by the Secretary of
Housing and Urban Development as an area having special flood hazards, or to the
contrary, that the Premises have been so identified but that the Premises has
been insured under the National Flood Insurance Act of 1968, as amended by Flood
Disaster Protection Act of 1973.
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(b) The Mortgagor covenants and warrants that if the Premises are so
identified by the Secretary of Housing and Urban Development as having special
flood hazards, it will keep the Premises insured against loss by flood hazards
in an amount at least equal to the outstanding principal balance of the Note
secured by this Mortgage, or to the maximum limit of coverage made available
with respect to the particular type of property under the National Flood
Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973,
whichever is less.
Section 3.12. Wherever "attorneys' or counsel fees" are referred to herein,
it shall include such fees whether incurred out of court or in litigation,
including, without limitation, appeals and bankruptcy proceedings.
Section 3.13. Whenever reference is made in this Mortgage to a lease,
lessee, tenancy or tenant, such reference shall be deemed to include a sublease,
sublessee, subtenancy or subtenant, as the case may be.
Section 3.14. To the maximum extent not prohibited by law, any controversy,
dispute or claim arising out of, in connection with, or relating to the Note or
any of the other Documents or any transaction provided for therein, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Documents, shall, at the
request of any party to the Documents (either before or after the commencement
of judicial proceedings), be settled by arbitration pursuant to Title 9 of the
United States Code, which the parties hereto acknowledge and agree applies to
the transaction involved herein, and in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"). In any
such arbitration proceeding: (i) all statutes of limitation which would
otherwise be applicable shall apply; and (ii) the proceeding shall be conducted
in Houston, Harris County, Texas, by a single arbitrator, if the amount in
controversy is $1 million or less, or by a panel of three arbitrators if the
amount in controversy is over $1 million. All arbitrators shall be selected by
the process of appointment from a panel pursuant to section 13 of the AAA
Commercial Arbitration Rules and each arbitrator will have AAA-acknowledged
expertise in the appropriate subject matter. Any award rendered in any such
arbitration proceeding shall be final and binding, and judgment upon any such
award may be entered in any court having jurisdiction.
If any party to the Note or other Documents files a proceeding in any court
to resolve any such controversy, dispute or claim, such action shall not
constitute a waiver of the right of such party or a bar to the right of any
other party to seek arbitration under the provisions of this Section of that or
any other claim, dispute or controversy, and the court shall, upon motion of any
party to the proceeding, direct that such controversy, dispute or claim be
arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator
may construe ambiguous terms) the Note or any
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other Document, (iii) enter judgment on the debt, (iv) exercise equitable powers
or issue or enter any equitable remedies or (v) allow discovery of
attorney/client privileged information. The Commercial Arbitration Rules of the
AAA are hereby modified to this extent for the purpose of arbitration of any
dispute, controversy or claim arising out of, in connection with, or relating to
any Document. The parties further waive, each to the other, any claims for
punitive damages, and agree that neither an arbitrator nor any court shall have
the power to assess punitive damages.
No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Documents before, during or after
any arbitration proceeding to: (i) exercise self-help remedies such as set off
or repossession; (ii) foreclose (judicially or otherwise) any lien on or
security interest in any real or personal property collateral; or (iii) obtain
emergency relief from a court of competent jurisdiction to prevent the
dissipation, damage, destruction, transfer, hypothecation, pledging or
concealment of assets or of collateral securing any indebtedness, obligation or
guaranty referenced in the Documents. Such emergency relief may be in the nature
of, but is not limited to: pre-judgment attachments, garnishments,
sequestrations, appointments of receivers, or other emergency injunctive relief
to preserve the status quo.
In the event applicable law prohibits the submission of a particular
controversy, dispute, or claim arising out of or in connection with any of the
Documents or transactions contemplated therein to arbitration, Mortgagor and
Mortgagee agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Premises is located or any other court in which
Mortgagee shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy. Mortgagor and Mortgagee, to the
extent permitted by applicable law, waive any right to assert the doctrine of
forum non-conveniens or to object to the venue to the extent any proceeding is
brought in accordance with this paragraph.
Section 3.15. Except as otherwise provided herein concerning transfers, if
the Mortgagor or American Tissue Corporation shall sell, transfer, sublease or
otherwise dispose of their respective interests in the Mortgaged Property, or
any part thereof without the prior consent in writing of the Mortgagee, the
Mortgagee may, at its option, declare the entire indebtedness hereby secured to
be immediately due and payable, without notice to the Mortgagor (which notice
the Mortgagor hereby expressly waives) and upon such declaration the entire
indebtedness hereby secured shall be immediately due and payable, anything
herein or in any bond, note or obligation of the Mortgagor to the contrary
notwithstanding.
Section 3.16. If the payment of the mortgage indebtedness is now or
hereafter further secured by assignments of leases or rentals, security
agreements, financing statements, mortgages, collateral assignments, pledges,
contracts of guaranty, letters of credit or other additional security documents,
any default beyond applicable notice and grace periods under the provisions of
any such further security documents shall constitute and be a default under this
Mortgage, and the Mortgagee may, at its option, exhaust any one or more of the
said security
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documents and the security thereunder as well as the Mortgaged Property covered
by this Mortgage either concurrently or independently and in such other and
further manner as the Mortgagee may elect, and Mortgagee may apply the proceeds
received therefrom upon the Mortgage indebtedness without waiving or affecting
Mortgagee's rights and remedies under this Mortgage exercised hereunder or
whether contained or exercised under any other such security documents.
Section 3.17. It is the intent of Mortgagee, Mortgagor, Guarantors, and all
other parties to the Documents, to conform to and contract in strict compliance
with applicable usury law from time to time in effect. All agreements between
Mortgagee or any other holder of the Note and Mortgagor (or any other party
liable with respect to any indebtedness under the Documents) are hereby limited
by this provision, which shall override and control all such agreements. In no
way, nor in any event or contingency (including but not limited to prepayment,
default, demand for payment, or acceleration of the maturity of any obligation,
or the recharacterization of any Application Fees, Standby Fees, Underwriting
Fees, or any other fees required hereunder or under the Documents as interest),
shall the interest taken, reserved, contracted for, charged or received under
the Note, or otherwise, exceed the maximum nonusurious amount permissible under
applicable law. If, from any possible construction of any document, interest
would otherwise be payable in excess of the maximum nonusurious amount, any such
construction shall be subject to this provision and such document shall be
automatically reformed and the interest payable shall be automatically reduced
to the maximum nonusurious amount permitted under applicable law, without the
necessity of execution of any amendment or new document. If the holder thereof
shall ever receive anything of value that is characterized as interest under
applicable law and that would apart from this provision, be in excess of the
maximum nonusurious amount, an amount equal to the amount that would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the indebtedness evidenced thereby in the inverse
order of its maturity and not to the payment of interest, or refunded to
Mortgagor or the other payor thereof if and to the extent such amount, which
would have been excessive, exceeds such unpaid principal. The right to
accelerate maturity of the Note, or any other indebtedness, does not include the
right to accelerate any interest that has not otherwise accrued on the date of
such acceleration, and the holder thereof does not intend to charge or receive
any unearned interest in the event of acceleration. All interest paid or agreed
to be paid to the holder thereof shall, to the extent permitted by applicable
law, be amortized, protected, allocated, and spread throughout the full stated
term (including any renewal or extension) of such indebtedness so that the
amount of interest on account of such indebtedness does not exceed the maximum
non-usurious amount permitted by applicable law; as used in this paragraph
applicable law shall mean the laws of the State of California or the federal
laws of the United States, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.
Section 3.18. Nothing contained herein shall create any joint venture,
partnership, agency or trust arrangement between Mortgagor and Mortgagee.
Section 3.19. At reasonable intervals, but not more frequently than once
during each 12
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month period, the Mortgagee may order a re-appraisal of the Premises by an
independent appraiser of its selection, or by a Mortgagee employee, and
Mortgagor agrees to allow access to the Premises to such independent appraiser
or Mortgagee employee, and in the case of an independent appraiser retained
after an Event of Default to pay to the Mortgagee, within 30 days of billing,
such appraiser's reasonable fee and expenses.
Section 3.20. This Mortgage secures the Note and all amendments,
replacements, substitutions and extensions thereof.
Section 3.21. The Mortgagor represents that the Mortgaged Property is
being, and will continue to be, used for commercial purposes.
Section 3.22. Except as otherwise specifically provided in this Mortgage by
applicable grace periods, time is of the essence in the performance by Mortgagor
or each and every obligation required by it to be performed by this Mortgage.
Section 3.23. The covenants contained in this Mortgage shall run with the
land and bind the Mortgagor, his successors and assigns and all subsequent
owners, encumbrancers, tenants and subtenants of the Premises, and shall enure
to the benefit of the Mortgagee, the personal representatives, successors and
assigns of the Mortgagee and all subsequent holders of this Mortgage.
Section 3.24. The parties hereto, for and on behalf of themselves and their
successors in interest, agree that should any agreement be hereafter entered
into modifying or changing the terms of this Mortgage in any particular, the
rights of the parties to such agreement shall, pursuant to the terms thereof, be
superior to the rights of the holder of any subordinate lien.
Section 3.25. Mortgagor covenants and warrants that:
(a) Mortgagor will not use the assets of an employee benefits plan, as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as now or hereafter amended ("ERISA"), in the exercise of any of its
obligations or right specified herein or in the Note or in any other
instrument which may be held by Mortgagee as evidence of or security for
the obligations secured or in the performance of any transaction
contemplated hereunder or under the Note or under any other instrument
which may be held by Mortgagee as additional security for the Note;
(b) The Mortgaged Premises do not, and without the written consent of
Mortgagee will not, constitute an asset of such an employee benefit plan;
and
(c) Mortgagor will not sell, convey or transfer the Mortgaged Premises
to a person or entity which could not satisfy the undertakings set forth in
subsections (a) and (b) of this Section regardless of whether any of the
above-described conditions arise by operation of law or otherwise.
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Section 3.26 This Mortgage may, by separate future written agreement
between Mortgagor and Mortgagee, be split from time to time into two or more
separate mortgages with an aggregate principal balance equal to the principal
balance of the indebtedness secured by this Mortgage at such time (the "Debt")
each of which separate mortgages shall encumber and continue to constitute a
lien on the Mortgaged Property. If Mortgagor and Mortgagee agree to split this
Mortgage, then the parties shall do any act or execute any additional documents
necessary to implement such splitting of this Mortgage, including a splitter and
modification agreement, severed mortgages and severed notes in the aggregate
principal balance of the Debt, all in form and substance satisfactory to
Mortgagor and the title insurance company insuring this Mortgage (or insuring
any severed mortgage arising from a splitting of this Mortgage), all in
furtherance of the provisions of this paragraph.
Section 3.27 In the event that any payment shall become overdue for a
period in excess of five days, a "late charge" of 5 cents for every dollar of
any installment so overdue may be charged by the Mortgagee for the purpose of
defraying the expense incident to handling such delinquent payment. Failure to
pay such "late charge" shall be deemed a default under the terms of this
Mortgage.
Section 3.28. This Mortgage may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original; and all such counterparts shall together constitute but one and the
same Mortgage.
Section 3.29. Mortgagee shall have the right to approve the management of
and the management contract for the Premises. It shall be a default hereunder if
Mortgagee at any time, and from time to time, notifies Mortgagor in writing that
the management of the Premises is not reasonably satisfactory, and Mortgagor
does not promptly change such management or effect such changes in management
practices or take such steps as one required to make it satisfactory to
Mortgagee. Mortgagor shall not amend, modify or cancel any approved management
contract nor enter into a new management contract without prior written consent
of Mortgagee not to be unreasonably withheld.
Section 3.30. Mortgagee, acting alone, may, from time to time, by
instrument in writing, substitute a successor or successors to any Trustee named
herein or acting hereunder. Such instrument, executed, acknowledged and recorded
in the manner required by law, shall be conclusive proof of proper substitution
of such successor Trustee or Trustees, who shall (without conveyance from the
preceding Trustee) succeed to all of the title, estate, rights, powers and
duties of such preceding Trustee. Such instrument shall contain the name of the
original Mortgagor, Trustee and Mortgagee hereunder, the book and page where
this Deed of Trust is recorded and the name and address of the new Trustee.
Section 3.31. Upon written request of Mortgagor stating that all sums
secured hereby have been paid, and upon surrender of this Deed of Trust and the
Guaranty to Trustee for cancellation and retention, and upon payment of its
fees, Trustee shall reconvey, without warranty, the property then held
hereunder. The recitals in any such reconveyance may be
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described as "the person or persons legally entitled thereto". Five years after
issuance of such full reconveyance, Trustee may destroy the Guaranty and this
Deed of Trust (unless directed in such request or retain them).
Section 3.32. Trustee shall be entitled to reasonable compensation for all
services rendered or expenses incurred in the administration or execution of the
trusts hereby created and Mortgagor hereby agrees to pay same. Trustee and
Mortgagee shall be indemnified, held harmless and reimbursed by Mortgagor for
any liability, damage or expense, including attorney's fees and amounts paid in
settlement, which they or either of them may incur or sustain in the execution
of this trust or in the doing of any act which they, or either of them, are
required or permitted to do by the terms hereof or by law.
Section 3.33. Trustee accepts the Trust created by this Deed of Trust when
this Deed of Trust, duly executed and acknowledged, is made a public record as
provided by law.
IN WITNESS WHEREOF, this Mortgage has been duly executed by the Mortgagor
on the date first above written.
CALEXICO TISSUE COMPANY LLC
By: American Tissue Holdings, Inc., Member
By: /s/ NOUROLLAH ELGHANAYAN
Nourollah Elghanayan, President
STATE OF NEW YORK)
: ss:
COUNTY OF SUFFOLK)
On this 15th day of April, 1999 before me Robert Joseph Knopf personally
appeared NOUROLLAH ELGHANAYAN, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
/s/ ROBERT JOSEPH KNOPF
-----------------------
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y.
No. 4627472
Qualified in Suffolk County
Commission Expires: June 30, 2000
ATTACHMENT NO. 3
AGENCY LOAN PROMISSORY NOTE
$166,000.00 May __, 1997
Calexico, California
FOR VALUE RECEIVED, CALEXICO TISSUE COMPANY LLC, a New York limited
liability company ("Developer"), promises to pay to the COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF CALEXICO, a public body corporate and politic (the
"Agency"), or order at the Agency's office at 608 Heber Avenue, Calexico,
California 92231, or such other place as the Agency may designate in writing,
the principal sum of One Hundred Sixty-Six Thousand Dollars ($166,000) (the
"Note Amount"), or so much of the Note Amount as has been disbursed by the
Agency to or on behalf of the Developer, in currency of the United States of
America, which at the time of payment is lawful for the payment of public and
private debts.
1. Agreement. This Agency Loan Promissory Note (the "Note") is given in
accordance with that certain Loan Agreement executed by the Agency and the
Developer, dated as of ________________, 1997 (the "Agreement"). The rights and
obligations of the Developer and the Agency under this Note shall be governed by
the Agreement and by the additional terms set forth in this Note. The Note
Amount shall be disbursed on behalf of the Developer by depositing the full Note
Amount with the construction loan bank pursuant to the Agreement.
2. Interest. The Note Amount shall bear interest at the rate of three
percent (3%) per annum, except that simple interest shall begin to accrue at the
rate of ten percent (10%) per annum in the event that the total amount of the
principal, interest and any other amounts owed under this Note shall become
immediately due and payable upon a default by the Developer under the Agreement
or this Note, which has not been cured within the period of time set forth in
those documents. Failure to declare such amounts due shall not constitute waiver
on the part of the Agency to declare them due subsequently.
3. Repayment of Note Amount. The Note Amount shall be fully amortized on a
quarterly basis over a fifteen-year period. Notwithstanding the foregoing, the
full Note Amount may be accelerated as set forth in Section 12 below.
4. Security. This Note is secured by a Deed of Trust With Assignment of
Leases and Rents, Security Agreement, Financing Statement, and Fixture Filing
(the "Agency Loan Deed of Trust") dated as of the same date as this Note.
5. Waivers
(a) Developer expressly agrees that this Note or any payment hereunder
may be extended from time to time at the Agency's sole discretion and that
the Agency may accept security in consideration for any such extension or
release any security for this Note at its sole discretion all without in
any way affecting the liability of Developer.
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<PAGE>
(b) No extension of time for payment of this Note made by agreement by
the Agency with any person now or hereafter liable for the payment of this
Note shall operate to release, discharge, modify, change or affect the
original liability of Developer under this Note, either in whole or in
part.
(c) The obligations of Developer under this Note shall be absolute and
Developer waives any and all rights to offset, deduct or withhold any
payments or charges due under this Note for any reasons whatsoever.
(d) Developer waives presentment, demand, notice of protest and
nonpayment, notice of default or delinquency, notice of acceleration,
notice of costs, expenses or leases or interest thereon, notice of
dishonor, diligence in collection or in proceeding against any of the
rights of interests in or to properties securing of this Note, and the
benefit of any exemption under any homestead exemption laws, if applicable.
(e) No previous waiver and no failure or delay by Agency in acting
with respect to the terms of this Note or the Agency Loan Deed of Trust
shall constitute a waiver of any breach, default, or failure or condition
under this Note, the Agency Loan Deed of Trust or the obligations secured
thereby. A waiver of any term of this Note, the Agency Loan Deed of Trust
or of any of the obligations secured thereby must be made in writing and
shall be limited to the express written terms of stick waiver.
6. Attorneys' Fees and Costs. Developer agrees that if any amounts due
under this Note are not paid when due, to pay in addition, all costs and
expenses of collection and reasonable attorneys' fees paid or incurred in
connection with the collection or enforcement of this Note, whether or not suit
is filed.
7. Joint and Several Obligation. This Note is the joint and several
obligation of all makers, sureties, guarantors and endorsers, and shall be
binding upon them and their heirs, successors and assigns.
8. Amendments and Modifications. This Note may not be changed orally, but
only by an amendment in writing signed by Developer and by the Agency.
9. Agency May Assign. Agency may, at its option, assign its right to
receive payment under this Note without necessity of obtaining the consent of
the Developer.
10. Developer Assignment Prohibited. Except in connection with transfers
permitted pursuant to Section 503 of the Agreement, in no event shall Developer
assign or transfer any portion of this Note without the prior express written
consent of the Agency, which consent may be given or withheld in the Agency's
sole discretion.
11. Terms. Any terms not separately defined herein shall have the same
meanings as set forth in the Agreement.
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<PAGE>
12. Acceleration and Other Remedies. Upon: (a) the occurrence of an event
of Default as defined in the Agreement, or (b) Developer selling, contracting to
sell, giving an option to purchase, conveying, leasing, further encumbering,
mortgaging, assigning or alienating any of the Properties whether directly or
indirectly whether voluntarily or involuntarily or by operation of law, or any
interest in the Site, or suffering its title, or any interest in the Site to be
divested, whether voluntarily or involuntarily, without the consent of the
Agency as set forth in Section 503 of the Agreement, except for such transfers
which are permitted pursuant to Section 503 of the Agreement, Agency may, at
Agency's option, declare the outstanding principal amount of this Note, together
with the then accrued and unpaid interest thereon and other charges hereunder,
and all other sums secured by the Agency Loan Deed of Trust, to be due and
payable immediately, and upon such declaration, such principal and interest and
other sums shall immediately become and be due and payable without demand or
notice, all as further set forth in the Agency Loan Deed of Trust. All costs of
collection, including, but not limited to, reasonable attorneys' fees and all
expenses incurred in connection with protection of, or realization on, the
security for this Note, may be added to the principal hereunder, and shall
accrue interest as provided herein. Agency shall at all times have the right to
proceed against any portion of the security for this Note in such order and in
such manner as such Agency may consider appropriate, without waiving any rights
with respect to any of the security. Any delay or omission on the part of the
Agency in exercising any right hereunder, under the Agreement or under the
Agency Loan Deed of Trust shall not operate as a waiver of such right, or of any
other right. No single or partial exercise of any right or remedy hereunder or
under the Agreement or any other document or agreement shall preclude other or
further exercises thereof, or the exercise of any other right or remedy. The
acceptance of payment of any sum payable hereunder, or part thereof, after the
due date of such payment shall not be a waiver of Agency's right to either
require prompt payment when due of all other sums payable hereunder or to
declare an Event of Default for failure to make prompt or complete payment.
13. Consents. Developer hereby consents to: (a) any renewal, extension or
modification (whether one or more) of the terms of the Agreement or the terms or
time of payment under this Note, (b) the release or surrender or exchange or
substitution of all or any part of the security, whether real or personal, or
direct or indirect, for the payment hereof, (c) the granting of any other
indulgences to Developer, and (d) the taking or releasing of other or additional
parties primarily or contingently liable hereunder. Any such renewal, extension,
modification, release, surrender, exchange or substitution may be made without
notice to Developer or to any endorser, guarantor or surety hereof, and without
affecting the liability of said parties hereunder.
14. Successors and Assigns. Whenever "Agency" is referred to in this Note,
such reference shall be deemed to include the Community Redevelopment Agency of
the City of Calexico and its successors and assigns, including, without
limitation, any subsequent assignee or holder of this Note. All covenants,
provisions and agreements by or on behalf of Developer, and on behalf of any
makers, endorsers, guarantors and sureties hereof which are contained herein
shall inure to the benefit of the Agency and Agency's successors and assigns.
15. Usury. It is the intention of Developer and Agency to conform strictly
to the Interest Law, as defined below, applicable to this loan transaction.
Accordingly, it is agreed that notwithstanding any provision to the contrary in
this Note, or in any of the documents securing payment hereof or otherwise
relating hereto, the aggregate of all interest and any other charges or
consideration
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<PAGE>
constituting interest under the applicable Interest Law that is taken, reserved,
contracted for, charged or received under this Note, or under any of the other
aforesaid agreements or otherwise in connection with this loan transaction,
shall under no circumstances exceed the maximum amount of interest allowed by
the Interest Law applicable to this loan transaction, If any excess of interest
in such respect is provided for in this Note, or in any of the documents
securing payment hereof or otherwise relating hereto, then, in such event:
(a) the provisions of this paragraph shall govern and control;
(b) neither Developer nor Developer's heirs, legal representatives,
successors or assigns shall be obligated to pay the amount of such interest
to the extent that it is in excess of the maximum amount of interest
allowed by the Interest Law applicable to this loan transaction;
(c) any excess shall be deemed canceled automatically and, if
theretofore paid, shall be credited on this Note by Agency or, if this Note
shall have been paid in full, refunded to Developer; and
(d) the effective rate of interest shall be automatically subject to
reduction to the Maximum Legal Rate of Interest (as defined below), allowed
under such Interest Law, as now or hereafter construed by courts of
appropriate jurisdiction. To the extent permitted by the Interest Law
applicable to this loan transaction, all sums paid or agreed to be paid to
Agency for the use, forbearance or detention of the indebtedness evidenced
hereby shall be amortized, prorated, allocated and spread throughout the
full term of this Note. For purposes of this Note, "Interest Law" shall
mean any present or future law of the State of California, the United
States of America, or any other jurisdiction which has application to the
interest and other charges under this Note. The "Maximum Legal Rate of
Interest" shall mean the maximum rate of interest that Agency may from time
to time charge Developer, and under which Developer would have no claim or
defense of usury under the Interest Law.
16. No Personal Liability. In the event of any default under the terms of
this Note or the Agency Loan Deed of Trust, the sole recourse of the Agency for
any and all such defaults shall be by judicial foreclosure or by the exercise of
the trustee's power of sale, and the Developer shall not be personally liable
for the payment of this Note or for the payment of any deficiency established
after judicial foreclosure or trustee's sale; provided, however, that the
foregoing shall not in any way affect any rights the Agency may have (as a
secured party or otherwise) hereunder or under the Agreement or Agency Loan Deed
of Trust to (a) recover directly from Developer any amounts secured by the
Agency Loan Deed of Trust, or any funds, damages or costs (including without
limitation reasonable attorneys' fees and costs) incurred by Agency as a result
of fraud, misrepresentation or waste, or (b) recover directly from the Developer
any condemnation or insurance proceeds, or other similar funds or payments
attributable to the Site which under the terms of the Agency Loan Deed of Trust
should have been paid to the Agency, and any costs and expenses incurred by the
Agency in connection with (a) or (b) above (including without limitation
reasonable attorneys' fees and costs).
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<PAGE>
17. Miscellaneous. Time is of the essence hereof. This Note shall be
governed by and construed under the laws of the State of California except to
the extent Federal laws preempt the laws of the State of California. Developer
acknowledges that this Note was entered into and is to be performed in the
County of Imperial and irrevocably and unconditionally submits to the
jurisdiction of the Superior Court of the State of California for the County of
Imperial or the United States District Court of the Southern District of
California, as Agency hereof may deem appropriate, or, if required, the
Municipal Court of the State of California for the County of Imperial, in
connection with any legal action or proceeding arising out of or relating to
this Note. Developer also waives any objection regarding personal or in rem
jurisdiction or venue.
DEVELOPER:
CALEXICO TISSUE COMPANY LLC, a New
York limited liability company
By: /s/ Mehdi Gabayzadeh
-----------------------------
Medhid Gabayzadeh - Manager
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<PAGE>
ATTACHMENT NO. 4
RECORDING REQUESTED BY )
AND WHEN RECORDED RETURN TO: )
)
Calexico Community Redevelopment Agency )
608 Heber Avenue )
Calexico, California 92231 )
Attention: Executive Director )
- --------------------------------------------------------------------------------
This document is exempt from
the payment of a recording
fee pursuant to Government
Code Section 27383.
AGENCY LOAN DEED OF TRUST
With Assignment of Leases and Rents, Security Agreement,
Financing Statement, and Fixture Filing
THIS AGENCY LOAN DEED OF TRUST WITH ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT, FINANCING STATEMENT, AND FIXTURE FILING ("Agency Loan Deed
of Trust"), made as of______________, 1997, is made by and among CALEXICO TISSUE
COMPANY LLC, a New York limited liability company ("Trustor"),
____________________________ ("Trustee"), and the COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF CALEXICO, a public body, corporate and politic, organized and
existing under laws of the State of California ("Beneficiary") The addresses of
the parties are set forth in Section 7.11 of this Agency Loan Deed of Trust.
ARTICLE I. GRANT IN TRUST
1.1 Grant. For the purposes of and upon the terms and conditions in this
Agency Loan Deed of Trust, Trustor irrevocably grants, conveys and assigns to
Trustee, in trust for the benefit of Beneficiary, with power of sale and right
of entry and possession, all that real property located in the City of Calexico,
County of Imperial, State of California, described on Exhibit A attached hereto,
together with all development rights or credits, air rights, water, water rights
and water stock related to the real property, and all minerals, oil and gas, and
other hydrocarbon substances in, on or under the real property, and tax
reimbursements, appurtenances, easements, rights and rights of way appurtenant
or related thereto, all buildings, other improvements and fixtures now or
hereafter located on the real property, including, but not limited to, Trustor's
interest in all apparatus, equipment, and appliances used in the operation or
occupancy of the real property, it being intended by the parties that all such
items shall be conclusively considered to be a part of the real property,
whether or not attached or affixed to the real property (the "Improvements"),
and all interest or estate which Trustor may hereafter acquire in the property
described above, and all additions and accretions thereto, and the proceeds of
any of the foregoing; but, specifically excluding any personal property of any
tenant of Trustor whether or not such personal property may be deemed a fixture
under applicable law; (all of the foregoing being
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<PAGE>
collectively referred to as the "Subject Property") The listing of specific
rights or property shall not be interpreted as a limit of general terms.
1.2 Address. The address of the Subject Property is
________________________ Calexico, California. However, neither the failure to
designate an address nor any inaccuracy in the address designated shall affect
the validity or priority of the lien of this Agency Loan Deed of Trust on the
Subject Property as described on Exhibit A.
ARTICLE II. OBLIGATIONS SECURED
2.1 Obligations Secured. Trustor makes this grant and assignment pursuant
to a Loan Agreement between Trustor and Beneficiary dated _______, 1997 (the
"Agreement"), for the purpose of securing the following obligations ("Secured
Obligations"):
(a) Payment to Beneficiary of all sums at any time owing under that
certain Agency Loan Promissory Note ("Note") in the amount of One Hundred
Sixty-Six Thousand Dollars ($166,000) of even date herewith, executed by
Trustor, as maker, and payable to the order of Beneficiary, as holder; and
(b) Payment and performance of all covenants and obligations of
Trustor under this Agency Loan Deed of Trust; and
(c) Payment and performance of all future advances and other
obligations that the then record owner of all or part of the Subject
Property may agree to pay and/or perform (whether as principal, surety or
guarantor) for the benefit of Beneficiary, when such future advance or
obligation is evidenced by a writing which recites that it is secured by
this Agency Loan Deed of Trust; and
(d) All modifications, extensions and renewals of any of the
obligations secured hereby, however evidenced, including, without
limitation: (i) modifications of the required principal payment dates or
interest payment dates or both, as the case may be, deferring or
accelerating payment dates wholly or partly; and (ii) modifications,
extensions or renewals at a different rate of interest whether or not in
the case of a note, the modification, extension or renewal is evidenced by
a new or additional promissory note or notes.
2.2 Obligations. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without limitation, all
interest and charges, prepayment charges, if any, late charges and loan fees at
any time accruing or assessed on any of the Secured Obligations.
2.3 Incorporation. All terms of the Secured Obligations and the document
evidencing such obligations are incorporated herein by this reference. All
persons who may have or acquire an interest in the Subject Property shall be
deemed to have notice of the terms of the Secured Obligations and to have
notice, if applicable and provided therein, that: (a) the Note may permit
borrowing, repayment and re-borrowing so that repayments shall not reduce the
amounts of the Secured Obligations; and (b) the rate of interest on one or more
Secured Obligations may vary from time to time.
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ARTICLE III. ASSIGNMENT OF LEASES AND RENTS
3.1 Assignment. Trustor hereby irrevocably, absolutely, unconditionally,
and presently assigns, transfers, conveys, sets over, and delivers to
Beneficiary all of Trustor's right, title and interest in, to and under: (a) all
leases of the Subject Property or any portion thereof, all licenses and
agreements relating to the management, leasing or operation of the Subject
Property or any portion thereof, and all other agreements of any kind relating
to the use, enjoyment or occupancy of the Subject Property or any portion
thereof, whether now existing or entered into after the date hereof ("Leases");
and (b) the rents, issues, deposits, income, revenues, royalties, earnings and
profits of the Subject Property, including, without limitation, all amounts
payable and all rights and benefits accruing to Trustor under the Leases, all
oil, gas and other mineral royalties, and all rents, issues, deposits, income,
revenues, royalties, earnings and profits arising from the use or operation of
coin operated laundry machines, vending machines, and all other coin operated
machines ("Payments"). The term "Leases" shall also include all guarantees of
and security for the lessees' performance thereunder, and all amendments,
extensions, renewals or modifications thereto which are permitted hereunder.
This is a present, absolute, perfected, choate and unconditional assignment, not
an assignment for security purposes only, and Beneficiary's right to the Leases
and Payments is not contingent upon, and may be exercised without possession of
the Subject Property.
3.2 Grant of License. Beneficiary confers upon Trustor a license
("License") to collect and retain the Payments as they become due and payable,
until the occurrence of a Default (as hereinafter defined). Upon a Default, the
License shall be automatically revoked and Beneficiary may collect and apply the
Payments pursuant to Section 6.4 without further notice other than as required
in Article VI hereof without taking possession of the Subject Property, without
having a receiver appointed, and without taking any other action. Trustor hereby
irrevocably authorizes and directs the lessees under the Leases to rely upon and
comply with any notice or demand by Beneficiary for the payment by such lessees
directly to Beneficiary of any rental or other sums which may at any time become
due under the Leases, or for the performance of any of the lessees' undertakings
under the Leases, and the lessees shall have no right or duty to inquire as to
whether any Default has actually occurred or is then existing hereunder. Trustor
hereby relieves the lessees from any liability to Trustor by reason of relying
upon and complying with any such notice or demand by Beneficiary.
3.3 Effect of Assignment. The foregoing irrevocable Assignment shall not
cause Beneficiary to be: (a) a mortgagee in possession, (b) responsible or
liable for the control, care, management or repair of the Subject Property or
for performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases, or (c)
responsible or liable for any waste committed on the Subject Property by the
lessees under any of the Leases or any other parties; for any dangerous or
defective condition of the Subject Property, or for any negligence in the
management, upkeep, repair or control of the Subject Property resulting in loss
or injury or death to any lessee, licensee, employee, invitee or other person.
Beneficiary shall not directly or indirectly be liable to Trustor or any other
person as a consequence of: (i) the exercise or failure to exercise any of the
rights, remedies or powers granted to Beneficiary hereunder; (ii) the failure or
refusal of Beneficiary to perform or discharge any obligation, duty or liability
of Trustor arising under the Leases.
3.4 Representations and Warranties. [Deleted]
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3.5 Covenants. Trustor covenants and agrees at Trustor's sole cost and
expense to (a) perform the obligations of lessor contained in the Leases and
enforce by all available remedies performance by the lessees of the obligations
of the lessees contained in the Leases, (b) give Beneficiary prompt written
notice of any default which occurs with respect to any of the Leases, whether
the default be that of the lessee or of the lessor; (c) exercise Trustor's best
efforts to keep all portions of the Subject Property that are currently subject
to Leases leased at all times at rentals not less than the maximum rent
permitted under the regulatory agreements and other restrictions encumbering the
Subject Property; (d) deliver to Beneficiary fully executed, counterpart
original(s) of each and every Lease if requested to do so; and (e) execute and
record such additional assignments of any Lease or specific subordinations of
any Lease to this Agency Loan Deed of Trust, in form and substance acceptable to
Beneficiary, as Beneficiary may request. Trustor shall not, without
Beneficiary's prior written consent: (i) enter into any Leases after the date of
this Assignment other than for occupancy of portions of the Subject Property;
(ii) execute any other assignment relating to any of the Leases except to
construction loans and permanent loans and refinancings of those loans which
have been approved by Beneficiary or are permitted pursuant to the Agreement;
(iii) discount any rent or other sums due under the Leases or collect the same
in advance, other than to collect rent one (1) month in advance of the time when
it becomes due; (iv) terminate, modify or amend any of the terms of the Leases
or in any manner release or discharge the lessees from any obligations
thereunder, except in the ordinary course of business; or (v) subordinate or
agree to subordinate any of the Leases to any other deed of trust or encumbrance
except to construction loans and permanent loans which have been approved by
Beneficiary or are permitted pursuant to the Agreement. Any such attempted
action in violation of the provisions of this Section 3.5 shall be null and
void. Without in any way limiting the requirement of Beneficiary's consent
hereunder, any sums received by Trustor in consideration of any termination (or
the release or discharge of any lessee), modification or amendment of any Lease
shall be applied to reduce the outstanding Secured Obligations and any such sums
received by Trustor shall be held in trust by Trustor for such purpose.
3.6 Estoppel Certificates. Within thirty (30) days after request by
Beneficiary, Trustor shall deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying (if such be the case): (i) that the
foregoing assignment and the Leases are in full force and effect; (ii) the date
of each lessee's most recent payment of rent; (iii) that there are no defenses
or offsets outstanding, or stating those claimed by Trustor or lessees under the
foregoing assignment or the Leases, as the case may be; and (iv) any other
information reasonably requested by Beneficiary.
ARTICLE IV. SECURITY AGREEMENT,
FINANCING STATEMENT, AND FIXTURE FILING
4.1 Security Interest. Trustor hereby grants and assigns to Beneficiary as
of the recording date of this Deed Of Trust a first priority security interest,
to secure payment and performance of all of the Secured Obligations, in all of
Trustor's interest in the following described personal property in which Trustor
now or at any time hereafter has any interest ("Collateral"):
All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and other
personal property, wherever situated, which are or are to be incorporated
into, used in connection with, or appropriated for use on all or any
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<PAGE>
part of the Subject Property (to the extent the same are not effectively
made a part of the Subject Property pursuant to Section 1.1 above),
together with all rents, issues, deposits and profits of the Subject
Property (to the extent, if any, they are not subject to Article III), all
inventory, accounts, cash receipts, deposit accounts, accounts receivable,
contract rights, general intangibles, chattel paper, instruments,
documents, notes, drafts, letters of credit, insurance policies, insurance
and condemnation awards and proceeds, any other rights to the payment of
money, trade names, trademarks and service marks arising from or related to
the Subject Property or any business now or hereafter conducted thereon by
Trustor; all permits, consents, approvals, licenses, authorizations and
other rights granted by, given by or obtained from, any governmental entity
with respect to the Subject Property, all deposits or other security now or
hereafter made with or given to utility companies by Trustor with respect
to the Subject Property; all advance payments of insurance premiums made by
Trustor with respect to the Subject Property; all plans, drawings and
specifications relating to the Subject Property, all loan funds held by
Beneficiary, whether or not disbursed; all funds deposited with Beneficiary
pursuant to any loan agreement; all reserves, deferred payments, deposits,
accounts, refunds, cost savings and payments of any kind related to the
Subject Property or any portion thereof together with all replacements and
proceeds of and additions and accessions to, any of the foregoing; together
with all books, records and files relating to any of the foregoing; but,
specifically excluding any personal property of any tenant of Trustor
whether or not such personal property may be deemed a fixture under
applicable law.
As to all of the above described personal property which is or which hereafter
becomes a "fixture" under applicable law, this Agency Loan Deed of Trust
constitutes a fixture filing under Section 9313, Section 9402(6), and all other
applicable sections of the California Uniform Commercial Code, as amended or
recodified from time to time, and is acknowledged and agreed to be a
"construction mortgage" under such Sections.
4.2 Representations and Warranties. Trustor represents and warrants that:
(a) Trustor has, or will have, good title to the Collateral; (b) Trustor has not
previously assigned or encumbered the Collateral, and no financing statement
covering any of the Collateral has been delivered to any other person or entity
except the Authority; and (c) Trustor's principal place of business is located
at the address shown in Section 7.11.
4.3 Rights of Beneficiary. In addition to Beneficiary's rights as a
"Secured Party" under the California Uniform Commercial Code, as amended or
recodified from time to time ("UCC"), Beneficiary may, but shall not be
obligated to, at any time without notice and at the expense of Trustor (a) give
notice to any person of Beneficiary's rights hereunder and enforce such rights
at law or in equity; (b) insure, protect, defend and preserve the Collateral or
any rights or interests of Beneficiary therein; (c) inspect the Collateral; and
(d) endorse, collect and receive any right to payment of money owing to Trustor
under or from the Collateral. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary
shall make an express written election of said remedy under UCC ss.9505, or
other applicable law.
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4.4 Rights of Beneficiary on Default. Upon the occurrence of a Default
under this Agency Loan Deed of Trust, then in addition to all of Beneficiary's
rights as a "Secured Party" under the UCC or otherwise at law:
(a) Beneficiary may (i) upon written notice, require Trustor to
assemble any or all of the Collateral and make it available to Beneficiary
at a place designated by Beneficiary; (ii) without prior notice, enter upon
the Subject Property or other place where any of the Collateral may be
located and take possession of, collect, sell, and dispose of any or all of
the Collateral, and store the same at locations acceptable to Beneficiary
at Trustor's expense; (iii) sell, assign and deliver at any place or in any
lawful manner all or any part of the Collateral and bid and become
purchaser at any such sales, and
(b) Beneficiary may, for the account of Trustor and at Trustor's
expense: (i) operate, use, consume, sell or dispose of the Collateral as
Beneficiary deems appropriate for the purpose of performing any or all of
the Secured Obligations; (ii) enter into any agreement, compromise, or
settlement, including insurance claims, which Beneficiary may deem
desirable or proper with respect to any of the Collateral; and (iii)
endorse and deliver evidences of title for, and receive, enforce and
collect by legal action or otherwise, all indebtedness and obligations now
or hereafter owing to Trustor in connection with or on account of any or
all of the Collateral.
Notwithstanding any other provision hereof Beneficiary shall not be deemed
to have accepted any property other than cash in satisfaction of any obligation
of Trustor to Beneficiary unless Trustor shall make an express written election
of said remedy under UCC ss.9505, or other applicable law.
4.5 Possession and Use of Collateral. Except as otherwise provided in this
Section or the other Loan Documents (as defined in Section 6.2(h), below), so
long as no Default exists under this Agency Loan Deed of Trust or any of the
Loan Documents, Trustor may possess, use, move, transfer or dispose of any of
the Collateral in the ordinary course of Trustor's business and in accordance
with the Loan Documents.
4.6 No Personal Liability. In the event of any default under the terms of
the Note or this Agency Loan Deed of Trust, the sole recourse of the Beneficiary
for any and all such defaults shall be by judicial foreclosure or by the
exercise of the trustee's power of sale, and the Trustor shall not be personally
liable for the payment of the Note or for the payment of any deficiency
established after judicial foreclosure or trustee's sale; provided, however,
that the foregoing shall not in any way affect any rights the Beneficiary may
have (as a secured party or otherwise) hereunder or under the Agreement or this
Agency Loan Deed of Trust to (a) recover directly from Trustor any amounts
secured by this Agency Loan Deed of Trust, or any funds, damages or costs
(including without limitation reasonable attorneys' fees and costs) incurred by
Agency as a result of fraud, misrepresentation or waste; or (b) recover directly
from the Trustor any condemnation or insurance proceeds, or other similar funds
or payments attributable to the Site which under the terms of this Agency Loan
Deed of Trust should have been paid to the Beneficiary, and any costs and
expenses incurred by the Beneficiary in connection with (a) or (b) above
(including without limitation reasonable attorneys' fees and costs).
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<PAGE>
ARTICLE V. RIGHTS AND DUTIES OF THE PARTIES
5.1 Title. Trustor represents and warrants that, except as disclosed to
Beneficiary in writing which refers to this warranty, Trustor lawfully holds and
possesses fee simple title to the Subject Property without limitation on the
right to encumber, and that this Agency Loan Deed of Trust is a second lien on
the Subject Property and on the Collateral.
5.2 Taxes and Assessments. Subject to Trustor's rights to contest payment
of taxes, Trustor shall pay prior to delinquency all taxes, assessments, levies
and charges imposed by any public or quasi-public authority or utility company
which are or which may become a lien upon or cause a loss in value of the
Subject Property or any interest therein. Trustor shall also pay prior to
delinquency all taxes, assessments, levies and charges imposed by any public
authority upon Beneficiary by reason of its interest in any Secured Obligation
or in the Subject Property, or by reason of any payment made to Beneficiary
pursuant to any Secured Obligation; provided, however, Trustor shall have no
obligation to pay taxes which may be imposed from time to time upon Beneficiary
and which are measured by and imposed upon Beneficiary's net income.
5.3 [Reserved]
5.4 Performance of Secured Obligations. Trustor shall promptly pay and
perform each Secured Obligation when due.
5.5 Liens. Encumbrances and Charges. Trustor shall immediately discharge
any lien not approved by Beneficiary in writing that has or may attain priority
over this Agency Loan Deed of Trust. Trustor shall pay when due all obligations
secured by or reducible to liens and encumbrances which shall now or hereafter
encumber or appear to encumber all or any part of the Subject Property or any
interest therein, whether senior or subordinate hereto.
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5.6 Damages; Insurance and Condemnation Proceeds.
(a) The following (whether now existing or hereafter arising) are all
absolutely and irrevocably assigned by Trustor to Beneficiary and, at the
request of Beneficiary, shall be paid directly to Beneficiary: (i) all awards of
damages and all other compensation payable directly or indirectly by reason of a
condemnation or proposed condemnation for public or private use affecting all or
any part of, or any interest in, the Subject Property; (ii) all other claims and
awards for damages to, or decrease in value of, all or any part of, or any
interest in, the Subject Property; (iii) all proceeds of any insurance policies
payable by reason of loss sustained to all or any part of the Subject Property;
and (iv) all interest which may accrue on any of the foregoing. Subject to
applicable law, and without regard to any requirement contained in Section
5.7(d), Beneficiary may at its discretion apply all or any of the proceeds it
receives to its expenses in settling, prosecuting or defending any claim and may
apply the balance to the Secured Obligation in any order, and/or Beneficiary may
release all or any part of the proceeds to Trustor upon any conditions
Beneficiary may impose. Beneficiary may commence, appear in, defend or prosecute
any assigned claim or action and may adjust, compromise, settle and collect all
claims and awards assigned to Beneficiary; provided, however, that if
Beneficiary fails to pursue any such claim, Beneficiary shall assign or permit
Trustor to pursue such claim upon Trustor's request, and in no event shall
Beneficiary be responsible for any failure to collect any claim or award,
regardless of the cause of the failure.
(b) Beneficiary shall permit insurance or condemnation proceeds held by
Beneficiary to be used for repair or restoration but may condition such
application upon reasonable conditions, including, without limitation: (i) the
deposit with Beneficiary of such additional funds which Beneficiary determines
are needed to pay all cost of the repair or restoration, (including, without
limitation, taxes, financing charges, insurance and rent during the repair
period); (ii) the establishment of an arrangement for lien releases and
disbursement of funds acceptable to Beneficiary; (iii) the delivery to
Beneficiary of plans and specifications for the work, a contract for the work
signed by a contractor acceptable to Beneficiary, a cost breakdown for the work
and a payment and performance bond for the work, all of which shall be
acceptable to Beneficiary; and (iv) the delivery to Beneficiary of evidence
acceptable to Beneficiary (aa) that after completion of the work the income from
the Subject Property will be sufficient to pay all expenses and debt service for
the Subject Property; (b) of the continuation of Leases acceptable to and
required by Beneficiary; (cc) that upon completion of the work, the size,
capacity and total value of the Subject Property will be at least as great as it
was before the damage or condemnation occurred, subject to City laws,
ordinances, regulations and standards then in effect, (d) that there has been no
material adverse change in the financial condition or credit of Trustor since
the date of this Agency Loan Deed of Trust; and (e) the satisfaction of any
additional conditions that Beneficiary may reasonably establish to protect its
security. Trustor hereby acknowledges that the conditions described above are
reasonable.
5.7 Maintenance and Preservation of the Subject Property. Trustor
covenants: (a) to insure the Subject Property against such risks as Beneficiary
may require and, at Beneficiary's request, to provide evidence of such insurance
to Beneficiaries, and to comply with the requirements of any insurance companies
insuring the Subject Property; (b) to keep the Subject Property in good
condition and repair; (c) except with Beneficiary's prior written consent, not
to remove or demolish the Subject Property or any part thereof; (d) to complete
or restore promptly and in good and workmanlike manner
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the Subject Property, or any part thereof which may be damaged or destroyed,
without regard to whether Beneficiary elects to require that insurance proceeds
be used to reduce the Secured Obligations as provided in Section 5.6, except to
the extent that the damage or destruction is due to a casualty which Trustor is
not required to insure against and in fact does not insure against, or to the
extent that insurance proceeds are not made available to Trustor; (e) to comply
with all laws, ordinances, regulations and standards, and all covenants,
conditions, restrictions and equitable servitudes, whether public or private, of
every kind and character which affect the Subject Property and pertain to acts
committed or conditions existing thereon, including, without limitation, any
work, alteration, improvement or demolition mandated by such laws, covenants or
requirements; (f) not to commit or permit waste of the Subject Property; and (g)
to do all other acts which from the character or use of the Subject Property may
be reasonably necessary to maintain and preserve its value.
5.8 Defense and Notice of Losses, Claims, and Actions. At Trustor's sole
expense, Trustor shall protect, preserve and defend the Subject Property and
title to and right of possession of the Subject Property, the security hereof
and the rights and powers of Beneficiary and Trustee hereunder against all
adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in
writing of the assertion of any claim of the filing of any action or proceeding,
of the occurrence of any damage to the Subject Property and of any condemnation
offer or action.
5.9 Acceptance of Trust; Powers and Duties of Trustee. Trustee accepts this
trust when this Agency Loan Deed of Trust is recorded. From time to time upon
written request of Beneficiary and presentation of this Agency Loan Deed of
Trust or a certified copy thereof for endorsement, and without affecting the
personal liability of any person for payment of any indebtedness or performance
of any obligations secured hereby, Trustee may, without liability therefor and
without notice reconvey all or any part of the Subject Property. Except as may
be required by applicable law, Trustee or Beneficiary may from time to time
apply to any court of competent jurisdiction for aid and direction in the
execution of the trust hereunder and the enforcement of the rights and remedies
available hereunder, and may obtain orders or decrees directing or confirming or
approving acts in the execution of said trust and the enforcement of said
remedies. Trustee has no obligation to notify any party of any pending sale or
any action or proceeding, including, without limitation, actions in which
Trustor, Beneficiary or Trustee shall be a party unless held or commenced and
maintained by Trustee under this Agency Loan Deed of Trust. Trustee shall not be
obligated to perform any act required of it hereunder unless the performance of
the act is requested in writing and Trustee is reasonably indemnified and held
harmless against loss, cost, liability or expense.
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5.10 Compensation; Exculpation; Indemnification.
(a) Trustor shall pay Trustee's fees and reimburse Trustee for expenses in
the administration of this trust, including attorneys' fees. Trustor shall pay
to Beneficiary reasonable compensation for services rendered concerning this
Agency Loan Deed of Trust, including without limit any statement of amounts
owing under any Secured Obligation. Beneficiary shall not directly or indirectly
be liable to Trustor or any other person as a consequence of (i) the exercise of
the rights, remedies or powers granted to Beneficiary in this Agency Loan Deed
of Trust; (ii) the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the Subject
Property or under this Agency Loan Deed of Trust; or (iii) any loss sustained by
Trustor or any third party resulting from Beneficiary's failure to lease the
Subject Property after a Default or from any other act or omission of
Beneficiary in managing the Subject Property after a Default unless the loss is
caused by the gross negligence or willful misconduct of Beneficiary and no such
liability shall be asserted against or imposed upon Beneficiary, and all such
liability is hereby expressly waived and released by Trustor.
(b) Trustor indemnifies Trustee and Beneficiary against, and holds Trustee
and Beneficiary harmless from, all losses, damages, liabilities, claims, causes
of action, judgments, court costs, attorneys' fees and other legal expenses,
cost of evidence of title, cost of evidence of value, and other expenses which
either may suffer or incur: (i) by reason of this Agency Loan Deed of Trust;
(ii) by reason of the execution of this trust or in performance of any act
required or permitted hereunder or by law; or (iii) as a result of any failure
of Trustor to perform Trustor's obligations, except to the extent such matters
which are caused as a result of the gross negligence or willful misconduct of
Beneficiary or Trustee. The above obligation of Trustor to indemnify and hold
harmless Trustee and Beneficiary shall survive the release and cancellation of
the Secured Obligations and the release and reconveyance or partial release and
reconveyance of this Agency Loan Deed of Trust.
(c) Trustor shall pay all amounts and indebtedness arising under this
Section 5.10 immediately upon demand by Trustee or Beneficiary together with
interest thereon from the date the indebtedness arises at the rate of interest
applicable to the principal balance of the Note as specified therein.
5.11 Substitution of Trustees. From time to time, by a writing, signed and
acknowledged by Beneficiary and recorded in the Office of the Recorder of the
County in which the Subject Property is situated, Beneficiary may appoint
another trustee to act in the place and stead of Trustee or any successor. Such
writing shall set forth any information required by law. The recordation of such
instrument of substitution shall discharge Trustee herein named and shall
appoint the new trustee as the trustee hereunder with the same effect as if
originally named Trustee herein. A writing recorded pursuant to the provisions
of this Section 5.11 shall be conclusive proof of the proper substitution of
such new Trustee.
5.12 Due on Sale or Encumbrance. Absent consent required pursuant to the
terms of the Loan Documents, if the Subject Property or any interest therein
shall be sold, transferred (including, without limitation, through sale or
transfer of a majority or controlling interest of the corporate stock or general
partnership interests of Trustor), mortgaged, assigned, further encumbered or
leased, whether
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directly or indirectly, whether voluntarily, involuntarily or by operation of
law, without the prior written consent of Beneficiary, or as otherwise permitted
pursuant to the Agreement, then Beneficiary, in its sole discretion, may declare
all Secured Obligations immediately due and payable.
5.13 Releases, Extensions, Modifications and Additional Security. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Subject Property or in any manner
obligated under the Secured Obligations ("Interested Parties"), Beneficiary may,
from time to time, release any person or entity from liability for the payment
or performance of any Secured Obligation, take any action or make any agreement
extending the maturity or otherwise altering the terms or increasing the amount
of any Secured Obligation, or accept additional security or release all or a
portion of the Subject Property and other security for the Secured Obligations.
None of the foregoing actions shall release or reduce the personal liability of
any of said Interested Parties, or release or impair the priority of the lien of
this Agency Loan Deed of Trust upon the Subject Property.
5.14 Reconveyance. Upon Beneficiary's written request, and upon surrender
to Trustee for cancellation of this Agency Loan Deed of Trust or a certified
copy thereof and any note, instrument, or instruments setting forth all
obligations secured hereby, Trustee shall reconvey, without warranty, the
Subject Property or that portion thereof then held hereunder. To the extent
permitted by law, the reconveyance may describe the grantee as "the person or
persons legally entitled thereto" and the recitals of any matters or facts in
any reconveyance executed hereunder shall be conclusive proof of the
truthfulness thereof. Neither Beneficiary nor Trustee shall have any duty to
determine the rights of persons claiming to be rightful grantees of any
reconveyance. When the Subject Property has been fully reconveyed, the last such
reconveyance shall operate as a reassignment of all future rents, issues and
profits of the Subject Property to the person or persons legally entitled
thereto.
5.15 Subrogation. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part by
Beneficiary pursuant to this Agency Loan Deed of Trust or by the proceeds of any
loan secured by this Agency Loan Deed of Trust.
5.16 Right of Inspection. Beneficiary, its agents and employees, may enter
the Subject Property at any reasonable time, upon reasonable advance notice
except in cases of emergency, for the purpose of inspecting the Subject Property
and ascertaining Trustor's compliance with the terms hereof.
ARTICLE VI. DEFAULT PROVISIONS
6.1 Default. For all purposes hereof the term "Default" shall mean (a) at
Beneficiary's option, the failure of Trustor to make any payment of principal or
interest on the Note or to pay any other amount due hereunder or under the Note
when the same is due and payable, whether at maturity, by acceleration or
otherwise; (b) the failure of Trustor to perform any non-monetary obligation
hereunder, or the failure to be true of any representation or warranty of
Trustor contained herein and the continuance of such failure for ten (10) days
after notice, or within any longer grace period, if any, allowed in the
Agreement for such failure, or (c) the existence of any Default or Event of
Default as defined in the Agreement.
Page 11 of 18
<PAGE>
6.2 Rights and Remedies. At any time after Default, Beneficiary and Trustee
shall each have all the following rights and remedies:
(a) With or without notice, to declare all Secured Obligations
immediately due and payable;
(b) With or without notice, and without releasing Trustor from any
Secured Obligation, and without becoming a mortgagee in possession, to cure
any breach or Default of Trustor and, in connection therewith, to enter
upon the Subject Property and do such acts and things as Beneficiary or
Trustee deem necessary or desirable to protect the security hereof,
including, without limitation: (i) to appear in and defend any action or
proceeding purporting to affect the security of this Agency Loan Deed of
Trust or the rights or powers of Beneficiary or Trustee under this Agency
Loan Deed of Trust, (ii) to pay, purchase, contest or compromise any
encumbrance, charge, lien or claim of lien which, in the sole judgment of
either Beneficiary or Trustee, is or may be senior in priority to this
Agency Loan Deed of Trust, the judgment of Beneficiary or Trustee being
conclusive as between the parties hereto, (iii) to obtain insurance, (iv)
to pay any premiums or charges with respect to insurance required to be
carried under this Agency Loan Deed of Trust; or (v) to employ counsel,
accountants, contractors and other appropriate persons.
(c) To commence and maintain an action or actions in any court of
competent jurisdiction to foreclose this instrument as a mortgage or to
obtain specific enforcement of the covenants of Trustor hereunder, and
Trustor agrees that such covenants shall be specifically enforceable by
injunction or any other appropriate equitable remedy and that for the
purposes of any suit brought under this subparagraph, Trustor waives the
defense of laches and any applicable statute of limitations;
(d) To apply to a court of competent jurisdiction for and obtain
appointment of a receiver of the Subject Property as a matter of strict
right and without regard to the adequacy of the security for the repayment
of the Secured Obligations, the existence of a declaration that the Secured
Obligations are immediately due and payable, or the filing of a notice of
default, and Trustor hereby consents to such appointment;
(e) To enter upon, possess, manage and operate the Subject Property or
any part thereof, to take and possess all documents, books, records, papers
and accounts of Trustor or the then owner of the Subject Property, to make,
terminate, enforce or modify the Leases of the Subject Property upon such
terms and conditions as Beneficiary deems proper, to make repairs,
alterations and improvements to the Subject Property as necessary, in
Trustee's or Beneficiary's sole judgment, to protect or enhance the
security hereof;
(f) To execute a written notice of such Default and of its election to
cause the Subject Property to be sold to satisfy the Secured Obligations.
As a condition precedent to any such sale, Trustee shall give and record
such notice as the law then requires. When the minimum period of time
required by law after such notice has elapsed, Trustee, without notice to
or demand upon Trustor except as required by law, shall sell the Subject
Property at the time and place of sale fixed by it in the notice of sale,
at one or several sales, either as a whole or in separate parcels and in
such manner and order, all as Beneficiary in its sole discretion may
determine, at public auction to the highest bidder for
Page 12 of 18
<PAGE>
cash, in lawful money of the United States, payable at time of sale.
Neither Trustor nor any other person or entity other than Beneficiary shall
have the right to direct the order in which the Subject Property is sold.
Subject to requirements and limits imposed by law, Trustee may from time to
time postpone sale of all or any portion of the Subject Property by public
announcement at such time and place of sale. Trustee shall deliver to the
purchaser at such sale a deed conveying the Subject Property or portion
thereof so sold, but without any covenant or warranty, express or implied.
The recitals in the deed of any matters or facts shall be conclusive proof
of the truthfulness thereof. Any person, including Trustee, Trustor or
Beneficiary may purchase at the sale;
(g) To resort to and realize upon the security hereunder and any other
security now or later held by Beneficiary concurrently or successively and
in one or several consolidated or independent judicial actions or lawfully
taken non-judicial proceedings, or both, and to apply the proceeds received
upon the Secured Obligations all in such order and manner as Trustee and
Beneficiary, or either of them, determine in their sole discretion.
(h) To pursue any other rights and remedies available to Beneficiary
or Trustee at law, in equity, or under this Agency Loan Deed of Trust, the
Note, or any other agreement, document, or instrument executed in
connection therewith (collectively, the "Loan Documents").
(i) Upon sale of the Subject Property at any judicial or non-judicial
foreclosure, Beneficiary may credit bid (as determined by Beneficiary in
its sole and absolute discretion) all or any portion of the Secured
Obligations. In determining such credit bid, Beneficiary may, but is not
obligated to, take into account all or any of the following: (i) appraisals
of the Subject Property as such appraisals may be discounted or adjusted by
Beneficiary in its sole and absolute underwriting discretion; (ii) expenses
and costs incurred by Beneficiary with respect to the Subject Property
prior to foreclosure; (iii) expenses and costs which Beneficiary
anticipates will be incurred with respect to the Subject Property after
foreclosure, but prior to resale, including, without limitation, costs of
structural reports and other due diligence, costs to carry the Subject
Property prior to resale, costs of resale (e.g., Agency's, attorneys' fees,
and taxes), costs of any hazardous materials clean-up and monitoring, costs
of deferred maintenance, repair, refurbishment and retrofit, costs of
defending or settling litigation affecting the Subject Property, and lost
opportunity costs (if any), including the time value of money during any
anticipated holding period by Beneficiary; (iv) declining trends in real
property values generally and with respect to properties similar to the
Subject Property; (v) anticipated discounts upon resale of the Subject
Property as a distressed or foreclosed property; (vi) the fact of
additional collateral (if any), for the Secured Obligations; and (vii) such
other factors or matters that Beneficiary (in its sole and absolute
discretion) deems appropriate. In regard to the above, Trustor acknowledges
and agrees that: (w) Beneficiary is not required to use any or all of the
foregoing factors to determine the amount of its credit bid, (x) this
Section does not impose upon Beneficiary any additional obligations that
are not imposed by law at the time the credit bid is made, (y) the amount
of Beneficiary's credit bid need not have any relation to any loan-to-value
ratios specified in the Loan Documents or previously discussed between
Trustor and Beneficiary; and (z) Beneficiary's credit bid may be (at
Beneficiary's sole and absolute discretion) higher or lower than any
appraised value of the Subject Property. Nothing herein shall diminish or
affect Trustor's right to a fair value determination in accordance with the
provisions of Code of Civil Procedure Section 5802.
Page 13 of 18
<PAGE>
6.3 Application of Foreclosure Sale Proceeds. After deducting all costs,
fees and expenses of Trustee, and of this trust, including, without limitation,
cost of evidence of title and attorneys fees in connection with sale and costs
and expenses of sale and of any judicial proceeding wherein such sale may be
made, Trustee shall apply all proceeds of any foreclosure sale: (i) to payment
of all sums expended by Beneficiary under the terms hereof and not then repaid,
with accrued interest at the rate of interest specified in the Note to be
applicable on or after maturity or acceleration of the Note; (ii) to payment of
all other Secured Obligations; and (iii) the remainder, if any, to the person or
persons legally entitled thereto.
6.4 Application of Other Sums. All sums received by Beneficiary under
Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary
or any receiver under Section 6.2 or Section 3.2, including, without limitation,
attorneys' fees, shall be applied in payment of the Secured Obligations in such
order as Beneficiary shall determine in its sole discretion; provided, however,
Beneficiary shall have no liability for funds not actually received by
Beneficiary.
6.5 No Cure or Waiver. Neither Beneficiary's nor Trustee's nor any
receiver's entry upon and taking possession of all or any part of the Subject
Property, nor any collection of rents, issues, profits, insurance proceeds,
condemnation proceeds or damages, other security or proceeds of other security,
or other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise or failure to exercise of any other right or remedy
by Beneficiary or Trustee or any receiver shall cure or waive any breach,
Default or notice of default under this Agency Loan Deed of Trust, or nullify
the effect of any notice of default or sale (unless all Secured Obligations then
due have been paid and performed and Trustor has cured all other defaults), or
impair the status of the security, or prejudice Beneficiary or Trustee in the
exercise of any right or remedy, or be construed as an affirmation by
Beneficiary of any tenancy, lease or option or a subordination of the lien of
this Agency Loan Deed of Trust.
6.6 Payment of Costs, Expenses and Attorney's Fees. Trustor agrees to pay
to Beneficiary immediately and without demand all costs and expenses incurred by
Trustee and Beneficiary pursuant to subparagraphs (a) through (i) inclusive of
Section 6.2 (including, without limitation, court costs and attorneys' fees,
whether incurred in litigation or not) with interest from the date of
expenditure until said sums have been paid at the rate of interest then
applicable to the principal balance of the Note as specified therein. In
addition, Trustor shall pay to Trustee all Trustee's fees hereunder and shall
reimburse Trustee for all expenses incurred in the administration of this trust,
including, without limitation, any attorneys fees.
6.7 Non-Recourse Obligation. In the event of any default under the terms of
the Note or this Agency Loan Deed of Trust, the sole recourse of Beneficiary for
any and all such defaults shall be by judicial foreclosure or by the exercise of
the trustee's power of sale, and Trustor shall not be personally liable for the
payment of the Note or for the payment of any deficiency established after
judicial foreclosure or trustee's sale; provided, however, that the foregoing
shall not in any way affect any rights Beneficiary may have (as a secured party
or otherwise) hereunder or under the Note to (a) recover directly from Trustor
any amounts secured by this Agency Loan Deed of Trust, or any funds, damages or
costs (including without limitation reasonable attorneys' fees and costs)
incurred by Beneficiary as a result of fraud, misrepresentation or waste, or (b)
recover directly from Trustor any condemnation or insurance proceeds, or other
similar funds or payments attributable to the Subject
Page 14 of 18
<PAGE>
Property which under the terms of this Agency Loan Deed of Trust should have
been paid to Beneficiary, and any costs and expenses incurred by Beneficiary in
connection with (a) or (b) above (including without limitation reasonable
attorneys' fees and costs).
ARTICLE VII. MISCELLANEOUS PROVISIONS
7.1 Additional Provisions. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan Documents
grant further rights to Beneficiary and contain further agreements and
affirmative and negative covenants by Trustor which apply to this Agency Loan
Deed of Trust and to the Subject Property and such further rights and agreements
are incorporated herein by this reference.
7.2 Merger. No merger shall occur as a result of Beneficiary's acquiring
any other estate in, or any other lien on, the Subject Property unless
Beneficiary consents to a merger in writing.
7.3 Obligations of Trustor, Joint and Several. If more than one person has
executed this Agency Loan Deed of Trust as "Trustor," the obligations of all
such persons hereunder shall be joint and several.
7.4 Recourse to Separate Property. Any married person who executes this
Agency Loan Deed of Trust as a Trustor agrees that any money judgment which
Beneficiary or Trustee obtains pursuant to the terms of this Agency Loan Deed of
Trust or any other obligation of that married person secured by this Agency Loan
Deed of Trust may be collected by execution upon that person's separate
property, and any community property of which that person is a manager.
7.5 Waiver of Marshaling Rights. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Subject Property, hereby waives all rights to have the
Subject Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured Obligation
("Other Property") marshaled upon any foreclosure of this Agency Loan Deed of
Trust or on a foreclosure of any other security for any of the Secured
Obligations. Beneficiary shall have the right to sell, and any court in which
foreclosure proceedings may be brought shall have the right to order a sale of,
the Subject Property and any or all of the Collateral or Other Property as a
whole or in separate parcels, in any order that Beneficiary may designate.
7.6 Rules of Construction. When the identity of the parties or other
circumstances make it appropriate the masculine gender includes the feminine
and/or neuter, and the singular number includes the plural. The term "Subject
Property" means all and any part of the Subject Property and any interest in the
Subject Property.
7.7 Successors in Interest. The terms, covenants, and conditions herein
contained shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto, provided, however, that this
Section does not waive or modify the provisions of Section 5.12.
Page 15 of 18
<PAGE>
7.8 Execution In Counterparts. This Agency Loan Deed of Trust may be
executed in any number of counterparts, each of which, when executed and
delivered to Beneficiary, will be deemed to be an original and all of which,
taken together, will be deemed to be one and the same instrument.
7.9 California Law. This Agency Loan Deed of Trust shall be construed in
accordance with the laws of the State of California, except to the extent that
Federal laws preempt the laws of the State of California.
7.10 Incorporation. Exhibit A is incorporated into this Agency Loan Deed of
Trust by this reference.
7.11 Notices. All notices or other communications required or permitted to
be given pursuant to the provisions of this Agency Loan Deed of Trust shall be
in writing and shall be considered as properly given if delivered personally or
sent by first class U.S. mail, postage prepaid, except that notice of a Default
may be sent by certified mail, return receipt requested, or by overnight express
mail or by commercial courier service, charges prepaid. Notices so sent shall be
effective three (3) days after mailing, if mailed by first class mail, and
otherwise upon receipt at the addresses set forth below. For purposes of notice,
the addresses of the parties shall be:
Trustor: Calexico Tissue Company LLC
135 Engineers Road
Hauppauge, New York 11788
With copy to: Mandel and Resnik, P.C.
220 East 42nd Street
New York, New York 10017
Attn: Nicholas J. Kaiser, Esq.
Trustee: _____________________________
_____________________________
_____________________________
_____________________________
Beneficiary: Community Redevelopment Agency of the
City of Calexico
608 Heber Avenue
Calexjco, CA 92231
its address for notice hereunder to any other location within the continental
United States by the giving of thirty (30) days notice to the other party in the
manner set forth hereinabove. Trustor shall forward to Beneficiary, without
delay, any notices, letters or other communications delivered to the Subject
Property or to Trustor naming Beneficiary, "Lender" or any similar designation
as addressee, or which could reasonably be deemed to affect the ability of
Trustor to perform its obligations to Beneficiary under the Note.
Page 16 of 18
<PAGE>
7.12 Waiver of Set Off Rights. Trustor hereby waives all rights to set off,
against any amount owed by Trustor under the Loan Documents, any claims Trustor
may have against Beneficiary, including, without limitation, the rights afforded
by California Code of Civil Procedure Section 431.70.
7.13 Trustor's Request for Notice of Default and Notice of Sale. Trustor
hereby requests that a copy of any notice of default or notice of sale under
this deed of trust be mailed to trustor at the address set forth in section 7.11
of this deed of trust.
IN WITNESS WHEREOF, Trustor has executed this Agency Loan Deed of Trust as
of the day and year set forth above.
CALEXICO TISSUE COMPANY LLC, a New
York limited liability
By: /s/ Mehdi Gabayzadeh
-----------------------------------
Mehdi Gabayzadeh - Manager
Page 17 of 18
<PAGE>
CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in real property conveyed under the
foregoing to the Community Redevelopment Agency of the City of Calexico, a
public body, corporate and politic, is hereby accepted by the undersigned
officer or agent on behalf of the Board of the Community Redevelopment Agency of
the City of Calexico, pursuant to authority conferred by resolution of said
Board adopted on _____________, 199__, and the grantee consents to recordation
thereof by its duly authorized officer.
COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF CALEXICO
Dated ________, 199_ By: _______________________________
ATTEST
____________________________________
Secretary
Page 18 of 18
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
That real property located in the State of California, County of Imperial, City
of Calexico, and described as follows:
Attachment 4
Exhibit A-1
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
STATE OF NEW YORK )
) ss.
COUNTY OF SUFFOLK )
On Sept. 17, 1997, before me, Robert Joseph Knopf, Notary Public,
(Print Name of Notary Public)
personally appeared Mehdi Gabayzadeh
|X| personally known to me
-or-
|_| proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity(ies), and that
by his/her/their signature(s) on the instrument the person(s),
or the entity upon behalf of which the person(s) acted,
executed the instrument.
ROBERT JOSEPH KNOPF
Notary Public, State of N.Y. WITNESS my hand and official seal.
No. 4627472 /s/ Robert Joseph Knopf
Qualified in Suffolk County ---------------------------------
Commission Expires: June 30, 1999 Signature Of Notary
- --------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
|_| Individual
|_| Corporate Officer
_____________________________________ ___________________________________
Title(s) Title Or Type Of Document
|_| Partner(s) |_| Limited
|_| General
|_| Attorney-In-Fact ___________________________________
|_| Trustee(s) Number Of Pages
|_| Guardian/Conservator
|_| Other: _________________________
___________________________________
Signer is representing: Date Of Document
Name Of Person(s) Or Entity(ies)
_____________________________________
___________________________________
_____________________________________ Signer(s) Other Than Named Above
- --------------------------------------------------------------------------------
ATTACHMENT NO. 5
REIMBURSEMENT PROMISSORY NOTE
$284,000 00 July, 1997
Calexico, California
FOR VALUE RECEIVED, CALEXICO TISSUE COMPANY LLC, a New York limited
liability company ("Developer"), promises to pay to the COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF CALEXICO, a public body corporate and politic (the
"Agency"), or order at the Agency's office at 608 Heber Avenue, Calexico,
California 92231, or such other place as the Agency may designate in writing,
the principal sum of Two Hundred Eighty-Four Thousand Dollars ($284,000) (the
"Note Amount"), or so much of the Note Amount as has been disbursed by the
Agency to or on behalf of the Developer, in currency of the United States of
America, which at the time of payment is lawful for the payment of public and
private debts.
1. Agreement. This Reimbursement Promissory Note (the "Note") is given in
accordance with that certain Loan Agreement executed by the Agency and the
Developer, dated as of_____,1997 (the "Agreement"). The rights and obligations
of the Developer and the Agency under this Note shall be governed by the
Agreement and by the additional terms set forth in this Note. The Note Amount
shall be disbursed on behalf of the Developer by depositing the full Note Amount
with the construction loan bank pursuant to the Agreement.
2. Interest. The Note Amount shall bear no interest except that simple
interest shall begin to accrue at the rate of ten percent (10%) per annum in the
event that the total amount of the principal, interest and any other amounts
owed under this Note shall become immediately due and payable upon a default by
the Developer under the Agreement or this Note, which has not been cured within
the period of time set forth in those documents. Failure to declare such amounts
due shall not constitute waiver on the part of the Agency to declare them due
subsequently.
3. Repayment of Note Amount. The Note Amount shall be due and payable on
the seventh anniversary of the date of this Note; provided, however, if
Developer has satisfied the requirements of Section 301 of the Loan Agreement
the full Note Amount shall be forgiven upon the fifth anniversary of the filing
of the first employment report demonstrating that the Developer has satisfied
the requirement of hiring 100 Qualified Employees as provided in Section 301.
Notwithstanding the foregoing, the full Note Amount may be accelerated as set
forth in Section 12 below.
4. Security. This Note is secured by a Deed of Trust With Assignment of
Leases and Rents, Security Agreement, Financing Statement, and Fixture Filing
(the "Agency Loan Deed of Trust") dated as of the same date as this Note.
Page 1 of 5
<PAGE>
5. Waivers
(a) Developer expressly agrees that this Note or any payment hereunder
may be extended from time to time at the Agency's sole discretion and that
the Agency may accept security in consideration for any such extension or
release any security for this Note at its sole discretion all without in
any way affecting the liability of Developer.
(b) No extension of time for payment of this Note made by agreement by
the Agency with any person now or hereafter liable for the payment of this
Note shall operate to release, discharge, modify, change or affect the
original liability of Developer under this Note, either in whole or in
part.
(c) The obligations of Developer under this Note shall be absolute and
Developer waives any and all rights to offset, deduct or withhold any
payments or charges due under this Note for any reasons whatsoever.
(d) Developer waives presentment, demand, notice of protest and
nonpayment, notice of default or delinquency, notice of acceleration,
notice of costs, expenses or leases or interest thereon, notice of
dishonor, diligence in collection or in proceeding against any of the
rights of interests in or to properties securing of this Note, and the
benefit of any exemption under any homestead exemption laws, if applicable.
(e) No previous waiver and no failure or delay by Agency in acting
with respect to the terms of this Note or the Reimbursement Deed of Trust
shall constitute a waiver of any breach, default, or failure or condition
under this Note, the Reimbursement Deed of Trust or the obligations secured
thereby. A waiver of any term of this Note, the Reimbursement Deed of Trust
or of any of the obligations secured thereby must be made in writing and
shall be limited to the express written terms of such waiver.
6. Attorneys' Fees and Costs. Developer agrees that if any amounts due
under this Note are not paid when due, to pay in addition, all costs and
expenses of collection and reasonable attorneys' fees paid or incurred in
connection with the collection or enforcement of this Note, whether or not suit
is filed.
7. Joint and Several Obligation. This Note is the joint and several
obligation of all makers, sureties, guarantors and endorsers, and shall be
binding upon them and their heirs, successors and assigns.
8. Amendments and Modifications. This Note may not be changed orally, but
only by an amendment in writing signed by Developer and by the Agency.
9. Agency May Assign. Agency may, at its option, assign its right to
receive payment under this Note without necessity of obtaining the consent of
the Developer.
Page 2 of 5
<PAGE>
10. Developer Assignment Prohibited. Except in connection with transfers
permitted pursuant to Section 503 of the Agreement, in no event shall Developer
assign or transfer any portion of this Note without the prior express written
consent of the Agency, which consent may be given or withheld in the Agency's
sole discretion.
11. Terms. Any terms not separately defined herein shall have the same
meanings as set forth in the Agreement.
12. Acceleration and Other Remedies. Upon: (a) the occurrence of an event
of Default as defined in the Agreement, or (b) Developer selling, contacting to
sell, giving an option to purchase, conveying, leasing, further encumbering,
mortgaging, assigning or alienating any of the Properties whether directly or
indirectly whether voluntarily or involuntarily or by operation of law, or any
interest in the Site, or suffering its title, or any interest in the Site to be
divested, whether voluntarily or involuntarily, without the consent of the
Agency as set forth in Section 503 of the Agreement, except for such transfers
which are permitted pursuant to Section 503 of the Agreement, Agency may, at
Agency's option, declare the outstanding principal amount of this Note, together
with the then accrued and unpaid interest thereon and other charges hereunder,
and all other sums secured by the Reimbursement Deed of Trust, to be due and
payable immediately, and upon such declaration, such principal and interest and
other sums shall immediately become and be due and payable without demand or
notice, all as further set forth in the Reimbursement Deed of Trust. All costs
of collection, including, but not limited to, reasonable attorneys' fees and all
expenses incurred in connection with protection of, or realization on, the
security for this Note, may be added to the principal hereunder, and shall
accrue interest as provided herein. Agency shall at all times have the right to
proceed against any portion of the security for this Note in such order and in
such manner as such Agency may consider appropriate, without waiving any rights
with respect to any of the security. Any delay or omission on the part of the
Agency in exercising any right hereunder, under the Agreement or under the
Reimbursement Deed of Trust shall not operate as a waiver of such right, or of
any other right. No single or partial exercise of any right or remedy hereunder
or under the Agreement or any other document or agreement shall preclude other
or further exercises thereof, or the exercise of any other right or remedy. The
acceptance of payment of any sum payable hereunder, or part thereof, after the
due date of such payment shall not be a waiver of Agency's right to either
require prompt payment when due of all other sums payable hereunder or to
declare an Event of Default for failure to make prompt or complete payment
13. Consents. Developer hereby consents to (a) any renewal, extension or
modification (whether one or more) of the terms of the Agreement or the terms or
time of payment under this Note, (b) the release or surrender or exchange or
substitution of all or any part of the security, whether real or personal, or
direct or indirect, for the payment hereof, (c) the granting of any other
indulgences to Developer, and (d) the taking or releasing of other or additional
parties primarily or contingently liable hereunder. Any such renewal, extension,
modification, release, surrender, exchange or substitution may be made without
notice to Developer or to any endorser, guarantor or surety hereof, and without
affecting the liability of said parties hereunder
14. Successors and Assigns. Whenever "Agency" is referred to in this Note,
such reference shall be deemed to include the Community Redevelopment Agency of
the City of Calexico and its successors and assigns, including, without
limitation, any subsequent assignee or holder of this
Page 3 of 5
<PAGE>
Note. All covenants, provisions and agreements by or on behalf of Developer, and
on behalf of any makers, endorsers, guarantors and sureties hereof which are
contained herein shall inure to the benefit of the Agency and Agency's
successors and assigns.
15. Usury. It is the intention of Developer and Agency to conform strictly
to the Interest Law, as defined below, applicable to this loan transaction.
Accordingly, it is agreed that notwithstanding any provision to the contrary in
this Note, or in any of the documents securing payment hereof or otherwise
relating hereto, the aggregate of all interest and any other charges or
consideration constituting interest under the applicable Interest Law that is
taken, reserved, contracted for, charged or received under this Note, or under
any of the other aforesaid agreements or otherwise in connection with this loan
transaction, shall under no circumstances exceed the maximum amount of interest
allowed by the Interest Law applicable to this loan transaction, If any excess
of interest in such respect is provided for in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, then, in such
event:
(a) the provisions of this paragraph shall govern and control;
(b) neither Developer nor Developer's heirs, legal representatives,
successors or assigns shall be obligated to pay the amount of such interest
to the extent that it is in excess of the maximum amount of interest
allowed by the Interest Law applicable to this loan transaction;
(c) any excess shall be deemed canceled automatically and, if
theretofore paid, shall be credited on this Note by Agency or, if this Note
shall have been paid in full, refunded to Developer; and
(d) the effective rate of interest shall be automatically subject to
reduction to the Maximum Legal Rate of Interest (as defined below), allowed
under such Interest Law, as now or hereafter construed by courts of
appropriate jurisdiction. To the extent permitted by the Interest Law
applicable to this loan transaction, all sums paid or agreed to be paid to
Agency for the use, forbearance or detention of the indebtedness evidenced
hereby shall be amortized, prorated, allocated and spread throughout the
full term of this Note. For purposes of this Note, "Interest Law" shall
mean any present or future law of the State of California, the United
States of America, or any other jurisdiction which has application to the
interest and other charges under this Note. The "Maximum Legal Rate of
Interest" shall mean the maximum rate of interest that Agency may from time
to time charge Developer, and under which Developer would have no claim or
defense of usury under the Interest Law.
16. No Personal Liability. In the event of any default under the terms of
this Note or the Reimbursement Deed of Trust, the sole recourse of the Agency
for any and all such defaults shall be by judicial foreclosure or by the
exercise of the trustee's power of sale, and the Developer shall not be
personally liable for the payment of this Note or for the payment of any
deficiency established after judicial foreclosure or trustee's sale; provided,
however, that the foregoing shall not in any way affect any rights the Agency
may have (as a secured party or otherwise) hereunder or under the Agreement or
Reimbursement Deed of Trust to (a) recover directly from Developer any amounts
secured by the Reimbursement Deed of Trust, or any funds, damages or costs
(including without limitation reasonable attorneys' fees and costs) incurred by
Agency as a result of fraud, misrepresentation or waste, or (b) recover directly
from the Developer any condemnation or insurance proceeds, or other similar
funds or
Page 4 of 5
<PAGE>
payments attributable to the Site which under the terms of the Reimbursement
Deed of Trust should have been paid to the Agency, and any costs and expenses
incurred by the Agency in connection with (a) or (b) above (including without
limitation reasonable attorneys' fees and costs).
17. Miscellaneous. Time is of the essence hereof. This Note shall be
governed by and construed under the laws of the State of California except to
the extent Federal laws preempt the laws of the State of California. Developer
acknowledges that this Note was entered into and is to be performed in the
County of Imperial and irrevocably and unconditionally submits to the
jurisdiction of the Superior Court of the State of California for the County of
Imperial or the United States District Court of the Southern District of
California, as Agency hereof may deem appropriate, or, if required, the
Municipal Court of the State of California for the County of Imperial, in
connection with any legal action or proceeding arising out of or relating to
this Note. Developer also waives any objection regarding personal or in rem
jurisdiction or venue.
DEVELOPER:
CALEXICO TISSUE COMPANY LLC, a New
York limited liability company
By: /s/ Mehdi Gabayzadeh
-------------------------------
Mehdi Gabayzadeh - Manager
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<PAGE>
ATTACHMENT NO. 6
RECORDING REQUESTED BY )
AND WHEN RECORDED RETURN TO )
Calexico Community Redevelopment Agency )
608 Heber Avenue )
Calexico, California 92231 )
Attention: Executive Director )
)
- --------------------------------------------------------------------------------
This document is exempt from
the payment of a recording
fee pursuant to Government
Code Section 27383.
REIMBURSEMENT DEED OF TRUST
With Assignment of Leases and Rents, Security Agreement,
Financing Statement, and Fixture Filing
THIS REIMBURSEMENT DEED OF TRUST WITH ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT, FINANCING STATEMENT, AND FIXTURE FILING ("Reimbursement Deed
of Trust"), made as of_______________, 1997, is made by and among CALEXICO
TISSUE COMPANY LLC, a New York limited liability company ("Trustor"),
_____________________________________("Trustee"), and the COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO, a public body, corporate and
politic, organized and existing under laws of the State of California
("Beneficiary"). The addresses of the parties are set forth in Section 7.11 of
this Reimbursement Deed of Trust
ARTICLE I. GRANT IN TRUST
1.1 Grant. For the purposes of and upon the terms and conditions in this
Reimbursement Deed of Trust, Trustor irrevocably grants, conveys and assigns to
Trustee, in trust for the benefit of Beneficiary, with power of sale and right
of entry and possession, all that real property located in the City of Calexico,
County of Imperial, State of California, described on Exhibit A attached hereto,
together with all development rights or credits, air rights, water, water rights
and water stock related to the real property, and all minerals, oil and gas, and
other hydrocarbon substances in, on or under the real property, and tax
reimbursements, appurtenances, easements, rights and rights of way appurtenant
or related thereto, all buildings, other improvements and fixtures now or
hereafter located on the real property, including, but not limited to, Trustor's
interest in all apparatus, equipment, and appliances used in the operation or
occupancy of the real property, it being intended by the parties that all such
items shall be conclusively considered to be a part of the real property,
whether or not attached or affixed to the real property (the "Improvements"),
and all interest or estate which Trustor may hereafter acquire in the property
described above, and all additions and accretions thereto, and the proceeds of
any of the foregoing; but, specifically excluding any personal property of any
tenant of Trustor whether
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<PAGE>
or not such personal property may be deemed a fixture under applicable law, (all
of the foregoing being collectively referred to as the "Subject Property"). The
listing of specific rights or property shall not be interpreted as a limit of
general terms.
1.2 Address. The address of the Subject Property is____________________
Calexico, California. However, neither the failure to designate an address nor
any inaccuracy in the address designated shall affect the validity or priority
of the lien of this Reimbursement Deed of Trust on the Subject Property as
described on Exhibit A.
ARTICLE II. OBLIGATIONS SECURED
2.1 Obligations Secured. Trustor makes this grant and assignment pursuant
to a Loan Agreement between Trustor and Beneficiary dated ___________, 1997 (the
"Agreement"), for the purpose of securing the following obligations ("Secured
Obligations"):
(a) Payment to Beneficiary of all sums at any time owing under that
certain Agency Loan Promissory Note ("Note") in the amount of Two Hundred
Eighty-Four Thousand Dollars ($284,000) of even date herewith, executed by
Trustor, as maker, and payable to the order of Beneficiary, as holder; and
(b) Payment and performance of all covenants and obligations of
Trustor under this Reimbursement Deed of Trust; and
(c) Payment and performance of all future advances and other
obligations that the then record owner of all or part of the Subject
Property may agree to pay and/or perform (whether as principal, surety or
guarantor) for the benefit of Beneficiary, when such future advance or
obligation is evidenced by a writing which recites that it is secured by
this Reimbursement Deed of Trust; and
(d) All modifications, extensions and renewals of any of the
obligations secured hereby, however evidenced, including, without
limitation: (i) modifications of the required principal payment dates or
interest payment dates or both, as the case may be, deferring or
accelerating payment dates wholly or partly; and (ii) modifications,
extensions or renewals at a different rate of interest whether or not in
the case of a note, the modification, extension or renewal is evidenced by
a new or additional promissory note or notes.
2.2 Obligations. The term "obligations" is used herein in its broadest and
most comprehensive sense and shall be deemed to include, without limitation, all
interest and charges, prepayment charges, if any, late charges and loan fees at
any time accruing or assessed on any of the Secured Obligations.
2.3 Incorporation. All terms of the Secured Obligations and the document
evidencing such obligations are incorporated herein by this reference. All
persons who may have or acquire an interest in the Subject Property shall be
deemed to have notice of the terms of the Secured Obligations and to have
notice, if applicable and provided therein, that: (a) the Note may permit
borrowing, repayment and re-borrowing so that repayments shall not reduce the
amounts of the Secured Obligations, and (b) the rate of interest on one or more
Secured Obligations may vary from time to time.
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<PAGE>
ARTICLE III. ASSIGNMENT OF LEASES AND RENTS
3.1 Assignment. Trustor hereby irrevocably, absolutely, unconditionally,
and presently assigns, transfers, conveys, sets over, and delivers to
Beneficiary all of Trustor's right, title and interest in, to and under (a) all
leases of the Subject Property or any portion thereof, all licenses and
agreements relating to the management, leasing or operation of the Subject
Property or any portion thereof, and all other agreements of any kind relating
to the use, enjoyment or occupancy of the Subject Property or any portion
thereof, whether now existing or entered into after the date hereof ("Leases"),
and (b) the rents, issues, deposits, income, revenues, royalties, earnings and
profits of the Subject Property, including, without limitation, all amounts
payable and all rights and benefits accruing to Trustor under the Leases, all
oil, gas and other mineral royalties, and all rents, issues, deposits, income,
revenues, royalties, earnings and profits arising from the use or operation of
coin operated laundry machines, vending machines, and all other coin operated
machines ("Payments"). The term "Leases" shall also include all guarantees of
and security for the lessees' performance thereunder, and all amendments,
extensions, renewals or modifications thereto which are; permitted hereunder.
This is a present, absolute, perfected, choate and unconditional assignment, not
an assignment for security purposes only, and Beneficiary's right to the Leases
and Payments is not contingent upon, and may be exercised without possession of,
the Subject Property.
3.2 Grant of License. Beneficiary confers upon Trustor a license
("License") to collect and retain the Payments as they become due and payable,
until the occurrence of a Default (as hereinafter defined). Upon a Default, the
License shall be automatically revoked and Beneficiary may collect and apply the
Payments pursuant to Section 6.4 without further notice other than as required
in Article VI hereof, without taking possession of the Subject Property, without
having a receiver appointed, and without taking any other action. Trustor hereby
irrevocably authorizes and directs the lessees under the Leases to rely upon and
comply with any notice or demand by Beneficiary for the payment by such lessees
directly to Beneficiary of any rental or other sums which may at any time become
due under the Leases, or for the performance of any of the lessees' undertakings
under the Leases, and the lessees shall have no right or duty to inquire as to
whether any Default has actually occurred or is then existing hereunder. Trustor
hereby relieves the lessees from any liability to Trustor by reason of relying
upon and complying with any such notice or demand by Beneficiary.
3.3 Effect of Assignment. The foregoing irrevocable Assignment shall not
cause Beneficiary to be: (a) a mortgagee in possession, (b) responsible or
liable for the control, care, management or repair of the Subject Property or
for performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; or (c)
responsible or liable for any waste committed on the Subject Property by the
lessees under any of the Leases or any other parties; for any dangerous or
defective condition of the Subject Property; or for any negligence in the
management, upkeep, repair or control of the Subject Property resulting in loss
or injury or death to any lessee, licensee, employee, invitee or other person.
Beneficiary shall not directly or indirectly be liable to Trustor or any other
person as a consequence of: (i) the exercise or failure to exercise any of the
rights, remedies or powers granted to Beneficiary hereunder; (ii) the failure or
refusal of Beneficiary to perform or discharge any obligation, duty or liability
of Trustor arising under the Leases.
3.4 Representations and Warranties. [Deleted]
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<PAGE>
3.5 Covenants. Trustor covenants and agrees at Trustor's sole cost and
expense to (a) perform the obligations of lessor contained in the Leases and
enforce by all available remedies performance by the lessees of the obligations
of the lessees contained in the Leases; (b) give Beneficiary prompt written
notice of any default which occurs with respect to any of the Leases, whether
the default be that of the lessee or of the lessor; (c) exercise Trustor's best
efforts to keep all portions of the Subject Property that are currently subject
to Leases leased at all times at rentals not less than the maximum rent
permitted under the regulatory agreements and other restrictions encumbering the
Subject Property; (d) deliver to Beneficiary fully executed, counterpart
original(s) of each and every Lease if requested to do so; and (e) execute and
record such additional assignments of any Lease or specific subordinations of
any Lease to this Reimbursement Deed of Trust, in form and substance acceptable
to Beneficiary, as Beneficiary may request. Trustor shall not, without
Beneficiary's prior written consent: (i) enter into any Leases after the date of
this Assignment other than for occupancy of portions of the Subject Property;
(ii) execute any other assignment relating to any of the Leases except to
construction loans and permanent loans and refinancings of those loans which
have been approved by Beneficiary or are permitted pursuant to the Agreement;
(iii) discount any rent or other sums due under the Leases or collect the same
in advance, other than to collect rent one (1) month in advance of the time when
it becomes due; (iv) terminate, modify or amend any of the terms of the Leases
or in any manner release or discharge the lessees from any obligations
thereunder, except in the ordinary course of business; or (v) subordinate or
agree to subordinate any of the Leases to any other deed of trust or encumbrance
except to construction loans and permanent loans which have been approved by
Beneficiary or are permitted pursuant to the Agreement. Any such attempted
action in violation of the provisions of this Section 3.5 shall be null and
void. Without in any way limiting the requirement of Beneficiary's consent
hereunder, any sums received by Trustor in consideration of any termination (or
the release or discharge of any lessee), modification or amendment of any Lease
shall be applied to reduce the outstanding Secured Obligations and any such sums
received by Trustor shall be held in trust by Trustor for such purpose.
3.6 Estoppel Certificates. Within thirty (30) days after request by
Beneficiary, Trustor shall deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying (if such be the case): (i) that the
foregoing assignment and the Leases are in full force and effect; (ii) the date
of each lessee's most recent payment of rent; (iii) that there are no defenses
or offsets outstanding, or stating those claimed by Trustor or lessees under the
foregoing assignment or the Leases, as the case may be; and (iv) any other
information reasonably requested by Beneficiary.
ARTICLE IV. SECURITY AGREEMENT,
FINANCING STATEMENT, AND FIXTURE FILING
4.1 Security Interest. Trustor hereby grants and assigns to Beneficiary as
of the recording date of this Deed Of Trust a first priority security interest,
to secure payment and performance of all of the Secured Obligations, in all of
Trustor's interest in the following described personal property in which Trustor
now or at any time hereafter has any interest ("Collateral"):
All goods, building and other materials, supplies, work in process,
equipment, machinery, fixtures, furniture, furnishings, signs and other
personal property, wherever situated, which are or are to be incorporated
into, used in connection with, or appropriated for use on all or any
Page 4 of 18
<PAGE>
part of the Subject Property (to the extent the same are not effectively
made a part of the Subject Property pursuant to Section 1 above), together
with all rents, issues, deposits and profits of the Subject Property (to
the extent, if any, they are not subject to Article III); all inventory,
accounts, cash receipts, deposit accounts, accounts receivable, contract
rights, general intangibles, chattel paper, instruments, documents, notes,
drafts, letters of credit, insurance policies, insurance and condemnation
awards and proceeds, any other rights to the payment of money, trade names,
trademarks and service marks arising from or related to the Subject
Property or any business now or hereafter conducted thereon by Trustor; all
permits, consents, approvals, licenses, authorizations and other rights
granted by, given by or obtained from, any governmental entity with respect
to the Subject Property; all deposits or other security now or hereafter
made with or given to utility companies by Trustor with respect to the
Subject Property; all advance payments of insurance premiums made by
Trustor with respect to the Subject Property; all plans, drawings and
specifications relating to the Subject Property, all loan funds held by
Beneficiary, whether or not disbursed; all funds deposited with Beneficiary
pursuant to any loan agreement, all reserves, deferred payments, deposits,
accounts, refunds, cost savings and payments of any kind related to the
Subject Property or any portion thereof, together with all replacements and
proceeds of, and additions and accessions to, any of the foregoing;
together with all books, records and files relating to any of the
foregoing; but, specifically excluding any personal property of any tenant
of Trustor whether or not such personal property may be deemed a fixture
under applicable law.
As to all of the above described personal property which is or which hereafter
becomes a "fixture" under applicable law, this Reimbursement Deed of Trust
constitutes a fixture filing under Section 9313, Section 9402(6), and all other
applicable sections of the California Uniform Commercial Code, as amended or
recodified from time to time, and is acknowledged and agreed to be a
"construction mortgage" under such Sections.
4.2 Representations and Warranties. Trustor represents and warrants that:
(a) Trustor has, or will have, good title to the Collateral; (b) Trustor has not
previously assigned or encumbered the Collateral, and no financing statement
covering any of the Collateral has been delivered to any other person or entity
except the Authority; and (c) Trustor's principal place of business is located
at the address shown in Section 7.11.
4.3 Rights of Beneficiary. In addition to Beneficiary's rights as a
"Secured Party" under the California Uniform Commercial Code, as amended or
recodified from time to time ("UCC"), Beneficiary may, but shall not be
obligated to, at any time without notice and at the expense of Trustor (a) give
notice to any person of Beneficiary's rights hereunder and enforce such rights
at law or in equity; (b) insure, protect, defend and preserve the Collateral or
any rights or interests of Beneficiary therein; (c) inspect the Collateral; and
(d) endorse, collect and receive any right to payment of money owing to Trustor
under or from the Collateral. Notwithstanding the above, in no event shall
Beneficiary be deemed to have accepted any property other than cash in
satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary
shall make an express written election of said remedy under UCC Section 9505, or
other applicable law.
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<PAGE>
4.4 Rights of Beneficiary on Default. Upon the occurrence of a Default
under this Reimbursement Deed of Trust, then in addition to all of Beneficiary's
tights as a "Secured Party" under the UCC or otherwise at law:
(a) Beneficiary may (i) upon written notice, require Trustor to
assemble any or all of the Collateral and make it available to Beneficiary
at a place designated by Beneficiary; (ii) without prior notice, enter upon
the Subject Property or other place where any of the Collateral may be
located and take possession of collect, sell, and dispose of any or all of
the Collateral, and store the same at locations acceptable to Beneficiary
at Trustor's expense; (iii) sell, assign and deliver at any place or in any
lawful manner all or any part of the Collateral and bid and become
purchaser at any such sales; and
(b) Beneficiary may, for the account of Trustor and at Trustor's
expense: (i) operate, use, consume, sell or dispose of the Collateral as
Beneficiary deems appropriate for the purpose of performing any or all of
the Secured Obligations; (ii) enter into any agreement, compromise, or
settlement, including insurance claims, which Beneficiary may deem
desirable or proper with respect to any of the Collateral; and (iii)
endorse and deliver evidences of title for, and receive, enforce and
collect by legal action or otherwise, all indebtedness and obligations now
or hereafter owing to Trustor in connection with or on account of any or
all of the Collateral.
Notwithstanding any other provision hereof, Beneficiary shall not be deemed
to have accepted any property other than cash in satisfaction of any obligation
of Trustor to Beneficiary unless Trustor shall make an express written election
of said remedy under UCC Section 9505, or other applicable law.
4.5 Possession and Use of Collateral. Except as otherwise provided in this
Section or the other Loan Documents (as defined in Section 6.2(h), below), so
long as no Default exists under this Reimbursement Deed of Trust or any of the
Loan Documents, Trustor may possess, use, move, transfer or dispose of any of
the Collateral in the ordinary course of Trustor's business and in accordance
with the Loan Documents.
4.6 No Personal Liability. In the event of any default under the terms of
the Note or this Reimbursement Deed of Trust, the sole recourse of the
Beneficiary for any and all such defaults shall be by judicial foreclosure or by
the exercise of the trustee's power of sale, and the Trustor shall not be
personally liable for the payment of the Note or for the payment of any
deficiency established after judicial foreclosure or trustee's sale; provided,
however, that the foregoing shall not in any way affect any rights the
Beneficiary may have (as a secured party or otherwise) hereunder or under the
Agreement or this Reimbursement Deed of Trust to (a) recover directly from
Trustor any amounts secured by this Reimbursement Deed of Trust, or any funds,
damages or costs (including without limitation reasonable attorneys' fees and
costs) incurred by Agency as a result of fraud, misrepresentation or waste; or
(b) recover directly from the Trustor any condemnation or insurance proceeds, or
other similar funds or payments attributable to the Site which under the terms
of this Reimbursement Deed of Trust should have been paid to the Beneficiary,
and any costs and expenses incurred by the Beneficiary in connection with (a) or
(b) above (including without limitation reasonable attorneys' fees and costs).
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<PAGE>
ARTICLE V. RIGHTS AND DUTIES OF THE PARTIES
5.1 Title. Trustor represents and warrants that, except as disclosed to
Beneficiary in writing which refers to this warranty, Trustor lawfully holds and
possesses fee simple title to the Subject Property without limitation on the
right to encumber, and that this Reimbursement Deed of Trust is a second lien on
the Subject Property and on the Collateral.
5.2 Taxes and Assessments. Subject to Trustor's rights to contest payment
of taxes, Trustor shall pay prior to delinquency all taxes, assessments, levies
and charges imposed by any public or quasi-public authority or utility company
which are or which may become a lien upon or cause a loss in value of the
Subject Property or any interest therein. Trustor shall also pay prior to
delinquency all taxes, assessments, levies and charges imposed by any public
authority upon Beneficiary by reason of its interest in any Secured Obligation
or in the Subject Property, or by reason of any payment made to Beneficiary
pursuant to any Secured Obligation, provided, however, Trustor shall have no
obligation to pay taxes which may be imposed from time to time upon Beneficiary
and which are measured by and imposed upon Beneficiary's net income.
5.3 [Reserved]
5.4 Performance of Secured Obligations. Trustor shall promptly pay and
perform each Secured Obligation when due.
5.5 Liens, Encumbrances and Charges. Trustor shall immediately discharge
any lien not approved by Beneficiary in writing that has or may attain priority
over this Reimbursement Deed of Trust. Trustor shall pay when due all
obligations secured by or reducible to liens and encumbrances which shall now or
hereafter encumber or appear to encumber all or any part of the Subject Property
or any interest therein, whether senior or subordinate hereto.
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<PAGE>
5.6 Damages; Insurance and Condemnation Proceeds.
(a) The following (whether now existing or hereafter arising) are all
absolutely and irrevocably assigned by Trustor to Beneficiary and, at the
request of Beneficiary, shall be paid directly to Beneficiary: (i) all
awards of damages and all other compensation payable directly or indirectly
by reason of a condemnation or proposed condemnation for public or private
use affecting all or any part of, or any interest in, the Subject Property;
(ii) all other claims and awards for damages to, or decrease in value of,
all or any part of, or any interest in, the Subject Property; (iii) all
proceeds of any insurance policies payable by reason of loss sustained to
all or any part of the Subject Property; and (iv) all interest which may
accrue on any of the foregoing. Subject to applicable law, and without
regard to any requirement contained in Section 5.7(d), Beneficiary may at
its discretion apply all or any of the proceeds it receives to its expenses
in settling, prosecuting or defending any claim and may apply the balance
to the Secured Obligations in any order, and/or Beneficiary may release all
or any part of the proceeds to Trustor upon any conditions Beneficiary may
impose. Beneficiary may commence, appear in, defend or prosecute any
assigned claim or action and may adjust, compromise, settle and collect all
claims and awards assigned to Beneficiary; provided. however, that if
Beneficiary fails to pursue any such claim, Beneficiary shall assign or
permit Trustor to pursue such claim upon Trustor's request, and in no event
shall Beneficiary be responsible for any failure to collect any claim or
award, regardless of the cause of the failure.
(b) Beneficiary shall permit insurance or condemnation proceeds held
by Beneficiary to be used for repair or restoration but may condition such
application upon reasonable conditions, including, without limitation: (i)
the deposit with Beneficiary of such additional funds which Beneficiary
determines are needed to pay all cost of the repair or restoration,
(including, without limitation, taxes, financing charges, insurance and
rent during the repair period); (ii) the establishment of an arrangement
for lien releases and disbursement of funds acceptable to Beneficiary;
(iii) the delivery to Beneficiary of plans and specifications for the work,
a contract for the work signed by a contractor acceptable to Beneficiary, a
cost breakdown for the work and a payment and performance bond for the
work, all of which shall be acceptable to Beneficiary; and (iv) the
delivery to Beneficiary of evidence acceptable to Beneficiary (aa) that
after completion of the work the income from the Subject Property will be
sufficient to pay all expenses and debt service for the Subject Property;
(b) of the continuation of Leases acceptable to and required by
Beneficiary; (cc) that upon completion of the work, the size, capacity and
total value of the Subject Property will be at least as great as it was
before the damage or condemnation occurred, subject to City laws,
ordinances, regulations and standards then in effect; (d) that there has
been no material adverse change in the financial condition or credit of
Trustor since the date of this Reimbursement Deed of Trust; and (e) the
satisfaction of any additional conditions that Beneficiary may reasonably
establish to protect its security. Trustor hereby acknowledges that the
conditions described above are reasonable.
5.7 Maintenance and Preservation of the Subject Property. Trustor
covenants: (a) to insure the Subject Property against such risks as Beneficiary
may require and, at Beneficiary's request, to provide evidence of such insurance
to Beneficiaries, and to comply with the requirements of any insurance companies
insuring the Subject Property; (b) to keep the Subject Property in good
condition and repair, (c) except with Beneficiary's prior written consent, not
to remove or demolish the Subject Property or any part thereof; (d) to complete
or restore promptly and in good and workmanlike manner
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<PAGE>
the Subject Property, or any part thereof which may be damaged or destroyed,
without regard to whether Beneficiary elects to require that insurance proceeds
be used to reduce the Secured Obligations as provided in Section 5.6, except to
the extent that the damage or destruction is due to a casualty which Trustor is
not required to insure against and in fact does not insure against, or to the
extent that insurance proceeds are not made available to Trustor; (e) to comply
with all laws, ordinances, regulations and standards, and all covenants,
conditions, restrictions and equitable servitudes, whether public or private, of
every kind and character which affect the Subject Property and pertain to acts
committed or conditions existing thereon, including, without limitation, any
work, alteration, improvement or demolition mandated by such laws, covenants or
requirements; (f) not to commit or permit waste of the Subject Property; and (g)
to do all other acts which from the character or use of the Subject Property may
be reasonably necessary to maintain and preserve its value.
5.8 Defense and Notice of Losses, Claims and Actions. At Trustor's sole
expense, Trustor shall protect, preserve and defend the Subject Property and
title to and right of possession of the Subject Property, the security hereof
and the rights and powers of Beneficiary and Trustee hereunder against all
adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in
writing of the assertion of any claim of the filing of any action or proceeding,
of the occurrence of any damage to the Subject Property and of any condemnation
offer or action.
5.9 Acceptance of Trust; Powers and Duties of Trustee. Trustee accepts this
trust when this Reimbursement Deed of Trust is recorded. From time to time upon
written request of Beneficiary and presentation of this Reimbursement Deed of
Trust or a certified copy thereof for endorsement, and without affecting the
personal liability of any person for payment of any indebtedness or performance
of any obligations secured hereby, Trustee may, without liability therefor and
without notice reconvey all or any part of the Subject Property. Except as may
be required by applicable law, Trustee or Beneficiary may from time to time
apply to any court of competent jurisdiction for aid and direction in the
execution of the trust hereunder and the enforcement of the rights and remedies
available hereunder, and may obtain orders or decrees directing or confirming or
approving acts in the execution of said trust and the enforcement of said
remedies. Trustee has no obligation to notify any party of any pending sale or
any action or proceeding, including, without limitation, actions in which
Trustor, Beneficiary or Trustee shall be a party unless held or commenced and
maintained by Trustee under this Reimbursement Deed of Trust. Trustee shall not
be obligated to perform any act required of it hereunder unless the performance
of the act is requested in writing and Trustee is reasonably indemnified and
held harmless against loss, cost, liability or expense.
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<PAGE>
5.10 Compensation; Exculpation; Indemnification.
(a) Trustor shall pay Trustee's fees and reimburse Trustee for
expenses in the administration of this trust, including attorneys' fees
Trustor shall pay to Beneficiary reasonable compensation for services
rendered concerning this Reimbursement Deed of Trust, including without
limit any statement of amounts owing under any Secured Obligation.
Beneficiary shall not directly or indirectly be liable to Trustor or any
other person as a consequence of (i) the exercise of the rights, remedies
or powers granted to Beneficiary in this Reimbursement Deed of Trust; (ii)
the failure or refusal of Beneficiary to perform or discharge any
obligation or liability of Trustor under any agreement related to the
Subject Property or under this Reimbursement Deed of Trust; or (iii) any
loss sustained by Trustor or any third party resulting from Beneficiary's
failure to lease the Subject Property after a Default or from any other act
or omission of Beneficiary in managing the Subject Property after a Default
unless the loss is caused by the gross negligence or willful misconduct of
Beneficiary and no such liability shall be asserted against or imposed upon
Beneficiary, and all such liability is hereby expressly waived and released
by Trustor.
(b) Trustor indemnifies Trustee and Beneficiary against, and holds
Trustee and Beneficiary harmless from, all losses, damages, liabilities,
claims, causes of action, judgments, court costs, attorneys' fees and other
legal expenses, cost of evidence of title, cost of evidence of value, and
other expenses which either may suffer or incur (i) by reason of this
Reimbursement Deed of Trust; (ii) by reason of the execution of this trust
or in performance of any act required or permitted hereunder or by law; or
(iii) as a result of any failure of Trustor to perform Trustor's
obligations, except to the extent such matters which are caused as a result
of the gross negligence or willful misconduct of Beneficiary or Trustee.
The above obligation of Trustor to indemnify and hold harmless Trustee and
Beneficiary shall survive the release and cancellation of the Secured
Obligations and the release and reconveyance or partial release and
reconveyance of this Reimbursement Deed of Trust.
(c) Trustor shall pay all amounts and indebtedness arising under this
Section 5.10 immediately upon demand by Trustee or Beneficiary together
with interest thereon from the date the indebtedness arises at the rate of
interest applicable to the principal balance of the Note as specified
therein.
5.11 Substitution of Trustees. From time to time, by a writing, signed and
acknowledged by Beneficiary and recorded in the Office of the Recorder of the
County in which the Subject Property is situated, Beneficiary may appoint
another trustee to act in the place and stead of Trustee or any successor. Such
writing shall set forth any information required by law. The recordation of such
instrument of substitution shall discharge Trustee herein named and shall
appoint the new trustee as the trustee hereunder with the same effect as if
originally named Trustee herein. A writing recorded pursuant to the provisions
of this Section 5.11 shall be conclusive proof of the proper substitution of
such new Trustee.
5.12 Due on Sale or Encumbrance. Absent consent required pursuant to the
terms of the Loan Documents, if the Subject Property or any interest therein
shall be sold, transferred (including, without limitation, through sale or
transfer of a majority or controlling interest of the corporate stock or general
partnership interests of Trustor), mortgaged, assigned, further encumbered or
leased, whether
Page 10 of 18
<PAGE>
directly or indirectly, whether voluntarily, involuntarily or by operation of
law, without the prior written consent of Beneficiary, or as otherwise permitted
pursuant to the Agreement, then Beneficiary, in its sole discretion, may declare
all Secured Obligations immediately due and payable.
5.13 Releases, Extensions, Modifications and Additional Security. Without
notice to or the consent, approval or agreement of any persons or entities
having any interest at any time in the Subject Property or in any manner
obligated under the Secured Obligations ("Interested Parties"), Beneficiary may,
from time to time, release any person or entity from liability for the payment
or performance of any Secured Obligation, take any action or make any agreement
extending the maturity or otherwise altering the terms or increasing the amount
of any Secured Obligation, or accept additional security or release all or a
portion of the Subject Property and other security for the Secured Obligations.
None of the foregoing actions shall release or reduce the personal liability of
any of said Interested Parties, or release or impair the priority of the lien of
this Reimbursement Deed of Trust upon the Subject Property.
5.14 Reconveyance. Upon Beneficiary's written request, and upon surrender
to Trustee for cancellation of this Reimbursement Deed of Trust or a certified
copy thereof and any note, instrument, or instruments setting forth all
obligations secured hereby, Trustee shall reconvey, without warranty, the
Subject Property or that portion thereof then held hereunder. To the extent
permitted by law, the reconveyance may describe the grantee as "the person or
persons legally entitled thereto" and the recitals of any matters or facts in
any reconveyance executed hereunder shall be conclusive proof of the
truthfulness thereof. Neither Beneficiary nor Trustee shall have any duty to
determine the rights of persons claiming to be rightful grantees of any
reconveyance. When the Subject Property has been fully reconveyed, the last such
reconveyance shall operate as a reassignment of all future rents, issues and
profits of the Subject Property to the person or persons legally entitled
thereto.
5.15 Subrogation. Beneficiary shall be subrogated to the lien of all
encumbrances, whether released of record or not, paid in whole or in part by
Beneficiary pursuant to this Reimbursement Deed of Trust or by the proceeds of
any loan secured by this Reimbursement Deed of Trust.
5.16 Right of Inspection. Beneficiary, its agents and employees, may enter
the Subject Property at any reasonable time, upon reasonable advance notice
except in cases of emergency, for the purpose of inspecting the Subject Property
and ascertaining Trustor's compliance with the terms hereof
ARTICLE VI. DEFAULT PROVISIONS
6.1 Default. For all purposes hereof the term "Default" shall mean (a) at
Beneficiary's option, the failure of Trustor to make any payment of principal or
interest on the Note or to pay any other amount due hereunder or under the Note
when the same is due and payable, whether at maturity, by acceleration or
otherwise; (b) the failure of Trustor to perform any non-monetary obligation
hereunder, or the failure to be true of any representation or warranty of
Trustor contained herein and the continuance of such failure for ten (10) days
after notice, or within any longer grace period, if any, allowed in the
Agreement for such failure, or (c) the existence of any Default or Event of
Default as defined in the Agreement.
Page 11 of 18
<PAGE>
6.2 Rights and Remedies. At any time after Default, Beneficiary and Trustee
shall each have all the following rights and remedies:
(a) With or without notice, to declare all Secured Obligations
immediately due and payable;
(b) With or without notice, and without releasing Trustor from any
Secured Obligation, and without becoming a mortgagee in possession, to cure
any breach or Default of Trustor and, in connection therewith, to enter
upon the Subject Property and do such acts and things as Beneficiary or
Trustee deem necessary or desirable to protect the security hereof,
including, without limitation: (i) to appear in and defend any action or
proceeding purporting to affect the security of this Reimbursement Deed of
Trust or the rights or powers of Beneficiary or Trustee under this
Reimbursement Deed of Trust; (ii) to pay, purchase, contest or compromise
any encumbrance, charge, lien or claim of lien which, in the sole judgment
of either Beneficiary or Trustee, is or may be senior in priority to this
Reimbursement Deed of Trust, the judgment of Beneficiary or Trustee being
conclusive as between the parties hereto; (iii) to obtain insurance, (iv)
to pay any premiums or charges with respect to insurance required to be
carried under this Reimbursement Deed of Trust; or (v) to employ counsel,
accountants, contractors and other appropriate persons.
(c) To commence and maintain an action or actions in any court of
competent jurisdiction to foreclose this instrument as a mortgage or to
obtain specific enforcement of the covenants of Trustor hereunder, and
Trustor agrees that such covenants shall be specifically enforceable by
injunction or any other appropriate equitable remedy and that for the
purposes of any suit brought under this subparagraph, Trustor waives the
defense of laches and any applicable statute of limitations;
(d) To apply to a court of competent jurisdiction for and obtain
appointment of a receiver of the Subject Property as a matter of strict
right and without regard to the adequacy of the security for the repayment
of the Secured Obligations, the existence of a declaration that the Secured
Obligations are immediately due and payable, or the filing of a notice of
default, and Trustor hereby consents to such appointment;
(e) To enter upon, possess, manage and operate the Subject Property or
any part thereof, to take and possess all documents, books, records, papers
and accounts of Trustor or the then owner of the Subject Property, to make,
terminate, enforce or modify the Leases of the Subject Property upon such
terms and conditions as Beneficiary deems proper, to make repairs,
alterations and improvements to the Subject Property as necessary, in
Trustee's or Beneficiary's sole judgment, to protect or enhance the
security hereof.
(f) To execute a written notice of such Default and of its election to
cause the Subject Property to be sold to satisfy the Secured Obligations.
As a condition precedent to any such sale, Trustee shall give and record
such notice as the law then requires. When the minimum period of time
required by law after such notice has elapsed, Trustee, without notice to
or demand upon Trustor except as required by law, shall sell the Subject
Property at the time and place of sale fixed by it in the notice of sale,
at one or several sales, either as a whole or in separate parcels and in
such manner and order, all as Beneficiary in its sole discretion may
determine, at public auction to the highest bidder for
Page 12 of 18
<PAGE>
cash, in lawful money of the United States, payable at time of sale.
Neither Trustor nor any other person or entity other than Beneficiary shall
have the right to direct the order in which the Subject Property is sold.
Subject to requirements and limits imposed by law, Trustee may from time to
time postpone sale of all or any portion of the Subject Property by public
announcement at such time and place of sale. Trustee shall deliver to the
purchaser at such sale a deed conveying the Subject Property or portion
thereof so sold, but without any covenant or warranty, express or implied.
The recitals in the deed of any matters or facts shall be conclusive proof
of the truthfulness thereof. Any person, including Trustee, Trustor or
Beneficiary may purchase at the sale;
(g) To resort to and realize upon the security hereunder and any other
security now or later held by Beneficiary concurrently or successively and
in one or several consolidated or independent judicial actions or lawfully
taken non-judicial proceedings, or both, and to apply the proceeds received
upon the Secured Obligations all in such order and manner as Trustee and
Beneficiary, or either of them, determine in their sole discretion.
(h) To pursue any other rights and remedies available to Beneficiary
or Trustee at law, in equity, or under this Reimbursement Deed of Trust,
the Note, or any other agreement, document, or instrument executed in
connection therewith (collectively, the "Loan Documents").
(i) Upon sale of the Subject Property at any judicial or non-judicial
foreclosure, Beneficiary may credit bid (as determined by Beneficiary in
its sole and absolute discretion) all or any portion of the Secured
Obligations. In determining such credit bid, Beneficiary may, but is not
obligated to, take into account all or any of the following: (i) appraisals
of the Subject Property as such appraisals may be discounted or adjusted by
Beneficiary in its sole and absolute underwriting discretion; (ii) expenses
and costs incurred by Beneficiary with respect to the Subject Property
prior to foreclosure; (iii) expenses and costs which Beneficiary
anticipates will be incurred with respect to the Subject Property after
foreclosure, but prior to resale, including, without limitation, costs of
structural reports and other due diligence, costs to carry the Subject
Property prior to resale, costs of resale (e.g. Agency's, attorneys' fees,
and taxes), costs of any hazardous materials clean-up and monitoring, costs
of deferred maintenance, repair, refurbishment and retrofit, costs of
defending or settling litigation affecting the Subject Property, and lost
opportunity costs (if any), including the time value of money during any
anticipated holding period by Beneficiary; (iv) declining trends in real
property values generally and with respect to properties similar to the
Subject Property; (v) anticipated discounts upon resale of the Subject
Property as a distressed or foreclosed property; (vi) the fact of
additional collateral (if any), for the Secured Obligations; and (vii) such
other factors or matters that Beneficiary (in its sole and absolute
discretion) deems appropriate. In regard to the above, Trustor acknowledges
and agrees that: (w) Beneficiary is not required to use any or all of the
foregoing factors to determine the amount of its credit bid; (x) this
Section does not impose upon Beneficiary any additional obligations that
are not imposed by law at the time the credit bid is made; (y) the amount
of Beneficiary's credit bid need not have any relation to any loan-to-value
ratios specified in the Loan Documents or previously discussed between
Trustor and Beneficiary; and (z) Beneficiary's credit bid may be (at
Beneficiary's sole and absolute discretion) higher or lower than any
appraised value of the Subject Property. Nothing herein shall diminish or
affect Trustor's right to a fair value determination in accordance with the
provisions of Code of Civil Procedure Section 5802.
Page 13 of 18
<PAGE>
6.3 Application of Foreclosure Sale Proceeds. After deducting all costs,
fees and expenses of Trustee, and of this trust, including, without limitation,
cost of evidence of title and attorneys' fees in connection with sale and costs
and expenses of sale and of any judicial proceeding wherein such sale may be
made, Trustee shall apply all proceeds of any foreclosure sale: (i) to payment
of all sums expended by Beneficiary under the terms hereof and not then repaid,
with accrued interest at the rate of interest specified in the Note to be
applicable on or after maturity or acceleration of the Note; (ii) to payment of
all other Secured Obligations; and (iii) the remainder, if any, to the person or
persons legally entitled thereto.
6.4 Application of Other Sums. All sums received by Beneficiary under
Section 6.2 or Section 3.2, less all costs and expenses incurred by Beneficiary
or any receiver under Section 6.2 or Section 3.2, including, without limitation,
attorneys' fees, shall be applied in payment of the Secured Obligations in such
order as Beneficiary shall determine in its sole discretion; provided, however,
Beneficiary shall have no liability for funds not actually received by
Beneficiary.
6.5 No Cure or Waiver. Neither Beneficiary's nor Trustee's nor any
receiver's entry upon and taking possession of all or any part of the Subject
Property, nor any collection of rents, issues, profits, insurance proceeds,
condemnation proceeds or damages, other security or proceeds of other security,
or other sums, nor the application of any collected sum to any Secured
Obligation, nor the exercise or failure to exercise of any other right or remedy
by Beneficiary or Trustee or any receiver shall cure or waive any breach,
Default or notice of default under this Reimbursement Deed of Trust, or nullify
the effect of any notice of default or sale (unless all Secured Obligations then
due have been paid and performed and Trustor has cured all other defaults), or
impair the status of the security, or prejudice Beneficiary or Trustee in the
exercise of any right or remedy, or be construed as an affirmation by
Beneficiary of any tenancy, lease or option or a subordination of the lien of
this Reimbursement Deed of Trust.
6.6 Payment of Costs, Expenses and Attorney's Fees. Trustor agrees to pay
to Beneficiary immediately and without demand all costs and expenses incurred by
Trustee and Beneficiary pursuant to subparagraphs (a) through (i) inclusive of
Section 6.2 (including, without limitation, court costs and attorneys' fees,
whether incurred in litigation or not) with interest from the date of
expenditure until said sums have been paid at the rate of interest then
applicable to the principal balance of the Note as specified therein. In
addition, Trustor shall pay to Trustee all Trustee's fees hereunder and shall
reimburse Trustee for all expenses incurred in the administration of this trust,
including, without limitation, any attorneys' fees.
6.7 Non-Recourse Obligation. In the event of any default under the terms of
the Note or this Reimbursement Deed of Trust, the sole recourse of Beneficiary
for any and all such defaults shall be by judicial foreclosure or by the
exercise of the trustee's power of sale, and Trustor shall not be personally
liable for the payment of the Note or for the payment of any deficiency
established after judicial foreclosure or trustee's sale; provided, however,
that the foregoing shall not in any way affect any rights Beneficiary may have
(as a secured party or otherwise) hereunder or under the Note to (a) recover
directly from Trustor any amounts secured by this Reimbursement Deed of Trust,
or any funds, damages or costs (including without limitation reasonable
attorneys' fees and costs) incurred by Beneficiary as a result of fraud,
misrepresentation or waste, or (b) recover directly from Trustor any
condemnation or insurance proceeds, or other similar funds or payments
attributable to the Subject
Page 14 of 18
<PAGE>
Property which under the terms of this Reimbursement Deed of Trust should have
been paid to Beneficiary, and any costs and expenses incurred by Beneficiary in
connection with (a) or (b) above (including without limitation reasonable
attorneys fees and costs).
ARTICLE VII. MISCELLANEOUS PROVISIONS
7.1 Additional Provisions. The Loan Documents contain or incorporate by
reference the entire agreement of the parties with respect to matters
contemplated herein and supersede all prior negotiations. The Loan Documents
grant further rights to Beneficiary and contain further agreements and
affirmative and negative covenants by Trustor which apply to this Reimbursement
Deed of Trust and to the Subject Property and such further rights and agreements
are incorporated herein by this reference.
7.2 Merger. No merger shall occur as a result of Beneficiary's acquiring
any other estate in, or any other lien on, the Subject Property unless
Beneficiary consents to a merger in writing.
7.3 Obligations of Trustor, Joint and Several. If more than one person has
executed this Reimbursement Deed of Trust as "Trustor," the obligations of all
such persons hereunder shall be joint and several.
7.4 Recourse to Separate Property. Any married person who executes this
Reimbursement Deed of Trust as a Trustor agrees that any money judgment which
Beneficiary or Trustee obtains pursuant to the terms of this Reimbursement Deed
of Trust or any other obligation of that married person secured by this
Reimbursement Deed of Trust may be collected by execution upon that person's
separate property, and any community property of which that person is a manager.
7.5 Waiver of Marshaling Rights. Trustor, for itself and for all parties
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Subject Property, hereby waives all rights to have the
Subject Property and/or any other property, including, without limitation, the
Collateral, which is now or later may be security for any Secured Obligation
("Other Property") marshaled upon any foreclosure of this Reimbursement Deed of
Trust or on a foreclosure of any other security for any of the Secured
Obligations. Beneficiary shall have the right to sell, and any court in which
foreclosure proceedings may be brought shall have the right to order a sale of
the Subject Property and any or all of the Collateral or Other Property as a
whole or in separate parcels, in any order that Beneficiary may designate.
7.6 Rules of Construction. When the identity of the parties or other
circumstances make it appropriate the masculine gender includes the feminine
and/or neuter, and the singular number includes the plural. The term "Subject
Property" means all and any part of the Subject Property and any interest in the
Subject Property.
7.7 Successors in Interest. The terms, covenants, and conditions herein
contained shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto; provided, however, that this
Section does not waive or modify the provisions of Section 5.12.
Page 15 of 18
<PAGE>
7.8 Execution In Counterparts. This Reimbursement Deed of Trust may be
executed in any number of counterparts, each of which, when executed and
delivered to Beneficiary, will be deemed to be an original and all of which,
taken together, will be deemed to be one and the same instrument.
7.9 California Law. This Reimbursement Deed of Trust shall be construed in
accordance with the laws of the State of California, except to the extent that
Federal laws preempt the laws of the State of California.
7.10 Incorporation. Exhibit A is incorporated into this Reimbursement Deed
of Trust by this reference.
7.11 Notices. All notices or other communications required or permitted to
be given pursuant to the provisions of this Reimbursement Deed of Trust shall be
in writing and shall be considered as properly given if delivered personally or
sent by first class U. S. mail, postage prepaid, except that notice of a Default
may be sent by certified mail, return receipt requested, or by overnight express
mail or by commercial courier service, charges prepaid. Notices so sent shall be
effective three (3) days after mailing, if mailed by first class mail, and
otherwise upon receipt at the addresses set forth below. For purposes of notice,
the addresses of the parties shall be:
Trustor: Calexico Tissue Company LLC
135 Engineers Road
Hauppauge, New York 11788
With copy to: Mandel and Resnik, P. C.
220 East 42nd, Street
New York, New York 10017
Attn: Nicholas J Kaiser, Esq.
Trustee: _____________________________
_____________________________
_____________________________
_____________________________
Beneficiary: Community Redevelopment Agency of the
City of Calexico
608 Heber Avenue
Calexico, CA 92231
its address for notice hereunder to any other location within the continental
United States by the giving of thirty (30) days notice to the other party in the
manner set forth hereinabove. Trustor shall forward to Beneficiary, without
delay, any notices, letters or other communications delivered to the Subject
Property or to Trustor naming Beneficiary, "Lender" or any similar designation
as addressee, or which could reasonably be deemed to affect the ability of
Trustor to perform its obligations to Beneficiary under the Note.
Page 16 of 18
<PAGE>
7.12 Waiver of Set Off Rights. Trustor hereby waives all rights to set off,
against any amount owed by Trustor under the Loan Documents, any claims Trustor
may have against Beneficiary, including, without limitation, the rights afforded
by California Code of Civil Procedure Section 431.70.
7.13 Trustor's Request for Notice of Default and Notice of Sale. Trustor
hereby requests that a copy of any notice of default or notice of sale under
this deed of trust be mailed to trustor at the address set forth in section 7.
11 of this deed of trust.
IN WITNESS WHEREOF, Trustor has executed this Reimbursement Deed of Trust
as of the day and year set forth above.
CALEXICO TISSUE COMPANY LLC, a New
York limited liability company
By: /s/ Mehdi Gabayzadeh
--------------------------------
Mehdi Gabayzadeh - Manager
Page 17 of 18
<PAGE>
CERTIFICATE OF ACCEPTANCE
This is to certify that the interest in real property conveyed under the
foregoing to the Community Redevelopment Agency of the City of Calexico, a
public body, corporate and politic, is hereby accepted by the undersigned
officer or agent on behalf of the Board of the Community Redevelopment Agency of
the City of Calexico, pursuant to authority conferred by resolution of said
Board adopted on______, 199_, and the grantee consents to recordation thereof by
its duly authorized officer.
COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF CALEXICO
Dated:________________, 199__
By:
-----------------------------
ATTEST:
- ------------------------------
Secretary
Page 18 of 18
AGREEMENT TO SUPPLY SAND & GRAVEL IN PLACE
Agreement entered into as of the 30th day of October, 1997, between JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation, having its
principal place of business at 99 High Street, Boston, Massachusetts 02117
(hereinafter referred to as "Seller"), and CROWN PAPER CO., a Virginia
corporation having its principal place of business at 300 Lakeside Drive,
Oakland, California 94612-3592 (hereinafter referred to as "Buyer").
WHEREAS, Buyer desires to obtain a long-term supply of sand and gravel for use
at its landfill in Success, New Hampshire, where it disposes of wastewater
treatment plant sludge from its Berlin pulp mill and Gorham paper mill, as well
as for other uses;
WHEREAS, Seller has purchased from Buyer, pursuant to a Timberland Acquisition
Agreement dated as of October 21, 1997, the land in Success, New Hampshire, from
which Buyer has heretofore obtained the sand and gravel needed for its landfill;
and
WHEREAS, Buyer and Seller desire to enter into a long-term agreement under which
Seller will supply Buyer with sand and gravel from Seller's newly acquired land
in Success, New Hampshire,
NOW THEREFORE, for and in consideration of the mutual promises and benefits
herein contained, Buyer and Seller agree to the purchase and sale of sand and
gravel in accordance with the terms and subject to the conditions set forth
herein.
1. MATERIALS SOLD
Seller agrees to supply and sell sand and gravel to Buyer, on the terms and
conditions set forth in this agreement, in, on, and under the following
described land in the unincorporated Town
<PAGE>
of Success, Coos County, New Hampshire, described more fully in Exhibit A hereto
(the "Subject Properties").
2. BUYER'S EXCLUSIVE RIGHTS: SELLER'S RESERVED RIGHTS
Buyer shall have the exclusive right to enter on the Subject Properties at
any and all times during the term of this agreement to remove the sand and
gravel for Buyer's use and not for resale, in accordance herewith. Seller
reserves to itself the right to go on and use the Subject Properties, for any
purpose, without unreasonable interference with the sand and gravel operations
of Buyer. However, Seller shall not remove sand and gravel from the Subject
Properties except for use in operating and managing timberlands owned by Seller
in the Town of Success and contiguous towns. Seller shall not sell, or grant,
lease, or license any rights to remove, sand and gavel from the Subject
Properties to any person other than Buyer.
3. TERM AND TERMINATION
(a) Initial Term and Automatic Extension. The initial term of this
Agreement shall be deemed to have commenced as of the effective date of this
Agreement as set forth in the first paragraph on the first page of this
Agreement (the "Effective Date") and shall continue for a period of twelve (12)
years from the Effective Date of this Agreement and shall be automatically
extended for successive terms of three years unless written notice is given by
either party of such party's intent to terminate this Agreement at least
thirty-three months prior to the end of the term (including any extension
thereof). This Agreement may be terminated prior to the end of the term (or any
extension thereof) in accordance with the provisions of Sections 3(b) and 3(c).
(b) Termination by Buyer. Buyer may terminate this Agreement upon one
hundred twenty (120) days notice to Seller.
-2-
<PAGE>
(c) Termination by Either Party. This Agreement may be terminated by either
party upon or after the occurrence of any of the following events;
(i) the failure by the other party to make any payment due hereunder
within ten (10) days after receipt of written demand therefor;
(ii) a breach by the other party of any of the material terms or
conditions of this Agreement which is not cured within ninety (90) days
after receipt of written notification thereof, provided, however, that the
ninety-day cure period shall be extended to account for any period during
which cure is made impossible or impractical by seasonal or weather
conditions;
(iii) the depletion of sand and gravel reserves on the Subject
Properties;
(iv) if buyer sells its Berlin pulp mill or Gorham paper mill and the
purchaser of such sold mill does not accept assignment of this Agreement
within thirty (30) days of such sale;
(v) the entry of an "Order for Relief" naming the other party as a
"Debtor" under Title 11 of the United States Code or upon the entry of a
decree or order by a court having competent jurisdiction in respect to any
petition filed or action respecting a party directly involved in a
reorganization, arrangement, creditors composition, readjustment,
liquidation, dissolution, bankruptcy or similar relief under any other
present or future statute, law or regulation, whether or not resulting in
the appointment of a receiver, liquidator, assignee, trustee, custodian, or
other similar official, and the continuation of any such decree or order is
unstayed and in effect for a period of ninety (90) consecutive days; or
-3-
<PAGE>
(vi) the making by the other party of an assignment for the benefit of
creditors, or the admission by such party in writing of its inability to
pay its debts generally as they become due, or the taking of action by such
party in furtherance of any such action.
4. PRICING; PAYMENT; MINIMUM QUANTITIES.
(a). Buyer agrees to pay the following initial prices for sand and gravel
removed from the Subject Properties:
Sand $ 1.00 per cubic yard
Gravel $ 2.25 per cubic yard
Cubic yard quantities shall be calculated based upon the number of
truckloads of sand and gravel removed from the Subject Properties multiplied by
the rated cubic yard capacity of the dump body of each truckload hauled away. No
payment is due for sand and gravel stockpiled on the Subject Properties until
such stockpiled material is hauled away and removed from the Subject Properties.
Within 30 days of the end of every month during which Buyer has removed sand or
gravel from the Subject Properties, Buyer shall submit to Seller a report
detailing the daily quantities of sand and gravel removed, accompanied by
payment for such quantities.
(b) Prices for sand and gravel will be subject to adjustment on January 1,
2000, and on January 1 of every second year thereafter (the "price adjustment
dates"). Thirty (30) days prior to each price adjustment date, Buyer and Seller
shall negotiate in good faith and according to commercially reasonable standards
in order to agree upon appropriate price adjustments, if any. If Buyer and
Seller are unable to agree upon price adjustments prior to a price adjustment
date, this Agreement shall nonetheless remain in full force and effect, and
Buyer shall continue to pay for purchases after such price adjustment date based
upon the prices in effect immediately prior to
-4-
<PAGE>
such price adjustment date, with Buyer or Seller, as appropriate, making a
subsequent and retroactive adjustment (payment or credit) for such purchases
within thirty (30) days of the date on which new prices are determined. If Buyer
and Seller have not agreed to price adjustments within sixty (60) days after a
price adjustment date, the adjusted prices are to be determined as follows:
Buyer and Seller shall each name a competent appraiser within seven (7) days,
and the two appraisers shall select a third within fourteen (14) days, and the
three appraisers shall determine fair and reasonable prices within twenty-one
(21) days of the selection of the third appraiser. Prices agreed upon by a
majority of the appraisers shall be accepted as final by Buyer and Seller.
(c) Buyer agrees to purchase during each calendar year during the term
hereof a minimum quantity of twenty thousand (20,000) cubic yards of sand and/or
gravel (the "annual minimum"). For example, the annual minimum will be met if
Buyer purchases during a calendar year any combination of sand and/or gravel
totaling twenty thousand cubic yards, such as twelve thousand cubic yards of
sand and eight thousand yards of gravel. The amount by which Buyer's purchases
of sand and gravel in a given year fall short of the annual minimum shall be
referred to as the "shortfall" for such year, which shall be referred to as a
"shortfall year." To determine the effect, if any, of a shortfall, quantities of
sand and gravel purchased in excess of the annual minimum ("excess purchases")
in the year immediately before and in the year immediately after a shortfall
year shall be added to the actual purchases in the shortfall year, and if the
total of such excess purchases plus the actual purchases in the shortfall year
exceed the annual minimum, then there will be no breach of the annual minimum
requirement for such shortfall year. By way of example, if actual purchases are
14,000 cubic yards in year 2000, then that year is a shortfall year; however,
-5-
<PAGE>
if purchases in 1999 were 22,000 cubic yards and purchases in 2001 are 24,000
yards, then the 6,000 cubic yards of excess purchases compensate for the
shortfall and there is no breach of the annual minimum requirement for year
2000. If there is a breach of the annual minimum requirement due to a shortfall
that is not compensated for by excess purchases, Buyer shall have no obligation
to pay for the shortfall. The only consequence of such a breach of the annual
minimum requirement is that Buyer's rights under this Agreement shall cease to
be exclusive, in which case (i) Seller may sell sand and gravel to anyone, and
(ii) Buyer's obligation under Section 6(a) to pay any costs of maintaining and
obtaining permits and licenses shall cease. No annual minimum will be applicable
to any partial calendar year during the term hereof if such partial calendar
year is less than one hundred eighty (180) days duration, but a prorated annual
minimum will apply to any such partial year of one hundred eighty (180) days
duration or longer.
(d) Seller agrees to allow Buyer to remove and purchase an indeterminate
quantity of sand and gravel from the Subject Properties, with no annual or
cumulative maximum quantities, limited only by the depletion of sand and gravel
reserves on the Subject Properties.
5. OPERATIONS; ROADS; MACHINERY AND EQUIPMENT.
(a) Buyer agrees to perform all labor and provide all equipment necessary
for the exploration, extraction, processing, loading, and hauling of the sand
and gravel.
(b) Buyer and Seller will consult, confer, and cooperate in exploring for,
planning and locating new sand and gravel pits, expanding pits, establishing
stockpile or processing areas, and clearing brush and timber as needed for such
purposes. Before commercial timber is to be cut for the above purposes, Buyer
and Seller will, in good faith and with commercial reasonableness, consult and
agree upon the quantities, varieties, and current stumpage value of such timber.
-6-
<PAGE>
(c) In order to obtain access to the Subject Properties, and to carry on
its operations, Buyer shall have the right to make use of and, if Buyer so
desires, improve all roadways now existing on the Subject Properties, and shall
have the right to build such additional roads as may be necessary for the
excavation, processing, stockpiling and removal of sand and gravel. In
maintaining, improving, or building such roads, Buyer may use sand, gravel, and
fill from the Subject Properties. Buyer shall not be required to pay for such
materials so used. Any road not in use by Buyer shall be left in a condition at
least as good as existed before use by Buyer under this agreement. Buyer shall
consult and confer with Seller as to the location, layout, and standards of new
roads that may be required, but Seller shall not unreasonably withhold approval
of any such new road. Buyer and Seller shall negotiate in good faith to share
the costs of construction and maintenance of any such roads that will be used to
a significant extent by Seller, based on the relative use of such roads by Buyer
and Seller. Buyer and Seller may construct and maintain gates on roads as either
may require, at the cost of the party so requiring, provided that the other
party shall be given keys thereto.
(d) Buyer shall have the right to place on the Subject Properties
machinery, equipment, sand and gravel processing plants, tool sheds, and other
structures required by it in connection with its operations, with the full right
to remove all the machinery, equipment and structure within one hundred eighty
(180) days after termination of this agreement.
(e) Buyer shall have the right to drill water wells on the described land
for use in connection with sand and gravel operations. On permanent cessation of
the use of any well, or on termination of this agreement, Buyer shall leave the
well and the well casing for the use of Seller, but Buyer may remove any pumps
or motors it has installed or caused to be installed.
-7-
<PAGE>
6. PERMITS; TAXES
(a) Buyer shall be responsible for obtaining and/or maintaining all permits
and licenses required by law for sand and gravel extraction operations on the
Subject Properties, and Buyer shall pay all costs associated with such
permitting and licensing, including, but not limited to, engineering studies,
application fees, monitoring tests, and environmental studies. Seller and Buyer
shall cooperate, consult and confer to plan sand and gravel operations in
accordance with existing permits and licenses and to obtain new permits and
licenses as needed, and Seller, as property owner, shall provide any and all
approvals and signatures that are necessary to maintain and/or obtain such
permits and licenses.
(b) Seller shall be responsible for payment of and filing all reports and
returns for Property Taxes, Excavation Taxes, and Excavation Activity Taxes
relating to the Subject Properties.
(c) Buyer shall be responsible for any taxes on any machinery, equipment,
or structures that it owns.
7. RECLAMATION
On conclusion of operations of any significant portion of the Subject
Properties and on termination of this agreement, Buyer shall perform at its cost
any reclamation work required by law or under the applicable permits, and remove
Buyer's machinery, equipment, and structures.
8. COMPLIANCE WITH LAW
Each party agrees to comply with all applicable laws, statutes, ordinances,
and governmental rules and regulations applicable to the subject matter of this
Agreement.
-8-
<PAGE>
9. INDEMNITY
(a) Buyer will hold Seller harmless from all claims that may arise solely
out of its occupation of the Subject Properties and operations conducted thereon
by it, its employees, agents, or contractors and shall indemnify and defend
Seller against any suit, claim, judgment or demand whatsoever arising out of the
breach of this agreement by Buyer or the negligence or willful misconduct of
Buyer in the exercise of any of its rights pursuant to this agreement, provided
that Seller is not a contributing cause to the events giving rise to such suit,
claim, demand or judgment.
(b) Seller will hold Buyer harmless from all claims that arise solely out
of its ownership of the Subject Properties and shall indemnify and defend Buyer
against any suit, claim, judgment or demand whatsoever arising out of the breach
of this agreement by Seller or the negligence or willful misconduct of Seller,
provided that Buyer is not a contributing cause to the events giving rise to
such suit, claim, demand or judgment.
(c) The obligations of the parties under this section shall survive the
expiration or termination of this agreement.
10. FORCE MAJEURE
Neither Buyer nor Seller shall be liable for failure to perform any of its
obligations under this Agreement during any period in which performance is
prevented by any cause beyond such party's control, which causes are called
"force majeure" below. For purposes of this Agreement, "force majeure" includes,
but is not limited to, acts of God, fire, flood, undue shortage of energy or
power, strikes, insurrection or mob violence, requirements or regulations of
government with which a party cannot reasonably comply, and other causes of a
similar nature that are beyond the
-9-
<PAGE>
control of a party. The party whose performance is prevented will notify the
other party of the date of commencement and cause of each period of force
majeure and the time of removal of such cause.
11. INDEPENDENT CONTRACTORS
This Agreement shall not constitute or give rise to a partnership or joint
venture between the parties. All activities by either party under the terms of
this Agreement shall be carried on as independent contracting parties and not as
an agent for or employee of the other party, and each party shall be solely
responsible for the acts of its agents and employees. Neither party shall have
any right, power, or authority to create any obligation, express or implied, on
behalf of the other party.
12. NOTICES
All notices, reports, and consents required or permitted to be given under
this Agreement shall be in writing and deemed given when hand delivered or by
documented overnight delivery service, or sent by telecopy, telefax, or other
electronic transmission service, provided a confirmation copy is also sent no
later than the next business day by first class mail, return receipt requested,
to the party to whom the same is directed at its address as set forth below or
to such other address as such party shall designate by notice under this
Section:
If to Buyer: A. Bradford Wyman
Wood Department
Crown Vantage
650 Main Street
Berlin, NH 03570-2489
Telecopy No. (603) 342-2301
-10-
<PAGE>
With a copy to: Chris McLain, Esq.
Grown Vantage
300 Lakeside Drive, Rm. 1451
Oakland, CA ###-##-####
Telecopy No. (510) 874-3939
If to Seller: Hancock Timber Resources Group
99 High Street, 26th Floor
Boston, Massachusetts 02117
ATTN: Mr. Bruce McKnight
Telecopy No. (617) 747-1502
With a copy to Henry L. Whittemore
Hancock Timber Resources Group
77 Water Street
Hallowell, Maine 04347
Telephone No. (207) 621-4020
Robert H. Golden, Esq.
John Hancock Mutual Life Insurance Company
Trinity Place - Home Office Receiving
Mortgage and Real Estate Law
T-50
Boston, Massachusetts 02117
Telecopy No. (617) 572-9268
Thomas J. Colgan
Wagner Forest Management, Ltd.
Route 10 North
P0 Box 160
Lyme, New Hampshire 03768
Telecopy No. (603) 795-2002
Karen A. Huber
Eaton, Peabody, Bradford & Veague, P.A.
Fleet Center - Exchange Street
P0 Box 1210
Bangor, Maine 04402-1210
Telecopy No. (207) 947-0111
-11-
<PAGE>
(d) Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law. The determination by any court of competent jurisdiction that one or more
of the sections or provisions of this Agreement are unenforceable shall not
invalidate this Agreement, and the decision of such court shall be given effect
so as to limit to the extent possible the sections or provisions of this
Agreement which are deemed unenforceable. To the extent such determination has a
material impact upon the economic expectations of the parties hereto, the
parties agree to make appropriate modifications to this Agreement to take such
impact into account.
(e) Headings; Construction. Section headings contained in this Agreement
are for convenient reference only, and shall not in any way affect the meaning
or interpretation of this Agreement. The language used in this Agreement will be
deemed the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any person.
(f) Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, including by means of telefaxed signature pages, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
THIS AGREEMENT has been executed by the duly authorized representative of
the parties as of the date first hereinabove set forth.
WITNESS CROWN PAPER CO.
/s/ R. Carl Anderson By: /s/ Christopher M. McLain
- ----------------------------- -----------------------------
Name: Christopher M. McLain
Its: Senior Vice President,
Duly Authorized
[Execute in Black Ink]
-13-
<PAGE>
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: Hancock Natural Resources Group, Inc.,
its Investment Manager, duly authorized
/s/ R. Carl Anderson By: /s/ John P. Lollis
- ----------------------------- -----------------------------
Name: John P. Lollis
Its: Account Manager,
Duly Authorized
[Execute in Black Ink]
-14-
ROUND WOOD SUPPLY AGREEMENT
This Agreement is made as of the 28th day of June, 1999 between Prime
Timber Company LLC, a New Hampshire limited liability company ("Prime"), and
Crown Paper Co., a Virginia corporation ("Crown").
Recitals
A. Crown owns a pulp mill located in Berlin, New Hampshire (the "Berlin
Mill").
B. Prime has acquired cutting rights to the timber on certain timberlands
in the States of New Hampshire and Maine which are more particularly described
on Exhibit A hereto (the "Timberlands").
C. The Timberlands have been a material source of roundwood supply for the
Berlin Mill and the parties hereto intend to utilize this Agreement to continue
a long-term relationship with respect thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and intending to be legally bound, the parties agree as
follows:
1. Quantities of Hardwood Pulpwood to be Supplied.
(a) During the period commencing on the date hereof and ending on
________(the "Initial Period") and during each Six-Month period thereafter
commencing on December 1 or June 1 (the Initial Period and each such six
month period being a "Six-Month Period"), until the supply obligations
under this Section of this Agreement are terminated in accordance with the
provisions of Section 6, Prime shall supply to Crown at the Berlin Mill
from any timberland owned by Prime at such time, and Crown shall purchase
from Prime, the quantity of Hardwood Pulpwood set forth in Exhibit B. The
quantities of Hardwood Pulpwood to be delivered during the Initial Period
shall be prorated based upon the actual number of days within the Initial
Period in relation to the 365-day year.
(b) Prime shall deliver such Hardwood Pulpwood so that the total quantity
of Hardwood Pulpwood to be purchased by Crown and supplied by Prime in each
Six-Month Period shall be delivered substantially in accordance with
Exhibit B.
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<PAGE>
(c) The quantity of Hardwood Pulpwood to be supplied hereunder shall be
purchased according to the specifications and the scaling rules set forth
in Exhibit C hereto in accordance with the usual business practice of the
timber industry in the State of New Hampshire.
2. Prices.
(a) The price at which Hardwood Pulpwood supplied hereunder is to be
purchased by Crown shall be established by the parties hereto for each
Six-Month Period during the term of this Agreement Crown shall make payment
no later than Friday for Hardwood Pulpwood delivered during the previous
week (Monday through Sunday).
(b) The prices for the Hardwood Pulpwood for each Six-Month Period shall be
market price in the vicinity. The parties shall use their best efforts to
agree on such market prices for each Six-Month Period at least 15 days
prior to the beginning of each such period, but if the parties are unable
to do so by such time, then neither party shall have any obligation to
supply or purchase Hardwood Pulpwood pursuant to this agreement for such
Six-Month Period. Prime shall have available for sale to Crown at the
beginning of each such Six-Month Period sufficient quantities of Hardwood
Pulpwood to satisfy the volumes provided for in Exhibit B.
(c) The price for Hardwood Pulpwood supplied hereunder shall be f.o.b. the
Berlin Mill or other point of delivery designated by Crown and shall be
determined on the basis of green tons of delivered wood.
(d) In addition to the payment provided for in paragraph 2(a), Crown shall
pay to Prime, within 30 days after the end of each Six-Month Period, a
performance premium of four percent (4%) of the agreed price of the
Products delivered to the Berlin Mill during such Six-Month Period,
provided Prime has delivered no less than 95% of the volume specified in
Exhibit B for such Product during such period and provided such premium
shall be paid on not less than 95% of such volume and on not more than 110%
of such volume.
(e) If Crown shall fail to make a payment for Hardwood Pulpwood delivered
by Prime to Crown hereunder when due, and such failure shall continue for
fifteen (15) days after Crown receives written notice of such failure, then
until such payment has been made (i) such unpaid amount shall bear interest
from the original due date of such payment at one percent over the prime
rate of Citibank, N.A. (New York City) in effect from time to time and (ii)
Prime shall be under no obligation to make further Hardwood Pulpwood
deliveries hereunder until such delinquent payment is made.
2
<PAGE>
3. Deliveries
Title to the Hardwood Pulpwood shall pass to Crown at the point of delivery
and the risk of loss or damage shall be borne by Prime until delivery.
4. Force Majeure.
Prime and Crown shall not be liable to each other or any failure or delay
in delivery or acceptance of delivery of Hardwood Pulpwood where such
failure or delay is due to circumstances beyond that party's control,
including, without limitation, extraordinary weather conditions, fires,
labor disputes, acts of God and acts of any governmental body or, as to
Crown, in the event Crown, with at least 90 days notice to Prime,
substantially curtails operations at the Berlin Mill (collectively referred
to herein as a "Force Majeure Event"), nor shall any such failure or delay
give either party the right to terminate this Agreement except as provided
in Section 6. Each party shall use its best efforts to minimize the
duration and consequences of any failure or delay in delivery or acceptance
of delivery resulting from a Force Majeure Event and shall give the other
party immediate notice of the occurrence of a Force Majeure Event and of
the time when the party affected by such Force Majeure Event is no longer
affected thereby. Notwithstanding the foregoing, if, as a result of a Force
Majeure Event pursuant to which a delay in Prime's performance is excused
hereunder, or for any other reason deliveries from Prime are reduced to the
extent that Crown cannot maintain its scheduled production level at the
Berlin Mill, Crown shall thereafter have the right to obtain the Hardwood
Pulpwood, or substitutes therefor (in either case, "Substitute Hardwood
Pulpwood"), from sources other than Prime until such time as Prime is again
able to commence delivery of Hardwood Pulpwood to Crown hereunder. After
Prime gives notice to Crown that it is again able to commence delivery of
Hardwood Pulpwood to Crown hereunder, Crown will notify Prime of any
commitments for Substitute Hardwood Pulpwood that Crown has entered into
and Crown shall not be required to again accept delivery from Prime until
it has accepted delivery of all Substitute Hardwood Pulpwood contracted by
Crown, provided that no such contract shall be entered into for a term
longer than three months without the consent of Prime, which consent shall
not be unreasonably withheld, and Crown's obligation to take Hardwood
Pulpwood hereunder (and Prime's obligation to deliver such) shall be
reduced, at Crown's election, by the quantity of all such Substitute
Hardwood Pulpwood. Notwithstanding the foregoing, if as a result of a Force
Majeure Event Crown cannot accept the quantity of Hardwood Pulpwood
determined hereunder, Crown shall promptly notify Prime of the same, and
Prime shall thereafter have the right to contract for the sale of any such
Hardwood Pulpwood Crown is unable to accept. After Crown gives notice to
Prime that it is again able to accept delivery of Hardwood Pulpwood to
Crown hereunder, Prime will notify Crown of any commitments for the sale of
Hardwood Pulpwood that Prime has entered into and
3
<PAGE>
Prime shall not be required to again deliver Hardwood Pulpwood to Crown
until such contract shall be entered into for a term longer than three
months without the consent of Crown, which consent shall not be
unreasonably withheld, and Prime's obligation to deliver Hardwood Pulpwood
hereunder (and Crown's obligation to accept such Hardwood Pulpwood) shall
be reduced, at Prime's election, by the quantity of all such Hardwood
Pulpwood.
5. Confidentiality.
(a) It is recognized that both parties may disclose to each other certain
information regarding the subject of this Agreement which they consider to
be private and confidential, the disclosure of which could prove injurious
to either party. Therefore, the parties agree to use such information
solely for the use, sale and pricing of Hardwood Pulpwood, and to use their
best efforts to prevent the disclosure of such information (other than
information which is a matter of public knowledge or which has been filed
as public information with any governmental authority) to third parties
without the prior written consent of the affected party, unless such
disclosure is required by law.
(b) Notwithstanding the provisions of paragraph 5(a), either party may make
any such disclosure necessary in connection with a legal action to enforce
its rights hereunder and, in the event there is a material breach by Prime
of its obligations pursuant to Section 7, Crown may disclose to any third
party purchaser of Timberlands involved in such breach the terms of Section
7 as they relate to such Timberlands.
6. Termination of Supply Obligations.
(a) Although it is the intent of the parties that this Agreement shall
result in a long term, mutually beneficial supply relationship, the wood
supply obligations pursuant to Section 1 of this Agreement may be
terminated by either party, at its option exercisable by written notice to
the other party, but only under any one of the following circumstances:
(i) As of November 1st, 2009 (the "initial Termination Date") or as of
any November 1st thereafter which is a multiple of three years after
the Initial Termination Date, provided (A) such notice is given not
less than three years prior to such termination date, and (B) such
notice is accompanied by a certificate of an officer of the party
providing such notice to the effect that the notice is being given due
to a change in management practices of the terminating party such
that, if Prime is the terminating party, the Hardwood Pulpwood is no
longer available, and, if
4
<PAGE>
Crown is the terminating party, the Hardwood Pulpwood can no longer be
utilized at the Berlin Mill; or
(ii) Through no default by either party, no Hardwood Pulpwood has been
delivered pursuant to the terms of this Agreement during the initial
twelve year term or any subsequent three year term; or
(iii) By either party if the other party shall default in the
performance of any of its agreements or obligations herein, and such
default continues unremedied for a period of sixty (60) days after
written notice from the nondefaulting party; or
(iv) In the event Crown sells the Berlin Mill, then by either party,
as to the supply obligations associated as provided in Exhibit B, (A)
on 30 days prior written notice if such supply obligations were not
assigned to the purchaser of such mill or (B) upon one year's prior
written notice effective as of any November 1st following such sale if
such supply obligations were assigned to the purchaser of such mill.
(b) Any such termination of the supply obligations shall not constitute a
waiver by either party of its rights to damages or other remedies for any
breach of this Agreement by the other party.
7. Transfer of Cutting Rights.
(a) Transfer. In the event Prime desires to sell, assign or otherwise
transfer all or any part of its cutting rights on the Timberlands, other
than exempt Property as described below, transfers shall be made subject to
this Agreement and Prime shall submit to Crown for its approval, not to be
unreasonably withheld or delayed, a proposal for equitable allocation of
Prime's obligations to provide the Hardwood Pulpwood volumes set forth in
Exhibit B for each Annual Period of the remaining term of this Agreement to
which property transferred shall be subject, with the overall objective of
ensuring that such volumes are provided to Crown during the term of this
Agreement and taking into consideration the following factors for
determining such reduction: (i) species and product mix; (ii) site index
(productivity); and (iii) time remaining under this Agreement Easements
(including conservation easements), mineral leases and recreational leases
shall not be considered a sale or transfer for purposes of this section.
(b) Exempt Property. Notwithstanding anything to the contrary set forth
above, the sale of any part of Prime's cutting rights on the Timberlands
shall be exempt from the obligations of this Wood Supply Agreement herein;
provided (A) the aggregate of all such exempt property ("Exempt Property")
shall not exceed 4,000 acres; and (B) until such 4,000 acre limit has been
reached, any parcel containing 500 acres or less the cutting rights on
which are sold or otherwise transferred shall be deemed Exempt Property.
The transfer of any
5
<PAGE>
Exempt Property pursuant to the provisions of this subsection (a) shall
relieve the Exempt Property from the obligations under this Agreement, but
shall not relieve Prime of its obligations under this Agreement including
the obligations to make available to Crown the Hardwood Pulpwood volumes in
Exhibit B.
8. Representations and Covenants.
(a) Prime hereby covenants and agrees that:
(i) it shall give Crown no less than 30 days prior notice of any
transfer of any of any of the cutting rights on the Timberlands or any
other transaction related thereto which would have any effect on
Prime's obligations under this Agreement; and
(ii) it has the right, power and authority to grant the rights hereby
purported to be granted Crown.
(b) Crown represents and warrants that it has the right, power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby.
9. Relationship of Parties.
In all matters relating to this Agreement, both parties shall be acting
solely as independent contractors and shall be solely responsible for the
acts of their employees; and employees of one party shall not be considered
employees of the other party. Neither party shall have any right, power or
authority to create any obligation, express or implied, on behalf of the
other party.
10. SF1.
Prime agrees to manage the Timberlands in accordance with the Sustainable
Forestry Initiative of the American Forest and Paper Association ("SFI).
This commitment will last until the first occurrence of either one of the
following two scenarios: (1) the SFI program is no longer a viable, ongoing
program, or (2) the Wood Supply Agreement between Crown and Prime is no
longer in effect.
11. Compliance with Law.
Each party agrees to comply with all applicable laws, statutes, ordinances
and governmental rules and regulations applicable to the conduct of its
business.
6
<PAGE>
12. Waiver.
No waiver shall be deemed to be made by either party of any of its rights
hereunder unless the same shall be in writing, and each waiver, if any,
shall be a waiver only with respect to the specific instance involved and
shall in no way impair the rights of the waiving party or the obligations
of the other party in any other respect at any other time.
13. Assignment.
(a) Either party may assign this Agreement to any corporation which
controls, is controlled by or is under common control with such party,
formed by consolidation of such party with another corporation or
corporations, or into which such party shall be merged, or to which
substantially all the property of such party shall be conveyed or
transferred as an entirety (the "Successor Corporation"), or to a trustee
under any deed of trust mortgaging or pledging all, or substantially all,
of such party's plants and real property. Upon any such transfer, all the
terms and provisions of this Agreement binding upon, or inuring to the
benefit of, the assigning party shall be binding upon, the inure to the
benefit of, its successor or assign, whether so expressed or not, provided,
however, in any such case the assignee shall assume in writing the
obligations of the assigning party and the assigning party shall remain
primarily liable hereunder. Except as above provided, this Agreement shall
not be assignable or transferable by either party without the consent of
the other party.
(b) In the event Crown sells the Berlin Mill, Crown may assign to any such
purchaser its supply rights under this Agreement as provided in Exhibit B,
and, in such event, such assignment shall also be deemed a delegation and
assumption by such purchaser of all Crown's duties and obligations
hereunder related to such supply rights, and upon the assumption in writing
by such purchaser of all Crown's duties and obligations hereunder, Crown
shall be released from all future obligations hereunder with respect to
such supply rights and Prime shall thereafter look only to such assignee
for performance under this Agreement with respect to such rights.
14. Separability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect.
15. Notices.
Any notices which may be required or are appropriate hereunder shall be in
writing or by electronic means producing a written record (facsimile
machine, telex, telecopier or telegraph), personally delivered or mailed by
Registered or Certified United States Mail or reputable overnight courier,
postage prepaid,
7
<PAGE>
return receipt requested, effective on personal delivery, one day after mailing
if by reputable overnight courier or three days after mailing if by United
States mail:
To Crown at the following address:
Mr. A. Bradford Wyman
Crown Vantage, Inc.
650 Main Street
Berlin, NH 03570
Telephone: (603) 342-2500
Facsimile: (603) 342-2301
Copy to:
Chris McLain, Esq.
Crown Vantage
300 Lakeside Drive, Room 1451
Oakland, CA 94612-3592
Telephone: (510) 874-3869
Facsimile: (510) 874-3939
To Prime at the following address:
Mr. Thomas I. Colgan
Prime Timber Company LLC
do Wagner Forest Management, Ltd.
P.O. Box 160
150 Orford Road
Lyme, NH 03768
Telephone: (603) 795-2002
Facsimile: (603) 795-4631
Copy to:
Karen Huber, Esq.
Eaton, Peabody, Bradford & Veague
144 Exchange Street, Fleet Center
Bangor, ME 04402
Telephone: (207) 947-0111
16. Headings.
The headings in this Agreement are solely for convenience of reference and shall
be given no effect in the construction or interpretation of this Agreement.
8
<PAGE>
17. Counterparts.
This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one
agreement.
18. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws
of the State of New Hampshire, without regard to the principles of conflict
of law thereof.
19. Nonrecordation.
Neither this Agreement nor a memorandum of the terms hereof shall be
recorded in the land records of any jurisdiction where any of the
Timberlands are located except in connection with a lawsuit filed by Crown
as a result of a breach by Prime of its obligations.
IN WITNESS WHEREOF, the parties hereto each of have caused this Agreement
to be duly executed as of the date first above written.
WITNESSED BY: PRIME T1MBER COMPANY LLC
By: Wagner Forest Management, Ltd.,
Its Manager
/s/ [ILLEGIBLE]
- -------------------------
By: /s/ J.F. Sobetzer
-------------------------------
Name: J.F. Sobetzer
Its: Vice President
Duly Authorized
WITNESSED BY: CROWN PAPER CO.
/s/ [ILLEGIBLE] By: /s/ Michael J. Hunter
- ------------------------- -------------------------------
Name: Michael J. Hunter
Its: Senior Vice President
Duly Authorized
9
<PAGE>
STATE OF NEW HAMPSHIRE
COUNTY OF Grafton
The foregoing instrument was acknowledged before me this 23 day of June,
1999. by J. F. Sobetzer, in his capacity as Vice President of Wagner Forest
Management, Ltd., a New Hampshire corporation, the Manager of Prime Timber
Company LLC, a New Hampshire limited liability company, on behalf of such
limited liability company.
[EXECUTE IN BLACK INK] /s/ Donna Brenner
---------------------------------------
Notary Public
Name: Donna Brenner, Notary Public
My Commission expires: April 29, 2003
(AFFIX SEAL]
10
<PAGE>
STATE OF CALIFORNIA
COUNTY OF ALEMEDA
The foregoing instrument was acknowledged before me this 29th day of June,
1999, by Michael J. Hunter, Senior Vice President of Crown Paper Co., a Virginia
corporation, on behalf of the corporation.
[EXECUTE IN BLACK INK] /s/ Laurel Avi
----------------------------------
Notary Public
Name: Laurel Avi
My Commission expires: 9/2/2000
[AFFIX SEAL]
11
NORTHEAST ROUNDWOOD SUPPLY AGREEMENT
This Agreement is made as of the 30th day of October, 1997 between JOHN
HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts Corporation ("Hancock"),
and CROWN PAPER Co., a Virginia corporation ("Crown").
Recitals
A. As of the date hereof, Hancock acquired certain real property interests
in timberlands from Crown Paper Co. pursuant to a Timberland Acquisition
Agreement (the "Purchase Agreement") dated as of October 21st, 1997 by and
between Crown and Hancock.
B. The timberlands acquired by Hancock in the State of New Hampshire are
described on Exhibit A hereto (the "Timberlands").
C. Crown owns a pulp mill located at Berlin, New Hampshire (the "Berlin
Mill").
D. The New Hampshire Timberlands constitute a material source of roundwood
supply for the Berlin Mill and the parties hereto intend to utilize this
Agreement to continue a long term relationship with respect thereto.
E. The Purchase Agreement provides for an agreement embodying substantially
the terms hereof.
Now, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and intending to be legally bound, the parties agree as
follows:
1. Quantities of Hardwood Pulpwood to be Supplied.
(a) During the period commencing on the date hereof and ending on Dec 1,
1997 (the "Initial Period") and during each six month period thereafter
<PAGE>
2
commencing on December 1 or June 1 (the Initial Period and each such six
month period being a "Six-Month Period"), until the supply obligations
under this Section of this Agreement are terminated in accordance with the
provisions of Section 6, Hancock shall supply to Crown at the Berlin Mill
from any timberland owned by Hancock at such time, and Crown shall purchase
from Hancock, the quantity of Hardwood Pulpwood set forth in Exhibit B. The
quantities of Hardwood Pulpwood to be delivered during the Initial Period
shall be prorated based upon the actual number of days within the Initial
Period in relation to a 365-day year.
(b) Hancock shall deliver such Hardwood Pulpwood so that the total quantity
of Hardwood Pulpwood to be purchased by Crown and supplied by Hancock in
each Six-Month Period shall be delivered substantially in accordance with
Exhibit B.
(c) The quantity of Hardwood Pulpwood to be supplied hereunder shall be
purchased according to the specifications and the scaling rules set forth
in Exhibit C hereto in accordance with the usual business practice of the
timber industry in the State of New Hampshire.
2. Prices.
(a) The price at which Hardwood Pulpwood supplied hereunder is to be
purchased by Crown shall be established by the parties hereto for each
Six-Month Period during the term of this Agreement. Crown shall make
payment no later than Friday for Hardwood Pulpwood delivered during the
previous week (Monday through Sunday).
(b) The prices for the Hardwood Pulpwood for each Six-Month Period shall be
market price in the vicinity. The parties shall use their best efforts to
agree on such market prices for each Six-Month Period at least 15 days
prior to the beginning of each such period, but if the parties are unable
to do so by such time, then neither party shall have any obligation to
supply or purchase Hardwood Pulpwood pursuant to this Agreement for such
Six-Month Period. Hancock shall have available for sale to Crown at the
beginning of each such Six-Month Period sufficient quantities of Hardwood
Pulpwood to satisfy the volumes provided for in Exhibit B.
(c) The price for Hardwood Pulpwood supplied hereunder shall be f.o.b. the
Berlin Mill or other point of delivery designated by Crown and shall be
determined on the basis of green tons of delivered wood.
(d) In addition to the payment provided for in paragraph 2(a), Crown shall
pay to Hancock, within 30 days after the end of each Six-Month Period, a
performance premium of four percent (4%) of the agreed price of the
Products delivered to the Berlin Mill during such Six-Month Period,
provided Hancock has delivered no less
<PAGE>
3
than 95% of the volume specified in Exhibit B for such Product during such
period and provided such premium shall be paid on not less than 95% of such
volume and on not more than 110% of such volume.
(e) If Crown shall fail to make a payment for Hardwood Pulpwood delivered
by Hancock to Crown hereunder when due, and such failure shall continue for
fifteen (15) days after Crown receives written notice of such failure, then
until such payment has been made (i) such unpaid amount shall bear interest
from the original due date of such payment at one percent over the prime
rate of Citibank, N.A. (New York City) in effect from time to time and (ii)
Hancock shall be under no obligation to make further Hardwood Pulpwood
deliveries hereunder until such delinquent payment is made.
3. Deliveries.
Title to the Hardwood Pulpwood shall pass to Crown at the point of delivery
and the risk of loss or damage shall be borne by Hancock until delivery.
4. Force Majeure.
Hancock and Crown shall not be liable to each other for any failure or
delay in delivery or acceptance of delivery of Hardwood Pulpwood where such
failure or delay is due to circumstances beyond that party's control,
including, without limitation, extraordinary weather conditions, fires,
labor disputes, acts of God and acts of any governmental body or, as to
Crown, in the event Crown, with at least 90 days notice to Hancock,
substantially curtails operations at the Berlin Mill (collectively referred
to herein as a "force Majeure Event"), nor shall any such failure or delay
give either party the right to terminate this Agreement except as provided
in Section 6. Each party shall use its best efforts to minimize the
duration and consequences of any failure or delay in delivery or acceptance
of delivery resulting from a Force Majeure Event and shall give the other
party immediate notice of the occurrence of a Force Majeure Event and of
the time when the party affected by such Force Majeure Event is no longer
affected thereby. Notwithstanding the foregoing, if, as a result of a Force
Majeure Event pursuant to which a delay in Hancock's performance is excused
hereunder, or for any other reason deliveries from Hancock are reduced to
the extent that Crown cannot maintain its scheduled production level at the
Berlin Mill, Crown shall thereafter have the right to obtain the Hardwood
Pulpwood, or substitutes therefor (in either case, "Substitute Hardwood
Pulpwood"), from sources other than Hancock until such time as Hancock is
again able to commence delivery of Hardwood Pulpwood to Crown hereunder.
After Hancock gives notice to Crown that it is again able to commence
delivery of Hardwood Pulpwood to Crown hereunder, Crown will notify Hancock
of any commitments for Substitute Hardwood Pulpwood that Crown has
<PAGE>
4
entered into and Crown shall not be required to again accept delivery from
Hancock until it has accepted delivery of all Substitute Hardwood Pulpwood
contracted by Crown, provided that no such contract shall be entered into
for a term longer than three months without the consent of Hancock, which
consent shall not be unreasonably withheld, and Crown's obligation to take
Hardwood Pulpwood hereunder (and Hancock's obligation to deliver such)
shall be reduced, at Crown's election, by the quantity of all such
Substitute Hardwood Pulpwood. Notwithstanding the foregoing, if as a result
of a Force Majeure Event Crown cannot accept the quantity of Hardwood
Pulpwood determined hereunder, Crown shall promptly notify Hancock of the
same, and Hancock shall thereafter have the right to contract for the sale
of any such Hardwood Pulpwood Crown is unable to accept. After Crown gives
notice to Hancock that it is again able to accept delivery of Hardwood
Pulpwood to Crown hereunder, Hancock will notify Crown of any commitments
for the sale of Hardwood Pulpwood that Hancock has entered into and Hancock
shall not be required to again deliver Hardwood Pulpwood to Crown until it
has delivered all Hardwood Pulpwood contracted by Hancock, provided that no
such contract shall be entered into for a term longer than three months
without the consent of Crown, which consent shall not be unreasonably
withheld, and Hancock's obligation to deliver Hardwood Pulpwood hereunder
(and Crown's obligation to accept such Hardwood Pulpwood) shall be reduced,
at Hancock's election, by the quantity of all such Hardwood Pulpwood.
5. Confidentiality.
(a) It is recognized that both parties may disclose to each other certain
information regarding the subject of this Agreement which they consider to
be private and confidential, the disclosure of which could prove injurious
to either party. Therefore, the parties agree to use such information
solely for the use, sale and pricing of the Hardwood Pulpwood, and to use
their best efforts to prevent the disclosure of such information (other
than information which is a matter of public knowledge or which has been
filed as public information with any governmental authority) to third
parties without the prior written consent of the affected party, unless
such disclosure is required by law.
(b) Notwithstanding the provisions of paragraph 5(a), either party may make
any such disclosure necessary in connection with a legal action to enforce
its rights hereunder and, in the event there is a material breach by
Hancock of its obligations pursuant to Section 7, Crown may disclose to any
third party purchaser of Timberlands involved in such breach the terms of
Section 7 as they relate to such Timberlands.
<PAGE>
5
6. Termination of Supply Obligations.
(a) Although it is the intent of the parties that this Agreement shall
result in a long term, mutually beneficial supply relationship, the wood
supply obligations pursuant to Section 1 of this Agreement may be
terminated by either party, at its option exercisable by written notice to
the other party, but only under any one of the following circumstances:
(i) As of November 1st, 2009 (the "Initial Termination Date") or as of
any November 1st thereafter which is a multiple of three years after
the Initial Termination Date, provided (A) such notice is given not
less than three years prior to such termination date, and (B) such
notice is accompanied by a certificate of an officer of the party
providing such notice to the effect that the notice is being given due
to a change in management practices of the terminating party such
that, if Hancock is the terminating party, the Hardwood Pulpwood is no
longer available and, if Crown is the terminating party, the Hardwood
Pulpwood can no longer be utilized at the Berlin mill; or
(ii) Through no default by either party, no Hardwood Pulpwood has been
delivered pursuant to the terms of this Agreement during the initial
twelve year term or any subsequent three year term; or
(iii) By either party if the other party shall default in the
performance of any of its agreements or obligations herein, and such
default continues unremedied for a period of sixty (60) days after
written notice from the non-defaulting party; or
(iv) In the event Crown sells the Berlin Mill, then by either party,
as to the supply obligations associated as provided in Exhibit B, (A)
on 30 days prior written notice if such supply obligations were not
assigned to the purchaser of such mill or (B) upon one year's prior
written notice effective as of any November 1st following such sale if
such supply obligations were assigned to the purchaser of such mill.
(b) Any such termination of the supply obligations shall not constitute a
waiver by either party of its rights to any damages or other remedies for
any breach of this Agreement by the other party.
7. Transfer of Timberlands.
(a) Transfer. In the event Hancock desires to sell, assign or otherwise
transfer all or any part of the Timberlands, other than Exempt Property as
described below,
<PAGE>
6
transfers shall be made subject to this Agreement and Hancock shall submit
to Crown for its approval, not to be unreasonably withheld or delayed, a
proposal for equitable allocation of Hancock's obligations to provide the
Hardwood Pulpwood volumes set forth in Exhibit B for each Annual Period of
the remaining term of this Agreement to which property transferred shall be
subject, with the overall objective of ensuring that such volumes are
provided to Crown during the term of this Agreement and taking into
consideration the following factors for determining such reduction: (i)
species and product mix; (ii) site index (productivity); and (iii) time
remaining under this Agreement. Cutting contracts, easements (including
conservation easements), mineral leases and recreational leases shall not
be considered a sale or transfer for purposes of this section.
(b) Exempt Property. Notwithstanding anything to the contrary set forth
above, the sale of any Timberlands shall be exempt from the obligations of
this Wood Supply Agreement herein; provided (A) the aggregate of all such
exempt property ("Exempt Property") shall not exceed 4,650 acres, and (B)
until such 4,650 acre limit has been reached, any parcel containing 500
acres or less which is sold or otherwise transferred shall be deemed Exempt
Property. The transfer of any Exempt Property pursuant to the provisions of
this subsection (a) shall relieve the Exempt Property from the obligations
under this Agreement, but shall not relieve Hancock of its obligations
under this Agreement including the obligations to make available to Crown
the Hardwood Pulpwood volumes in Exhibit B.
8. Representations and Covenants.
(a) Hancock hereby covenants and agrees that:
(i) it shall give Crown no less than 30 days prior notice of any
transfer of any of the Timberlands or any other transaction related
thereto which would have any effect on Hancock's obligations under
this Agreement; and
(ii) it has the right, power and authority to grant the rights hereby
purported to be granted Crown.
(b) Crown represents and warrants that it has the right, power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby.
9. Relationship of Parties.
In all matters relating to this Agreement, both parties shall be acting
solely as independent contractors and shall be solely responsible for the
acts of their employees; and employees of one party shall not be considered
employees of the
<PAGE>
7
other party. Neither party shall have any right, power or authority to
create any obligation, express or implied, on behalf of the other party.
10. SFI.
Hancock agrees to manage the Timberlands in accordance with the Sustainable
Forestry Initiative of the American Forest and Paper Association ("SF1").
This commitment will last until the first occurrence of either one of the
following two scenarios: (1) the SF1 program is no longer a viable, ongoing
program, or (2) the Wood Supply Agreement between Crown and Hancock is no
longer in effect.
11. Compliance with Law.
Each party agrees to comply with all applicable laws, statutes, ordinances
and governmental rules and regulations applicable to the conduct of its
business.
12. Waiver.
No waiver shall be deemed to be made by either party of any of its rights
hereunder unless the same shall be in writing, and each waiver, if any,
shall be a waiver only with respect to the specific instance involved and
shall in no way impair the rights of the waiving party or the obligation of
the other party in any other respect at any other time.
13. Assignment.
(a) Either party may assign this Agreement to any corporation which
controls, is controlled by or is under common control with such party,
formed by consolidation of such party with another corporation or
corporations, or into which such party shall be merged, or to which
substantially all the property of such party shall be conveyed or
transferred as an entirety (the "Successor Corporation"), or to a trustee
under any deed of trust mortgaging or pledging all, or substantially all,
of such party's plants and real property. Upon any such transfer, all the
terms and provisions of this Agreement binding upon, or inuring to the
benefit of, the assigning party shall be binding upon, and inure to the
benefit of, its successor or assign, whether so expressed or not, provided,
however, in any such case the assignee shall assume in writing the
obligations of the assigning party and the assigning party shall remain
primarily liable hereunder. Except as above provided, this Agreement shall
not be assignable or transferable by either party without the consent of
the other party.
(b) In the event Crown sells the Berlin Mill, Crown may assign to any such
purchaser its supply rights under this Agreement as provided in Exhibit B,
and, in
<PAGE>
8
such event, such assignment shall also be deemed a delegation and
assumption by such purchaser of all Crown's duties and obligations
hereunder related to such supply rights, and upon the assumption in writing
by such purchaser of all Crown's duties and obligations hereunder, Crown
shall be released from all future obligations hereunder with respect to
such supply rights and Hancock shall thereafter look only to such assignee
for performance under this Agreement with respect to such rights.
14. Separability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the balance of this Agreement shall remain in effect.
15. Notices.
Any notices which may be required or are appropriate hereunder shall be in
writing or by electronic means producing a written record (facsimile
machine, telex, telecopier or telegraph), personally delivered or mailed by
Registered or Certified United States Mail or reputable overnight courier,
postage prepaid, return receipt requested, effective on personal delivery,
one day after mailing if by reputable overnight courier or three days after
mailing if by United States mail:
To Crown at the following address:
Mr. A. Bradford Wyman
Crown Vantage, Inc.
650 Main Street
Berlin, NH 03570
Telephone: (603) 342-2500
Facsimile: (603) 342-2301
Copy to: Chris McLain, Esq.
Crown Vantage, Inc.
300 Lakeside Drive, Room 1451
Oakland, CA 94612-3592
Telephone: (510) 874-3869
Facsimile: (510) 874-3939
<PAGE>
9
To Hancock at the following address:
Hancock Timber Resource Group
99 High Street, 26th Floor
Boston, Massachusetts 02117
Attn: Mr. Bruce McKnight
Telephone: (617) 747-1502
Copy to: Robert H. Golden, Esq.
John Hancock Mutual Life Insurance Company
Trinity Place - Home Office Receiving
Mortgage and Real Estate Law, T-50
Boston, Massachusetts 02117
Facsimile: (617) 572-9268
Copy to: Mr. Henry L. Whittemore
Hancock Timber Resource Group
77 Water Street
Hallowell, ME 04347
Telephone: (207) 621 -4020
Copy to: Mr. Thomas J. Colgan
Wagner Forest Management, Ltd.
P.0. Box 160
150 Orford Road
Lyme, New Hampshire 03768
Telephone: (603) 795-2002
Copy to: Karen Huber, Esq.
Eaton, Peabody, Bradford & Veague
144 Exchange Street, Fleet Center
Bangor, Maine 04402
Telephone: (207) 947-0111
16. Headings.
The headings in this Agreement are solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
17. Counterparts.
This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one
agreement.
<PAGE>
10
18. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws
of the State of New Hampshire, without regard to the principles of conflict
of law thereof.
19. Nonrecordation.
Neither this Agreement nor a memorandum of the terms hereof shall be
recorded in the land records of any jurisdiction where any of the
Timberlands are located except in connection with a lawsuit filed by Crown
as a result of a breach by Hancock of its obligations.
IN WITNESS WHEREOF, the parties hereto each have caused this Agreement to
be duly executed as of the date first above written
WITNESSED BY: JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: Hancock Natural Resources Group, Inc.
its Investment Manager, duly authorized
/s/ R. Carl Anderson By: /s/ John P. Lollis
- ------------------------------ ------------------------------------
Name John P. Lollis
Its: Account Manager,
Duly Authorized
[Execute in Black Ink]
WITNESSED BY: CROWN PAPER CO.
/s/ R. Carl Anderson By: /s/ Christopher M. McLain
- ------------------------------ ------------------------------------
Name: Christopher M. McLain
Its: Senior Vice President
Duly Authorized
[Execute in Black Ink]
<PAGE>
11
STATE OF NEW HAMPSHIRE
COUNTY OF MERRIMACK
The foregoing was acknowledged before me this 30th day of October, 1997, by
John P. Lollis, as Account Manager of and duly authorized to act on behalf of
Hancock Natural Resources Group, Inc., a Massachusetts corporation and
Investment Manager of John Hancock Mutual Life Insurance Company, a
Massachusetts corporation, on behalf of the corporation.
[EXECUTE IN BLACK INK] /s/ R. Carl Anderson
-----------------------------------
Notary Public
Name: R. Carl Anderson
[Print or Type Name]
My Commission expires: 3/23/99
[AFFIX SEAL]
STATE OF NEW HAMPSHIRE
COUNTY OF
The foregoing instrument was acknowledged before me this 30th day of
October, 1997, by Christopher M. McLain, Senior Vice President of Crown Paper
Co., a Virginia corporation, on behalf of the corporation.
[EXECUTE IN BLACK INK] /s/ R. Carl Anderson
-----------------------------------
Notary Public
Name: R. Carl Anderson
[Print or Type Name]
My Commission expires: 3/23/99
[AFFIX SEAL]
--1--
COOPERATIVE AGREEMENT
BY AND BETWEEN KIMBERLY-CLARK CORPORATION, NEENAH, WISCONSIN, HEREINAFTER
REFERRED TO AS THE CORPORATION, AND THE UNITED PAPERWORKER'S INTERNATIONAL
UNION, AFL-CIO-CLC, AND LOCAL 482, HEREINAFTER REFERRED TO AS THE UNION.
THIS AGREEMENT CONTINUES TO GUIDE OUR WORK SYSTEM AND GOVERN THE RELATIONSHIPS
AND DEALINGS BETWEEN THE PARTIES UNLESS BOTH AGREE TO CHANGE IT.
SECTION ONE: OUR OPERATING PHILOSOPHY
All employees, the union and the company, at Kimberly-Clark's
Lakeview/Badger-Globe facilities, have shared a proud history, made possible by
our hard work, determination and commitment to the success of our products in
the marketplace. It is a heritage not only to be proud of, but to carry forward
and build on. However, our industry and its competitive environment are changing
and this demands that we alter the traditional relationships between people and
their work. This Philosophy Statement will guide us to create new and more
productive relationships as we face the challenges of today and tomorrow. It
will help us build on our strengths, and focus on setting the directions and
taking the required actions that will result in the continuous improvement
necessary to ensure our future as envisioned by the founding fathers at this,
the birthplace of Kimberly-Clark Corporation. It will make Lakeview/Badger-Globe
an effective and rewarding place to work.
BUSINESS OBJECTIVE
Our business objective is to manufacture and distribute products which satisfy
the needs and expectations of our customers as they perceive them and to do this
better than any other company or Kimberly-Clark location. Our customers
include those who buy and use our products, the corporation's stockholders and
employees, the business sectors we serve, and society. Ultimately, customer
satisfaction determines our success. Only satisfied customers provide job
security.
<PAGE>
- --2--
VALUES
Our business objective can only be obtained by mutually establishing a work
place based on the following values:
Safety
Both parties to this agreement support the concept that safety is a joint
responsibility and each individual is ultimately responsible for his/her own
safety. Local 482 and Lakeview/Badger-Globe are pledged to cooperate fully to
support the letter and spirit of the following: "We are equally committed to
safety in the workplace. Working safely should be our number one priority at all
times at Kimberly-Clark. In fact, nothing is more important than safety. There
is no production goal, there is no cost or time-saving measure and there is no
competitive advantage that is ever worth an injury of any kind. In other words,
our goal is an accident-free workplace. This goal is difficult, but can be
accomplished by providing continuing employee education on safe operating
practices and by ensuring that our work environment meets or exceeds all
governmental requirements for health and safety" (taken from Kimberly-Clark's
Code of Conduct dated May 1994).
People
People in our operations are trustworthy, deserving of respect, and committed to
the success of the business. They take pride in work well done and want to
perform to the best of their abilities. People are most effective when they have
influence on all issues affecting them. We recognize the need for our people to
have a rewarding lifestyle at work, at home, and in the community at large.
The most productive relationships are based on mutual respect, openness, and
cooperation in which differences in status are minimized, people are recognized
for their ideas and their achievements, there are no limits placed on the
contributions they make, and teams of individuals work together effectively with
minimal direction.
Work Design
The most effective work designs are those which create and encourage teamwork by
making certain that individuals and
<PAGE>
--3--
teams have the necessary information, competency, self-sufficiency, freedom and
responsibility to make decisions and take action to achieve common goals. People
perform at their fullest potential when they are a part of creating their vision
and direction, when they know their role, and when their work is challenging,
meaningful, flexible, and when their tasks are focused on specific business
objectives.
Conflict
In order to reach the best possible decisions, where all points of view are
considered, an atmosphere in which questioning and openly discussing differences
is encouraged and valued. Opposing views, handled in a problem-solving manner,
result in better, more balanced solutions by ensuring that a full spectrum of
ideas has been considered and developed.
Teams/individuals are expected to resolve conflict. Informal one-on-one
discussions are recommended as the first step. If unsuccessful, one of the
following procedures will be used: Co-worker Issue Resolution, Issue-Resolution
- - Section Six, or Local 482 Trial and Appeals Process.
Learning and Skill Development
Learning and skill development are critical because we understand that change is
continual. People have both the right and the accountability to learn and
practice the skills needed to perform tasks safely and proficiently. The needed
learning opportunities to promote long-term development and continued growth for
our people and the company will be provided.
Communications
Successful communication is the cornerstone of a strong organization. The most
productive communication is continuous, timely, open, direct, and occurs where
actions are consistent with communications. People need accurate and prompt
feedback on both operating and personal levels to be effective members of the
organization. People make good decisions when provided with the necessary
training and information to know and understand their jobs. To promote
<PAGE>
- --4--
commitment, ownership, and understanding of the business, vital information will
be shared. Everyone's contribution counts.
Continuous Improvement
The application of this operating philosophy is a process which will evolve as
changes occur and as learning and experience are gained. This requires a climate
in which problems are identified and resolved early, and setbacks are viewed as
valuable learning experiences. This process should promote creative initiative,
innovation, and the generation of new ideas essential for business success.
The union and the company are committed to an ongoing dialogue to ensure
continuous improvement in everything we do.
SECTION TWO: PRINCIPLES OF TEAM ORGANIZATION
A. Lakeview/Badger-Globe is organized into business units to encourage a focus
on teamwork, innovation, and process improvement around a complete process,
product, or business.
B. Business unit structure will not limit or restrict individual or group
contributions to the unit.
C. Business units are designed around team(s) which possess the following
characteristics:
1. Team has complete task: input transformation or production output so
that a product or service is produced.
2. The work is designed so that team members cooperate in order to
complete tasks, make a unique contribution to results, and work in
proximity such that team identity is maintained and observable.
3. Team members will have the necessary knowledge and skills to complete
a whole task.
4. Teams will be self-sufficient, with as few support tasks as possible
outside of operating teams.
<PAGE>
--5--
5. Team members and hourly leaders will have responsibility and authority
to determine who does what by when for daily activities, and will
participate in decision making and goal setting for the teams and
business unit. Team members are expected to take direction from
designated leadership.
6. Everyone on a team must possess some minimum number of skills and
demonstrate the flexibility to utilize those skills on a regular
basis, focusing on the process/business unit rather than a job or
task.
7. The training process is continuous and includes a team-building
curriculum.
8. The compensation system is designed to encourage and reward the
development and utilization of multiple skills.
9. Teams will give and receive accurate and timely information about
results, operating standards, and new developments.
D. In order to effectively manage our business we need productive daily team
meetings. The format and content will vary to meet the specific needs of
individual business units and teams.
E. Operating schedules will be designed to meet business needs and employee
preferences to the extent possible.
F. Teams are expected to develop new, innovative approaches to problem solving
and decision making.
SECTION THREE: SENIORITY AND SERVICE
A. Seniority
1. Definition: Seniority refers to the rank order of bargaining unit
employees relative to other bargaining unit employees. Rank order is
determined by the time spent with the Lakeview/Badger-Globe Mill,
Business Unit, and Team. Mill seniority is retroactive to the
employee's start date on the hourly payroll.
<PAGE>
- --6--
The following definition of team seniority will be applied across the
facility:
Team seniority will refer to the rank order of an entire business unit team
(all shifts) in a particular function, i.e., Diaper Plant business unit has
an operations team, stores team, and quality team. Badger-Globe business
unit has a manufacturing team, converting team, and utility team.
Shift crews will be rank ordered according to team seniority. Employees who
change shift crews within a team will carry their team seniority with them.
Employees who join the team from another team within the business unit or
from another business unit will be assigned to the last position on the
team seniority list. (Exception: All maintenance tradespersons within
Lakeview/Badger-Globe are considered one team. Maintenance employees
transferring from one business unit to another carry their maintenance team
seniority with them.)
2. Principles: The corporation has the responsibility to determine who and how
many persons it will employ. New hires will have a ninety (90) calendar day
probationary period. Probationary, temporary, and summer employees do not
accrue seniority during their probationary, temporary, and summer
employment. Mill seniority prevails if business unit and team seniority are
equal.
3. An employee absent due to illness or off-duty accident who returns to work
within one (1) year shall be returned without loss of seniority. In unusual
cases, by specific agreements of the parties, an employee's seniority can
be protected beyond the one (1) year without loss of seniority. An employee
absent due to an on-duty accident shall be returned to work without loss of
seniority, regardless of the length of the absence. This time off shall be
included in computing service time and seniority as if it were time worked.
Employees temporarily transferred outside of the bargaining unit shall have
their seniority protected for a
<PAGE>
--7--
period established by agreement between the union president and management.
B. Service
Service is defined as the actual time spent employed by Kimberly-Clark
Corporation. Service is considered broken by discharge or resignation. For
purposes of computing vacation privileges and other benefits for which
continuous employment is a factor, service is not broken by absences due to
off with permission, authorized leave, certified leave of absence, illness,
military service, or layoff. However, the actual time spent on certified
leave of absence (as defined in Section 12) or a layoff in excess of 30
days will be excluded in computing length of service.
The period of absence during any layoff shall be excluded in computing
pension service in accordance with the Kimberly-Clark Corporation Hourly
Employees' Standard Retirement Plan.
SECTION FOUR: TRANSFER PROCEDURE
When permanent vacancies exist, the following procedure will be used:
A. The vacancy will first be filled from within the business unit based on
business unit seniority and providing the employee can successfully perform
the necessary minimum skill blocks.
B. If the vacancy is not filled from within the business unit, the vacancy
will be announced (via posting) to all LV/BG facilities including the
Lakeview Feminine Care Plant. Informational meetings will be held to
discuss specifics of the position(s). A minimum of two informational
meetings will be held, the second meeting being held at least 48 hours
prior to the end of the posting period. The posting period will be for 10
calendar days. Employees who wish to transfer must call the facility
contact by the designated date/time specified on the posting, and place
their name on the posting list. When an employee places their name on the
posting list, they have accepted the vacancy if they are one of the senior
qualified employees. Employees will
<PAGE>
- --8--
not be able to remove their name from the list. Employees can place their
names on as many posting lists as they wish. Notification will be sent to
each business unit regarding who responded to the posting and the employees
who filled the vacancy. Positions not included within the current transfer
procedure will be handled through jointly developed posting procedures
(e.g. trades apprentice). Employees must have six months of mill seniority
before being eligible for signing on the transfer procedure. Employees will
be selected on the basis of their mill seniority, past performance, the
ability to perform the necessary minimum skill blocks for that business
unit, and in the case of the Lakeview Feminine Care Plant, the ability to
meet selection criteria.
C. Involuntarily transferred employees displaced from their business unit due
to reductions will be given priority placement on the business unit
transfer list from which they were displaced. Involuntarily transferred
employees will be displaced by business unit seniority. These employees
will select from available vacancies by mill seniority. Employees
involuntarily displaced from more than one business unit will have one
priority placement choice. These displaced employees will accumulate
seniority in the new business unit on the effective date of the first
transferred employee. When permanent vacancies exist, these employees will
be given one opportunity to return; if they decline they will lose their
priority position.
D. Employees with long-term, substantiated medical limitations will be given
priority consideration for selection and placement.
E. Vacancies created by a mill layoff will be filled by this transfer
procedure.
F. Physical transfers should be made within six weeks unless unusual
circumstances arise; then a consensus action plan will be developed between
union and management representatives. Team/business unit seniority begins
on the effective date of the first transferred employee. An employee who is
unable to perform the duties within the new business unit because of
substantiated medical limitations may return to the former business unit
with no loss of seniority within a period of thirty days of the transfer
date.
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G. The intent of the company is to staff new Lakeview/Badger-Globe
operations, where possible, with current bargaining unit employees. The
selection process for staffing new or expanded Lakeview/Badger-Globe
operations will be discussed in advance.
Where no permanent vacancies exist, the following procedure will be used:
Excess employees will be loaned out to other business units by business
unit seniority. Loaned employees will select from available business units
by mill seniority. Loaned employees will maintain their pay rate and will
not accrue seniority in the new business unit.
SECTION FIVE: MILL LAYOFF AND RECALL
A. Mill Layoff and Recall -- Lakeview/Badger-Globe
1. When a reduction in the workforce is required and no alternative to a
layoff is found, employees will leave Lakeview/Badger-Globe in reverse
order of their mill seniority. Employees with maintenance skills
needed to maintain the business may be retained outside of mill
seniority order. Lakeview/Badger-Globe employees are not eligible to
displace Lakeview Feminine Care Plant employees. Alternatives to
consider would include voluntary layoff by mutual agreement.
2. Vacancies created by junior employees being laid off will be filled by
utilizing the transfer procedure applied to Lakeview/Badger-Globe
employees.
3. Employees will have recall rights of two years (probationary, summer
and temporary employees do not have recall rights).
4. Lakeview/Badger-Globe employees in layoff status will have first
opportunity to openings in Lakeview/Badger-Globe before going to
Lakeview Feminine Care Plant employees on the transfer list or hiring.
Lakeview/Badger-Globe employees will be recalled in the order of
their mill seniority (Exception: Employees with maintenance skills
needed to maintain the business may be recalled outside of mill
seniority order).
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5. Prior to hiring, Lakeview Feminine Care Plant employees in layoff
status will have priority consideration to openings in other business
units, in accordance with the transfer procedure.
6. Employees will return to work with no rights to their former business
unit.
7. Lakeview/Badger-Globe employees' recall rights will be fulfilled when
they have been given the opportunity to return to
Lakeview/Badger-Globe. Lakeview/Badger-Globe employees may turn down
Feminine Care Plant openings without losing their recall rights.
8. The employee will be notified of an opportunity for recall by
registered mail sent to the last address furnished to the mill. The
employee will be given seventy-two (72) hours after receipt of the
recall notice to notify the mill of the employee's intent to return to
work and two (2) weeks to actually report for work, unless the period
is extended by the business unit. Failure to comply with either of the
above will result in the loss of the employee's recall rights.
B. Mill Layoff And Recall -- Lakeview Feminine Care Plant
1. When a reduction in the workforce is required and no alternative to a
layoff is found, employees will leave Lakeview Feminine Care Plant in
reverse order of their mill seniority. Employees with maintenance
skills needed to maintain the business may be retained outside of mill
seniority order. Feminine Care employees are not eligible to displace
Lakeview/Badger-Globe employees. Alternatives to consider would
include voluntary layoff by mutual agreement.
2. Vacancies created by junior employees being laid off will be filled by
utilizing the transfer procedure applied to Lakeview Feminine Care
Plant employees.
3. Employees will have recall rights of two years (probationary summer
and temporary employees do not have recall rights).
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--11--
4. Lakeview Feminine Care Plant employees in layoff status will have
first opportunity to openings in the Lakeview Feminine Care Plant
before going to Lakeview/Badger-Globe employees on the transfer list
or hiring. Lakeview Feminine Care Plant employees will be recalled in
the order of their mill seniority. (Exception: Employees with
maintenance skills needed to maintain the business may be recalled
outside of mill seniority order.)
5. Prior to hiring, Lakeview/Badger-Globe employees in layoff status will
have priority consideration to openings in the Lakeview Feminine Care
Plant, in accordance with the transfer procedure.
6. Employees will return to work with no rights to their former business
unit.
7. Lakeview Feminine Care Plant employees' recall rights will be
fulfilled when they have been given the opportunity to return to the
Lakeview Feminine Care Plant. Lakeview Feminine Care Plant employees
may turn down Lakeview/Badger-Globe openings without losing their
recall rights.
8. The employee will be notified of an opportunity for recall by
registered mail sent to the last address furnished to the mill. The
employee will be given seventy-two (72) hours after receipt of the
recall notice to notify the mill of the employee's intent to return to
work and two (2) weeks to actually report for work, unless the period
is extended by the business unit. Failure to comply with either of the
above will result in the loss of the employee's recall rights.
SECTION SIX: ISSUE RESOLUTION
A. The Company and the Union have established the following principles:
1. Informal handling of grievances and other conflicts within the
framework of our agreements.
2. Expeditious investigation and disposition of such grievances or
conflicts.
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- --12--
In the event a conflict occurs, the parties concerned will use the following
procedure (Exception: Disciplinary action involving discharge will be referred
directly to Step 3.):
Step 1: FACT-FINDING REVIEW AND RESOLUTION
The involved parties will meet to discuss the issue, ascertain all facts, and
make a genuine attempt to resolve it. This may necessitate more than one meeting
using whatever resources are available. The individual(s) involved should be
present at these meetings. A facilitator should be utilized on an as-needed
basis to aid in mutually resolving the issue. The facilitator, by mutual
agreement, can be any hourly or salaried person possessing the necessary skills.
Resolutions that arrive out of conflicts involving this or other
union-management agreements will be covered with the appropriate
union-management representatives.
Step 2: INFORMAL RESOLUTION
If the conflict has not been resolved in Step 1, the business unit leader and
the union area vice-president will meet with the parties involved in Step 1 and
be apprised of all pertinent facts.
A mutually agreed-upon facilitator may be utilized in all discussions to aid in
resolution.
Normally, it is expected that Step 1 and Step 2, if needed, would be completed
within one week.
Any resolution resulting from the informal discussion portion of this procedure
need not be precedent setting.
Step 3: FORMAL RESOLUTION
Issues that were not resolved in Steps 1 or 2 may be submitted to the business
unit leader (in writing) within five (5) working days (excluding Saturdays,
Sundays, and holidays).
<PAGE>
--13--
Procedure:
The mill/plant manager or representative, a representative of the
international union, and the local bargaining committee shall discuss the
issue. These parties may be assisted by such mill personnel as appropriate.
The agreed-upon facilitator, if utilized in Step 2 of the informal
discussion, may also be utilized in the formal discussions. If the parties
are unable to agree upon a satisfactory settlement within ten (10) working
days (Saturdays, Sundays, and holidays excluded) from the date of referral,
the grievance may be submitted to the impartial arbitrator as outlined
below.
When circumstances warrant, the time limits specified may be extended by
agreement between the parties.
SECTION SEVEN: ARBITRATION
A. Either party desiring to arbitrate a grievance which has not been settled
satisfactorily according to the provisions of Issue Resolution, shall
notify the other party in writing within twenty (20) days (Saturdays,
Sundays, and holidays excluded) of the completion of step three of the
Issue Resolution procedure, unless extended by agreement between the
parties.
B. The Union and Corporation shall endeavor to select the impartial arbitrator
by mutual agreement within ten (10) days after request for arbitration has
been received. For such purpose, each party shall submit to the other party
a list containing the names of at least three (3) persons considered
qualified to serve in such capacity.
C. If the parties are unable to reach mutual agreement in the selection of the
impartial arbitrator, the parties shall then jointly request the Federal
Mediation and Conciliation Service to submit a panel of five (5) qualified
arbitrators from which the impartial arbitrator may be selected. In the
first arbitration case which arises between the parties, the Union shall
first strike two (2) names and the Corporation shall then strike two (2)
names, and the one (1) name remaining shall be selected as the impartial
arbitrator. In subsequent arbitrating cases which arise,
<PAGE>
- --14--
the right of initially rejecting any two (2) of the five (5) names
submitted shall alternate between the parties.
D. It is understood that the function of the arbitrator shall be to interpret
and apply this Agreement and any supplements to the Agreement. The
arbitrator has no power to extend the duration, add terms or provisions,
arbitrate a dispute concerning a general wage adjustment, nor to enlarge
his own jurisdiction except upon mutual consent of the Corporation and the
Union.
E. The decisions of the arbitrator concerning any matter properly arising out
of this Agreement shall (if not contrary to state or federal law) be final
and conclusive upon the employees, the Union, and the Corporation.
F. Each party shall bear the expense of preparing and presenting its own case,
including witnesses and attending employees, before the arbitrator. The
fees and expenses of the arbitrator shall be borne equally by the parties
to this Agreement.
SECTION EIGHT: HOURS OF WORK
A. Definitions
1. A shift worker is an employee whose schedule involves rotation.
2. A day worker is an employee whose schedule does not rotate and whose
regularly scheduled hours every week fall between 5:30 a.m. and 7:30
p.m.
3. A night worker is an employee whose schedule is such that more than
one-half of the regularly scheduled hours each week fall between 6:00
p.m. and 6:00 a.m.
4. A mutual agreement is an arrangement approved in advance by the crew
in which qualified employees agree to change hours or shifts within
the same week and where no other additional premiums are caused.
<PAGE>
--15--
B. Daily, Weekly Schedules
The basic work week for five-day workers is Monday through Friday, for
seven-day workers it is Monday through Sunday. The basic daily schedule
will be 8 1/2 hours per day and will include a daily team meeting and
thirty (30) minutes of unpaid relief period, with no fixed or designated
lunch time.
Unusual production schedules will be discussed with the appropriate
management and union representatives.
Employees should not be expected to work more than 12 1/2 hours in any
24-hour period. Crews will agree on how to provide coverage. For pay
purposes, the work day (24-hour period) and the work week will begin with
the regular starting time for the crews.
The necessary facilitating services to support Saturday, Sunday, and
holiday operations will be provided.
C. Relief Periods
Employees who are on 8 1/2 hour schedules will receive fifteen (15) minutes
of paid relief time and thirty (30) minutes of unpaid relief period, with
no fixed or designated lunch time.
Employees scheduled to work beyond their regular workday will be provided a
fifteen (15) minute paid relief for every four (4) additional hours
scheduled.
Employees who are eligible to receive inconvenience pay or who are held
over or called in/second round trip on Sunday or their day-of-rest will be
provided with a paid relief period.
D. Business Meetings
1. Voluntary
Voluntary meetings outside of employee's regular work schedule will be
paid at time and one-half rates. The call time, second round trip, and
pay for work on scheduled days off provisions of this agreement are
not
<PAGE>
- --16--
applicable to these meetings. These hours will be offset against FLSA
overtime. Employees who voluntarily change their work schedule to
attend a meeting will be paid at straight time rate unless weekly or
daily overtime applies.
2. Required
From time to time, business meetings, including training, may require
the attendance of the full crew. Employees who attend these required
meetings will be paid at time and one-half rates for the actual hours
spent in the meeting if it is scheduled outside of the employee's
regular working hours or on the employee's scheduled day of rest. The
call time, second round trip, and pay for work on scheduled days off
provisions of this agreement will apply to meetings which require
attendance of the full crew. These meeting hours will not be offset
against FLSA overtime for seven-day shift workers.
Employees will be required to attend meetings called by the team or
business unit except when they are off work due to vacation, illness,
leave of absence, accident, union business, or when they are excused
by the crew. Meetings in which the attendance of the full business
unit is required will be scheduled no more than once a quarter.
E. Collective Bargaining Meetings
Employees attending meetings with the company to negotiate a renewal,
amendment, or modification of this cooperative agreement, or a general wage
level change, will be paid a daily allowance of eight (8) hours per day at
the employee's straight-time rate. Shift workers may elect to be off work
the day before or the last day of the bargaining session and will receive
the daily allowance for that meeting.
Union representatives and employees will be compensated for attendance at
issue resolution meetings (as outlined in Section Six) if they would
otherwise be at work.
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F. Travel and Work Outside of the Mill
Employees traveling on company business (more than 30 miles from the mill)
on their regularly scheduled work day will be paid for travel time up to a
maximum of eight hours in addition to hours worked. If travel time plus
hours worked is less than eight (8), the employee will receive eight hours
of pay.
Employees traveling on a scheduled off-day will be paid straight time for
actual travel time up to a maximum of eight hours of pay, unless weekly or
Sunday premium applies.
Employees working on company business outside of the mill on a regularly
scheduled work day will be paid for actual hours worked, or eight hours,
whichever is greater. Employees working outside of the mill on company
business, on a nonscheduled workday, will be paid only for hours worked at
the applicable rate.
G. Reporting Time
Employees who have not received at least two hours notification that their
services are not required for their regularly scheduled day or shift will
receive a minimum of four hours' work or, if no work is available, be given
two hours of pay. Pay will be at the employee's regular rate, with premium
rates applicable to work on Sundays and holidays.
SECTION NINE: PAY AND BENEFITS
A. SKILL-BASED PAY
1. Definition/Principles
In the Lakeview/Badger-Globe skill-based pay system, employees are
compensated for the job related skills they possess and can
demonstrate rather than the work assignment they are performing. For
pay purposes, groups of skills are organized into skill blocks. Once
an employee has demonstrated competency on a skill block and has
performed those skills for a period of time (mastery period), they
will be paid for possessing
<PAGE>
- --18--
that skill as long as they maintain mastery and are performing or
applying those skills on a regular basis. Skill-based pay systems have
evolved and are applied differently in each business unit to best meet
the needs of that business unit. The specific rates of each business
unit's pay system are described in Section Seventeen.
2. Hiring Rate
New employees, except summer hires and temporary employees, will
receive the following rates:
Starting Rate Effective Date
------------- --------------
$12.53 6/1/95
$12.91 6/1/96
$13.30 6/1/97
$13.70 6/1/98
$14.18 6/1/99
After satisfactory performance of ninety (90) days, employees will
receive the following rates and will be eligible for the skill-based
pay.
Rates Effective Date
----- --------------
$13.44 6/1/95
$13.84 6/1/96
$14.26 6/1/97
$14.69 6/1/98
$15.20 6/1/99
Temporary employees will be paid ninety percent (90%) of the starting
rate. Summer hires will be paid $9.50 throughout their period of
employment.
Maintenance Tradespersons' starting rate is:
Start 30-day 60-day 90-day Effective Date
- ----- ------ ------ ------ --------------
tradespersons
base rate
$16.15 $16.74 $17.33 $17.94 6/1/95
$16.63 $17.24 $17.85 $18.48 6/1/96
$17.13 $17.76 $18.38 $19.03 6/1/97
$17.64 $18.29 $18.93 $19.60 6/1/98
$18.26 $18.93 $19.60 $20.29 6/1/99
<PAGE>
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All tradespersons including new hires are eligible for the maintenance
continuity block, in addition to base rate, after they meet the two
year requirement.
3. Assessment and Qualification
The qualification process for acquiring skill blocks will include five
steps: training, competency assessment, mastery, mastery assessment,
and follow-up. Employees will receive the pay for a skill block after
they have trained on the tasks associated with a skill block, have
spent a minimum mastery period practicing these skills, and have
demonstrated mastery of that skill.
a. Training
Training periods will not be fixed, but will be based on business
unit requirements and on an individual's capacity to learn a
particular skill. Opportunity to train will be based on team
seniority, ability to successfully perform the skill, and the
distribution of required skills within the team.
b. Competency Assessment
Employees will be assessed prior to the beginning of their
mastery period to demonstrate the tasks on the skill checklist
safely, efficiently, and effectively.
c. Mastery/Reassessment
Once an employee has demonstrated the ability to competently
perform the skills on the skill checklist, they will begin a
minimum mastery period. During this period, the employee will be
expected to develop and utilize the skill on a regular basis.
After completing this mastery period, the employee will be
reassessed. Once the employee has been reassessed and has
demonstrated mastery, the pay associated with the skill block
will be rewarded. An employee may not be in a mastery period in
more than one skill block.
If an employee is off work 30 consecutive days or less, that time
will be credited toward the mastery period or
<PAGE>
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time/grade system. Time off exceeding 30 consecutive days
(excluding vacations) will not be credited toward mastery or
time/grade system.
d. Follow-up
To maintain the rate of pay associated with all skill blocks,
employees must maintain mastery and perform the skills on a
regular basis. Follow-up assessments may be required of employees
to demonstrate ongoing mastery. Employees who are unable to
demonstrate such mastery will lose the pay for the skill block.
4. Transfers
The following principles will apply to the treatment of skill-based
pay in transfers or other movement.
a. Voluntary Transfer from Team to Team
Employees returning to a former team within two years will
transfer in at the entry rate [$13.44 eff. 6/1/95, $13.84 eff.
6/1/96, $14.26 eff. 6/1/97, $14.69 eff. 6/1/98, $15.20 eff.
6/1/99]. During the first 30 days on the team, employees will be
assessed on the skill blocks they previously held. Training and
mastery periods will be waived for any previously held skill
blocks the employee can perform completely, and the employee will
receive the pay associated with these skill blocks retroactive to
the date of transfer. Employees returning to a former team after
two years will not be given credit for any skill blocks they
previously held. Maintenance tradespersons voluntarily
transferring to a different business unit (Lakeview Mill, LVDP,
LVFCP, BG and KCWest) will have their rate returned to the base
rate for a two year period. If an employee transfers and returns
to the same business unit within two years, the maintenance
continuity block will be restored. This restriction will be
discussed as a separate issue for new or expanded facilities.
<PAGE>
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b. Involuntary Transfer -- Team to Team
When an employee is involuntarily transferred from one team to
another, they will have their rate maintained for a period of one
year from the date of transfer if a rate reduction would
ordinarily result. During this period, employees will receive
wage increases only when the pay for the skill blocks attained in
the new team equals or exceeds the retained rate. After one year
the employee will be paid for those skills that they have
mastered in the new team. (Exception: see employees returning to
former team.) The rate of involuntarily displaced maintenance
tradespersons will be maintained for a period of one year from
the date of transfer. Time spent during this involuntary
displacement will be credited toward the maintenance continuity
block.
5. Physical Limitations -- On Duty
When an employee cannot perform all the skills for which they are
being paid due to a work-related physical limitation, they will have
their current rate maintained for up to 30 days from the date of the
limitation. If the limitation is greater than 30 days and the team can
utilize the individual, the employee will receive pay for those skill
blocks which they are able to fully perform as determined by the
assessment process.
Once physical restrictions have been lifted, employees will receive
the pay for skill blocks relinquished during the period of limitation
providing they can demonstrate mastery on those blocks.
6. Rate Adjustments
When significantly new skills are required to perform the work in a
business unit, or when the current skills are rendered obsolete,
management and union may discuss the anticipated change in the area
work design and the skill-based pay system.
<PAGE>
- --22--
a. New or Changed Skill Blocks
If new or changed skill blocks are required, the area
vice-president and business unit manager may negotiate a pay rate
based on a comparison of similar skills, across and within the
Lakeview/Badger-Globe Mill. Rates negotiated will be retroactive
to the date of the change to the skill-based pay system, but not
to exceed 180 days. The establishment of new rates will not be a
subject of arbitration.
b. Obsolete Skills
When current skills are judged to be obsolete, affected employees
shall receive the pay for that skill block for a period of one
year from the date the skill became obsolete.
B. PREMIUM PAY
1. Monday through Saturday Overtime
Overtime will be paid at time and one-half for all time worked in
excess of the basic schedule of eight (8) hours per day or weekly
hours in excess of forty (40), whichever is greater, but not both.
2. Sunday and Holiday Premium
Double time will be paid for work performed during a twenty-four (24)
hour period on Sundays and holidays. Employees scheduled to work on a
Sunday or holiday will receive a minimum of three (3) hours at the
premium rate, exclusive of work that carries over into their next
regular shift.
Weekday overtime does not apply to hours worked on Sundays or holidays
except when the basic daily schedule on a Sunday or holiday is worked
and the employee continues to work consecutive hours into the next
work day. When this occurs, the employee will be paid week day
overtime of time and one-half for the hours worked after the Sunday or
holiday premium period. This is not applicable unless the hours worked
are consecutive hours.
<PAGE>
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3. Night Differential
For day workers, a night work differential of forty cents (40 (cent))
per hour (45 (cent) eff. 6/1/97) shall be paid for all hours worked
between the hours of 6 p.m. to 6 am., except as described in the
section on temporary change in work schedules.
For employees on eight (8) hour shift schedules, a twenty-five cents
per hour (25(cent)) night differential will be paid for work performed
on the "B" shift and a forty cents per hour (40(cent)) (45(cent) per
hour eff. 6/1/97) differential will be paid for work performed on the
"C" shift.
4. Temporary Changes in Daily or Weekly Work Schedules (This applies only
to day workers and shift workers who are moved to days for more than a
week).
A temporary change from day to night work is one which does not extend
through one (1) workweek. If the temporary change continues into the
next workweek, it will not be considered as a second change in
schedule but a continuation of the original change. Payment for
temporary changes in schedule will be as follows:
a. Time and one-half will be paid for the first two (2) days
(excluding Sundays and holiday) for hours worked between 6:00
p.m. and 6:00 a.m. The premium pay of time and one-half for two
days will not be offset against overtime payable under FLSA.
b. No night differential will be paid during a change in schedule.
5. Call Time/Second Round Trip
Call time is applicable when employees are asked to work hours in
addition to their regular schedule, and the employee is not in the
mill when the request to work additional hours is made. The mill/plant
entrance is the point of reference for being in or out of the mill.
Second round trip is applicable when employees are called or scheduled
to make an additional round trip to the mill during the same day.
<PAGE>
- --24--
The following guidelines explain the premium time associated with call
time or second round trip.
a. If the time worked on the call is greater than two hours = two
hours of call time at straight time rates plus time and one-half
for hours worked. (Exception: Sunday and holiday hours worked are
paid at double time.)
b. If the time worked on the call is less than two hours = two hours
of call time at straight time rates plus two hours of minimum
pay. (Exception: Sunday or holiday pays two hours of minimum pay
at double time.)
Call time and second round trip provisions do not apply when
coming into the mill to remove a lockout lock, or attend a
meeting or fire brigade training.
6. Pay for Work on Scheduled Days Off
Time and one-half will be paid for any hours worked on an employee's
scheduled day of rest. This premium pay will not be offset against
overtime payable under FLSA. This applies to seven-day swing
operations only.
All employees scheduled in advance to come in for work on their
scheduled off-day will be allowed a minimum of four (4) hours of pay
when the pay for the actual time worked is less than four (4) hours.
This minimum allowance does not apply to work which begins prior to
and extends into the employee's next scheduled shift, or to holdover
work from the employee's previous shift.
These provisions are not applicable to voluntary meeting hours.
7. Distribution of Overtime
The opportunity for available overtime work will be distributed among
qualified employees in each business unit. Business units will
determine guidelines for distribution in their respective teams.
<PAGE>
--25--
C. INCONVENIENCE PAY (effective 11/1/95)
When employees work the following overtime hours inconvenience pay will be
applicable:
1. Eligible hours
The following hours worked will be accumulated for each November 1
through October 31 time period:
a. Employees called in -- see Section Nine B5.
b. Additional round trip -- see Section Nine B5.
c. Employees held over beyond their scheduled quitting time
(Emergency Holdover).
d. Inconvenience pay does not apply to Sundays or days of rest.
2. Pay Calculation
Total hours accumulated in C.1 above will be multiplied by $2.20.
3. Payment will be made by November 15 following the November 1 through
October 31 time period.
4. In no case shall employees receive inconvenience pay for holdovers
when notified prior to leaving the mill on their previous workday, or
if they are absent due to accident, illness, permission off, or a
mutual agreement and they are notified when they normally would have
been at work.
D. SEVERANCE PAY
Severance pay is applicable to layoffs due to lack of work. It is not
applicable to interruptions of operations due to fire, flood, strikes, or
curtailment of service.
After ninety (90) days from the date of layoff, an employee will receive a
payment equal to seventy-five dollars ($75) for each full year of
employment.
<PAGE>
- --26--
Should the employee return to work, the period of employment on which the
severance pay is based will be excluded in determining future severance
pay.
No severance pay will be paid to an employee who accepts or rejects an
opportunity to return to work within ninety (90) days of the date of
layoff.
E. FUNERAL PAY
1. Eligibility
Employees will be compensated for time lost from their scheduled hours
of work associated with the funeral of an immediate family member or
relative.
In the event of an absence due to a death in the immediate family or
relative (spouse, son or daughter, mother or father, father-in-law or
mother-in-law, brother, sister or grandparent of the employee), the
employee may receive up to three days of pay associated with the
funeral.
2. Pay
Employees will be paid at straight time for their scheduled hours for
the day(s), excluding overtime. Funeral pay will not be counted as
time worked for the purpose of overtime computation. The employee
shall apply for funeral pay upon return to work.
F. JURY DUTY
1. Eligibility
Employees required to serve on any municipal, county, state, or
federal jury or subpoenaed to appear at one of the above hearings will
be excused for such service.
2. Pay
Employees will be entitled to reimbursement for the difference between
pay received for court service, excluding expenses, and the employee's
basic scheduled hours per day, excluding overtime.
<PAGE>
--27--
Employees must present a signed statement to their crew from the court
showing the day(s) served and the amount of pay received in order to
be eligible for pay.
Employees whose regular schedule is the "C" shift the day preceding a
necessary court appearance will have the option of being scheduled off
either the day preceding or the day of the appearance.
G. BENEFITS
1. General
Employees will be eligible for the following benefits as applicable to
Lakeview/Badger-Globe bargaining unit employees. Summer hire and
temporary employees are excluded from all benefits except the
Retirement and Incentive Investment Plan.
a. Kimberly-Clark Corporation Hourly Employees' Standard Retirement
Plan
b. Kimberly-Clark Corporation Group Life Insurance Plan
c. Kimberly-Clark Corporation Group Dental Insurance Plan or Care
Plus Dental Plan
d. Kimberly-Clark Corporation Managed Care Plan or Health
Maintenance Organization(s)
e. Kimberly-Clark Hourly Employees' Incentive Investment Plan
f. Military Service and Military Leave benefits
g. Sickness and Accident Plan
h. Long-Term Disability Plan
Details of each benefit are available to all employees.
2. Clothing
Where the corporation requires the wearing of uniforms, such uniforms
will be furnished and laundered.
<PAGE>
- --28--
3. Safety Shoes
In the interest of promoting safety, the corporation agrees to
contribute up to ninety dollars ($90) (one-hundred $100 6/1/97) per
contract year towards the purchase of employees' safety shoes
providing the shoes are purchased from the safety shoemobile or
designated vendor.
SECTION TEN: VACATION
A. Eligibility
Employees will become eligible for paid vacation according to the following
schedule:
Weeks of paid Number of weeks
vacation during can be taken as
Years of Employment calendar year day-at-a-time vacation
- ------------------- ------------- ----------------------
1 1 1
3 2 1
8 3 2
12 4 3
18 5 4
25 6 4
B. Vacation Pay
1. Vacation pay will be forty-eight (48) hours per week. Pay will be at
the employee's straight time hourly rate. Exception: Night work
employees on paid vacation will be paid the night differential for
their regularly scheduled shift.
2. One week of day-at-a-time vacation equals six (6) days.
3. Vacation taken day-at-a-time will be paid at eight (8) hours.
4. Employees with eight (8) or more years of service are eligible for one
(1) week of pay for unused vacation. Payment will be made in February
of the following year based on the employee's December 31 pay rate.
<PAGE>
--29--
C. Administration
1. Team vacation liability should be managed in consideration of employee
preferences and business needs.
2. Vacations/days off shall be scheduled by mill seniority by the
business unit crews.
3. Vacation will not be cumulative from year to year.
4. Employees who become eligible for vacations in the calendar year may
take vacation prior to their anniversary date but will not be entitled
to vacation pay until their anniversary date.
5. On the last day of the calendar year an employee becomes eligible for
the vacation for the next calendar year.
6. Any employee in layoff status for more than thirty (30) days will have
the period of time in layoff status excluded in determining vacation
eligibility.
7. Employees eligible for paid vacation who leave the payroll will be
paid for unused vacation for that calendar year. Employees laid off
will be given the option of receiving vacation pay at the time of the
layoff or at the time scheduled for vacation.
8. When an employee attends collective bargaining meetings during their
scheduled vacation, the employee will be eligible for the bargaining
allowance and their vacation will be rescheduled.
9. In cases of transfers, crews will make every effort to honor the
vacation dates the employee had originally signed for.
10. Unless otherwise agreed to the following principles should apply in
signing for vacations.
a. First two weeks -- employees may sign for two weeks on their
first sign-up date.
b. Remaining weeks -- employees may sign up for each
<PAGE>
- --30--
remaining week one week at a time until all vacation weeks have
been exhausted.
c. Day-at-a-time vacations -- employees may sign for two days on
their first sign-up. They may then sign for single days until
their day-at-a-time vacation has been exhausted.
d. Vacations must be signed during the annual sign-up period.
Vacations may be changed by approval.
e. Crew vacations/days off should be scheduled in the following
order:
1. Weekly vacation
2. Personal holiday
3. Day at a time
4. Banked day
f. Vacation liability will not be reduced by employee selection of
payment for unused vacation.
11. Employees will not be permitted to work or attend meetings while off
on vacation. Any exceptions must be approved by the Union President
and Mill/Plant Manager.
SECTION ELEVEN: HOLIDAYS
A. Recognized Holidays and Shutdown Periods
The following are recognized 24-hour holidays. The intent of holidays is
for employees to have a day off from work. The Corporation may operate,
however, on a voluntary basis during the holidays noted, and employees who
are needed for continuous operating services such as boiler house, water
treatment plant, security, etc., may be required to work.
<PAGE>
- --31--
Holiday Operation Status
------------------- ---------------------------
New Year's Eve Day Voluntary -- first 12 hours
New Year's Day Down
Easter Sunday* Voluntary
Memorial Day Voluntary
July 3 or 5 Voluntary
July 4 Voluntary
Labor Day Down
Thanksgiving Voluntary
2 Floating Holidays Voluntary
Christmas Eve Day Down
Christmas Day Down
Personal Holiday N/A
When July 4, Christmas Day or New Year's Day fall on a Sunday, seven-day
shift workers who would have worked on Sunday will recognize their holiday
on Sunday. These employees will work on the next Monday on a scheduled
basis and be paid double time. Seven-day swing shift workers on their day
of rest will recognize the holiday on Sunday. All other employees will
recognize the holiday on Monday.
Personal holidays will be scheduled by teams by mill seniority within
business units according to business needs and employee preferences. Any
employees on the payroll as of January 1 are eligible for a personal
holiday in that calendar year.
B. Easter Sunday Holiday*
Seven-day swing operations shall be shut down for a twenty-four (24) hour
period on Easter Sunday, and those employees whose basic weekly work
schedule would normally require the employee to work during this period
shall be allowed eight (8) hours holiday pay at the employee's regular
straight time rate, excluding night differential.
C. Pay for Holidays Not Worked
Employees will be paid eight hours for holidays at the employee's regular
straight time day rate, excluding night
<PAGE>
- --32--
days off, paid vacation, or leave of absence coincide with Easter Sunday
will not receive Easter Sunday holiday pay.
Employees off due to personal illness or off-duty accident for less than 30
days prior to a holiday will receive holiday pay Employees off due to
personal illness or off-duty accidents for more than 30 days prior to a
holiday, and employees who are on inactive payroll status at the time of a
holiday will not receive holiday pay. This will not be applicable to the
personal holiday.
Employees receiving worker's compensation will not receive holiday pay.
D. Premium Pay for Work on Holidays
Employees working on recognized holidays will be paid double time plus the
holiday allowance for which they are eligible. Double time hours worked on
a holiday (not to exceed eight hours) will be included in determining FLSA
overtime premiums if the holiday falls on a regular scheduled workday for
the employee.
Employees working on recognized holidays may elect to bank their holiday
pay. Banked holiday hours may be applied to receive a day off within one
year of the worked holiday. Pay will be at the employee's straight time
rate at the time of the holiday worked. Hours applied to the day off will
be included in the FLSA computation for the week.
SECTION TWELVE: LEAVE OF ABSENCE
A. Union Business
Any employee selected by the union for an assignment necessitating their
absence from work can be granted a leave from work without loss of
seniority. Requests for leave of greater than one month will be made to the
Mill or Plant Manager.
B. Time Off for Personal Reasons
Requests for personal leaves shall be classified as follows:
<PAGE>
- --33--
1. Off with Permission -- Unpaid absence for a period of seven (7)
calendar days or less. Authorized by crew. Benefits are unaffected.
2. Authorized Leave -- Unpaid absence for a period of more than seven (7)
days, but less than three (3) months. Authorized by business unit
manager. Benefits are unaffected.
3. Certified Leave of Absence -- Unpaid absence for a period of more than
three (3) months. Authorized by business unit manager. The time off is
not counted in computing benefits for which continuous employment is a
factor.
C. Military Service and Leave
The Corporation will abide by all state and federal laws, and joint
union-management agreements concerning military service and leave.
SECTION THIRTEEN: LEARNING AND SKILL DEVELOPMENT
A. Apprenticeship Program
The Union and the Corporation agree to the need for selecting and training
employees as tradespersons through a State-indentured Trades Apprenticeship
training program. The Company further agrees that this program will be the
primary vehicle for filling trades vacancies in the mill.
To accomplish this objective, an apprenticeship advisory committee
consisting of equal management and union representation will review future
manpower needs, establish apprenticeship classes, develop curriculum to
meet business requirements, and guide apprentices through the program.
Applicants will be selected from among the bargaining unit employees.
<PAGE>
- --34--
B. Tuition Reimbursement
When an employee presents evidence of having satisfactorily completed an
educational course which will increase the employee's proficiency within
the business unit and is approved by the Corporation prior to enrollment,
they shall be reimbursed for one-half of the cost of tuition and supplies
(books, forms, drawing instruments, tools, apparatus, etc.).
C. Other
From time to time, salaried employees may temporarily work with teams of
hourly employees for training purposes. No hourly employee shall lose any
seniority nor be deprived of any hours of work because of this program.
These situations will be communicated to the appropriate union
representatives.
Opportunity for training will be offered by team seniority.
SECTION FOURTEEN: SUBLETTING MAINTENANCE, CONSTRUCTION, AND INSTALLATION WORK
The business unit maintenance manager/business unit manager will review the
requirements for the project with appropriate maintenance support team(s)
including union leadership in advance of making a decision to sublet work. Our
intent is to effectively utilize our maintenance resources to accomplish our
business objectives.
SECTION FIFTEEN: UNION RECOGNITION AND ADMINISTRATION
A. Collective Bargaining Unit
The Corporation recognizes the United Paperworker's International Union and
their Neenah Local 482 as the sole collective bargaining agent representing
all employees in the Corporation in the Lakeview/Badger-Globe Mill included
in the certification of the National Labor Relations Board, dated April 19,
1944, and April 16, 1946, and including certain trades and warehouse
employees located at Kimberly-Clark Corporation West Office building, and
<PAGE>
--35--
employees in other warehouse facilities who have been included in the unit
by mutual agreement of the parties, excluding guards as defined in the
National Labor Relations Act as amended, in all matters pertaining to
wages, hours of work, and working conditions.
Crews will provide for union officers to attend union-management meetings.
B. All Union Shop
The Corporation reserves to itself the exclusive right to determine who and
how many persons it will employ. Who and how many persons the Corporation
will retain shall be determined in accordance with the provisions relating
to seniority.
As a condition of continued employment, all current and future employees
must apply and become members of the signatory Union forty-five (45)
calendar days after their respective dates of employment.
C. Dues Collection
The Corporation agrees to deduct the regular monthly Union dues from earned
wages of those employees who individually authorize such deduction in
writing on "Authorization Cards" mutually agreed upon by the Union and the
Corporation, and send such to the Financial Secretary of Local 482 of the
United Paperworker's International Union, AFL-CIO-CLC, within ten (10) days
of the said deduction.
SECTION SIXTEEN: DURATION OF AGREEMENT
A. Change or Modification of Agreement
This agreement shall be in effect 6/1/95, and shall remain in effect until
5/31/2000 inclusive, and from year to year thereafter, unless terminated as
outlined below.
If either party shall desire to change any provision of this agreement, it
shall give written notice of such desire to the other party at least sixty
(60) days in advance of the anniversary date.
<PAGE>
- --36--
If the parties have not reached agreement on or before the anniversary
date, all the provisions of the agreement shall remain in effect unless
specifically terminated in accordance with the provisions as outlined
below.
B. Termination of Agreement
At any time after the anniversary date, if no agreement on the questions at
issue has been reached, either party may give written notice to the other
party of intent to terminate the agreement in (not less than) six (6) days.
All the provisions of the agreement shall remain in full force and effect
until the time set forth has elapsed. During this period, attempts to reach
an agreement shall be continued.
If the parties have failed to resolve their differences before the time set
forth has elapsed, all obligations under this agreement are automatically
cancelled.
C. Interruption of Work
The United Paperworker's International Union, Local 482, at the
Lakeview/Badger-Globe Mill, agrees that there will be no strikes during the
term of this agreement.
Any strike not expressly authorized by the Union in accordance with its
International Constitution, Bylaws, Standing Rules and General Laws, shall
be an unauthorized strike for which there shall be no financial liability
on the part of the United Paperworker's International Union, its local
Union, or officers.
In the event of an unauthorized strike, the United Paperworker's
International Union and the local Union will declare publicly that such
action is unauthorized, will promptly order its members to return to work,
and assist the Management to take such steps as may be deemed necessary to
correct the situation.
The Corporation agrees that there shall be no authorized lockout of
employees. The Union, on behalf of itself and its members, agrees that the
Corporation shall not be liable for any unauthorized lockout by
representatives of the
<PAGE>
--37--
Corporation, provided the Corporation, after receiving notice, promptly
disavows such acts and terminates such lockout.
The Corporation and the Union mutually agree that the existing collective
bargaining agreement shall govern all relations between the parties unless
such provision conflicts with existing or future federal or state statutes
and regulations and Executive Orders, in which event such statutes,
regulations, and orders shall control.
<PAGE>
--38--
SECTION SEVENTEEN: RATES OF PAY
Lakeview/Badger-Globe includes the following units:
Maintenance
-----------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------- ------- ------- -------
TRADESPERSON
Base Rate: $ 17.94 18.48 19.03 19.60 20.29
Continuity Block: $ 0.56 0.58 0.60 0.62 0.64
APPRENTICE
First Year $ 14.86 15.31 15.77 16.24 16.81
Second Year $ 15.41 15.87 16.35 16.84 17.43
Third Year $ 16.14 16.62 17.12 17.63 18.25
Fourth Year $ 17.05 17.56 18.09 18.63 19.28
Appentices will be eligible for maintenance continuity adjustment one year
after all terms of Apprentice indentureship are satisfied and/or they are
offically recognized as a tradesperson by Lakeview/Badger-Globe.
UTILITY
Blade/Sitter Grinder $ 15.08 15.53 16.00 16.48 17.06
First Painter $ 15.61 16.08 16.56 17.06 17.66
BOILERHOUSE
Boiler House Operator
First Year $ 14.49 14.92 15.37 15.83 16.38
Second Year $ 15.49 15.95 16.43 16.92 17.51
Third Year $ 16.48 16.97 17.48 18.00 18.63
Final Year $ 17.49 18.01 18.55 19.11 19.78
<PAGE>
--39--
BADGER-GLOBE
------------
<TABLE>
<CAPTION>
Mastery
period
Skill Blocks in months 6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
- ------------ --------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Entry Rate = $13.44 13.84 14.26 14.69 15.20
Top achievable rate,
per contract year = $18.57 19.13 19.7 20.29 21.00
Manufacturing Team:
Adv. Beater Room 6 $ 0.68 0.70 0.72 0.74 0.77
Basic Beater Room 6 $ 0.68 0.70 0.72 0.74 0.77
No.3 TM 9 $ 1.04 1.07 1.10 1.13 1.17
No.4 TM 9 $ 1.04 1.07 1.10 1.13 1.17
QA/Mfg 1 $ 0.10 0.10 0.10 0.10 0.10
Basic Core 6 $ 0.68 0.70 0.72 0.74 0.77
Advanced Core
Manufact 7 $ 0.80 0.82 0.84 0.87 0.90
Shipping 2 $ 0.24 0.25 0.26 0.27 0.28
TAC 6 $ 0.69 0.71 0.73 0.75 0.78
Training Coordinator 2 $ 0.24 0.25 0.26 0.27 0.28
Converting Team:
Entry Rate = $13.44 13.84 14.26 14.69 15.20
Top achievable rate,
per contract year = $16.86 17.37 17.89 18.43 19.80
Kimpak Operations/
QA 9 $ 1.02 1.05 1.08 1.11 1.15
Core Converting 5 $ 0.58 0.60 0.62 0.64 0.66
Issue/Receiving 3 $ 0.34 0.35 0.36 0.37 0.38
Truck Coordination 4 $ 0.46 0.47 0.48 0.49 0.51
Janitor 1 $ 0.10 0.11 0.11 0.12 0.13
Team Coordinator 4 $ 0.46 0.47 0.48 0.49 0.51
Team Administration 2 $ 0.23 0.24 0.25 0.26 0.27
Training Coordinator 2 $ 0.23 0.24 0.25 0.26 0.27
</TABLE>
<PAGE>
--40--
BADGER-GLOBE (CONT.)
--------------------
UTILITY TEAM
------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------ ------ ------ ------
Entry $ 13.44 13.84 14.26 14.69 15.20
1 month $ 13.90 14.32 14.75 15.19 15.72
7 months $ 14.58 15.02 15.47 15.93 16.49
13 months $ 15.27 15.73 16.20 16.69 17.27
19 months $ 15.95 16.43 16.92 17.43 18.04
LVDC
----
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------ ------ ------ ------
Level 1 $ 13.44 13.84 14.26 14.69 15.20
Level 2 $ 14.58 15.02 15.47 15.93 16.49
(12 months)
Level 3 $ 15.15 15.6 16.07 16.55 17.13
(6 months)
Level 4 $ 15.96 16.19 16.68 17.18 17.78
(6 months)
Level 5 $ 15.96 16.44 16.93 17.44 18.05
Level 6 $ 16.40 16.89 17.40 17.92 18.55
LV FACILITIES SERVICES
----------------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------ ------ ------ ------
Entry (1 year) $ 13.44 13.84 14.26 14.69 15.20
Janitors (3 months) $ 14.58 15.02 15.47 15.93 16.49
Security (3 months) $ 15.15 15.60 16.07 16.55 17.13
Stores (9 months) $ 15.84 16.32 16.81 17.31 17.92
Flex (10 months) $ 15.96 16.44 16.93 17.44 18.05
Materials (5 Months) $ 15.96 16.44 16.93 17.44 18.05
Planner (3 Months) $ 16.40 16.89 17.40 17.92 18.55
<PAGE>
--41--
FACIAL COVERTING
----------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------ ------ ------ ------
Entry Rate $ 13.44 13.84 14.26 14.69 15.20
Increace each 6 months
for 30 months $ 0.38 0.39 0.41 0.42 0.43
Month 36 -- Crew $ 15.73 16.20 16.69 17.19 17.79
Member
Crew Leader $ 16.68 17.18 17.70 18.23 18.87
TOWEL CONVERTING
----------------
Mastery
period
Skill Blocks in months 6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
- ------------ --------- ------- ------ ------ ------ ------
Entry Rate = $ 13.44 13.84 14.26 14.69 15.20
Top Achievable
Rate = $ 16.80 17.30 17.82 18.35 18.99
Core Machine 3 $ 0.34 0.35 0.36 0.37 0.38
#5 Winder 7 $ 0.80 0.82 0.84 0.87 0.90
Ink Formulator 1 $ 0.10 0.10 0.10 0.10 0.10
#5 Wrappers 7 $ 0.82 0.84 0.87 0.90 0.93
Bundler 1.5 $ 0.18 0.19 0.20 0.21 0.22
Stckwrapper 1.5 $ 0.19 0.20 0.21 0.22 0.23
Team Administrator 2 $ 0.24 0.25 0.26 0.27 0.28
Team Coordinator 4 $ 0.46 0.47 0.48 0.48 0.50
Training Administrator 2 $ 0.23 0.24 0.24 0.24 0.25
LAKEVIEW BEATER ROOM
--------------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------ ------ ------ ------
Entry Rate $ 13.44 13.84 14.26 14.69 15.20
Increace each 6 months $ 0.25 0.26 0.26 0.27 0.28
for 30 months
Increace after $ 0.23 0.23 0.27 0.26 0.27
36 months
Increase each 6 $ 0.32 0.33 0.34 0.36 0.37
months for 24 months
Month 66 -- $ 16.54 17.04 17.55 18.08 18.71
Crew Member
<PAGE>
- --42--
LAKEVIEW BEATER ROOM (Cont.)
----------------------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------- ------- ------- -------
Back-up crew leader $ 16.85 17.36 17.88 18.42 19.06
Crew Leader $ 17.80 18.33 18.88 19.45 20.13
LAKEVIEW MANUFACTURING
----------------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------- ------- ------- -------
Entry rate $ 13.44 13.84 14.26 14.69 15.20
Increase each 6 months
for 30 months $ 0.43 0.45 0.46 0.47 0.49
Months 36-60 $ 16.04 16.52 17.02 17.53 18.14
Increase each
6 months $ 0.38 0.39 0.40 0.42 0.43
for 18 months
Month 84 -- Crew $ 17.56 18.09 18.63 19.19 19.86
member
Back-up crew leader $ 17.82 18.35 18.90 19.47 20.15
Crew Leader $ 18.57 19.13 19.70 20.29 21.00
DIAPERS
-------
Skills 6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
- ------ ------- ------- ------- ------- -------
Entry Rate = $ 13.44 13.84 14.26 14.69 15.20
Operations Team:
Top achievable rate, $ 17.20 17.72 18.25 18.80 19.46
per contract year =
Basic (13 months) $ 1.48 1.53 1.57 1.62 1.68
Advance (11 months) $ 1.26 1.30 1.34 1.38 1.43
Flex/machine spec.
(9 months) $ 1.02 1.05 1.08 1.11 1.15
Day Cleaner $ 14.11 14.53 14.97 15.42 15.96
Quality Team:
Top achievable rate, $ 14.92 15.37 15.83 16.30 16.87
per contract year =
Basic Quality
(4 months) $ 0.46 0.48 0.49 0.50 0.52
Expert Quality
(9 months) $ 1.02 1.05 1.08 1.11 1.15
<PAGE>
--43--
DIAPERS(Cont.)
--------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------ ------ ------ ------ ------
Stores Team:
Top Achievable rate $15.84 16.32 16.81 17.31 17.92
per contract year=
Utlilty/Chemical
(2months) $ 0.23 0.24 0.25 0.26 0.27
Customer Service
(4 months) $ 0.45 0.46 0.47 0.48 0.50
Receiving Services
(5 months) $ 0.58 0.60 0.61 0.62 0.64
Stores System
Specialist (2 months) $ 0.23 0.24 0.25 0.26 0.27
Planning Director $ 0.45 0.46 0.47 0.48 0.50
- --Stores
Team Administrator $ 0.23 0.24 0.25 0.26 0.27
- --Stores
Training/Coordinator $ 0.23 0.24 0.25 0.26 0.27
- --Stores
FEMININE CARE
-------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------ ------ ------ ------ ------
Entry $13.44 13.84 14.26 14.69 15.20
6 months $14.01 14.43 14.86 15.31 15.85
12 months $14.58 15.02 15.47 15.93 16.49
18 months $15.15 15.60 16.07 16.55 17.13
24 months $15.72 16.19 16.68 17.18 17.78
30 months $16.29 16.78 17.28 17.80 18.42
36 months $16.86 17.37 17.89 18.43 19.08
<PAGE>
- --44--
KC-WEST WAREHOUSE
-----------------
6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------ ------ ------ ------ ------
Entry $13.44 13.84 14.26 14.69 15.20
Utility (12 months) $14.58 15.02 15.47 15.93 16.49
Flex $15.49 15.95 16.43 16.92 17.51
Shipping/Receiving $15.49 15.95 16.43 16.92 17.51
Truck and Material
Handling $15.49 15.95 16.43 16.92 17.51
Stores $15.84 16.32 16.81 17.31 17.92
Hut $15.84 16.32 16.81 17.31 17.92
<PAGE>
--45--
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
at Neenah, Wisconsin this 19th day of June 1995.
FOR THE CORPORATION:
H.A. Lindeke /s/ A.R. Coons /s/
- ------------------------------------- ----------------------------------
R.B. Reilly /s/ K.R. Lett /s/
- ------------------------------------- ----------------------------------
J.A. Reker /s/ B.L. Olejniczak /s/
- ------------------------------------- ----------------------------------
W.P Ward /s/
- ------------------------------------
FOR THE UNION:
UNITED PAPERWORKER'S INTERNATIONAL UNION,
AFL-CIO-CLC
Wayne E. Glenn, President
Jon Geenen /s/ Kelly L. Burr /s/
- ------------------------------------- ----------------------------------
International Representative Area Vice President,
Local No. 482 (Witness)
Robert W. Ekdahl /s/ Douglas M. Bethke /s/
- ------------------------------------- ----------------------------------
President, Local No. 482 Area Vice President,
Local No. 482 (Witness)
Kathleen M. Hamilton /s/ Kevin P. Duffey /s/
- ------------------------------------- ----------------------------------
Executive Vice President, Area Vice President,
Local No. 482 (Witness) Local No. 482 (Witness)
Michael R. Heinritz /s/ Kenneth J. Allcox /s/
- ------------------------------------- ----------------------------------
Secretary, Local No. 482 Area Vice President,
(Witness) Local No. 482 (Witness)
Leo J. Roth /s/ Dean M. Hoks /s/
- ------------------------------------- ----------------------------------
Area Vice President, Area Vice President,
Local No. 482 Local No. 482
(Witness) (Witness)
Garry L. Turner /s/ Karmen K. Jones /s/
- ------------------------------------- ----------------------------------
Area Vice President, Area Vice President,
Local No. 482 Local No. 482
(Witness) (Witness)
LABOR AGREEMENT
BETWEEN
CROWN
Vantage
Printing,
Publishing, and
Specialty Papers
AND
UNITED PAPERWORKERS
INTERNATIONAL
UNION
A.F.L. - C.I.0.
AND ITS
UNITED BROTHERHOOD
LOCAL UNION NO.75
o
JUNE 25, 1997 - JUNE 24, 2002
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Article
<S> <C> <C>
Purpose of Agreement 1 1.1
Certification and Recognition 1 1.2
Supervisors Performing Work 1 1.4
E.E.O.C. 1 1.5
Union Security 1 2.1
Employee Meetings 2 2.5
Training Sessions 2 2.5
No Strikes or Lockouts 3 3.1
Union Representation 3 4.1
Regular Conferences 3 5.1
Procedure Applicable to Disputes of a General Nature 3 6.1
Employee Grievances 4 7.1
Work Week 5 8.1
Posting of Schedules 5 9.1
Overtime and Overtime Pay 6 10.1
Filling Vacancies 6 11.1
Equitable Distribution of Overtime 7 12.1
Holidays 8 13.1
Modernization 10 14.1
Temporary and Probationary Employees 10 15.1
Causes for Loss of Seniority 11 16.1
Retention and Accumulation of Seniority--Military Service 11 17.1
Newly Appointed Supervisors 11 17.2
Apprentices 12 17.3
Seniority--Departmental and Company--Use in Layoffs 12 18.1
Permanent Layoff Procedure 13 19.1
Recall of Employees after Permanent Layoff 13 20.1
Recall of Curtailed Employees 14 20.2
Filling Vacancies and Promotions 14 21.1
Employment Pool Schedule 15 21.3
Temporary Promotion Time Limit 16 21.4
Transfers 16 22.1
Review--Revision--Waiver of Seniority 17 23.1
Vacation 17 24.1
Wage Rates 19 25.1
Cash Sharing 19 25.3
Shift Jobs 20 26.1
Working Lunch Hour, Traveling--Lunches 21 27.1
Call In 21 28.1
Failure to Provide Work 21 29.1
Rates for Assigned Jobs 22 30.1
Insurance Benefits--Pensions 22 31.1
Death Immediate Family 22 31.5
</TABLE>
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<TABLE>
<S> <C> <C>
Jury Duty 23 31.6
National Guard--Reserve Training 23 31.7
Legislative Meetings 23 31.8
Protection of Company Property 23 32.1
Notice of Absence or Return to Work 23 33.1
Safety and Health 24 34.1
Bulletin boards 24 35.1
Dismissals 24 36.1
Management 25 37.1
Company Rules 25 37.2
Enabling Agreement 25 37.3a
Maintenance Flexibility 25 37.3b
Cooperation for Continuous Improvement 27 37.3c
Statement of Policy 28 38.1
Continuation of Contract Obligation 28 39.1
Government Regulations 28 40.1
Duration and Termination 28 41.1
Exhibit A
Company Rules
30
Exhibit B
Prescription Drug Plan 33
Berlin-Gorham Dental Care Program 33
Exhibit C
Health Care Plan 35
Mental Health and Substance Abuse 35
Retiree Group Hospital and Medical Plan 35
Sickness and Accident Benefits 36
Life Insurance 36
Total and Permanent Disability Benefit 36
Exhibit D
Pension 38
Death Benefit 39
Wage Rate Schedule 40
</TABLE>
<PAGE>
LABOR AGREEMENT
THIS AGREEMENT, made and entered into as of the 24th day of June, 1997 by and
between CROWN VANTAGE (hereinafter referred to collectively as the Company), and
the UNITED PAPER WORKERS INTERNATIONAL UNION, A.F.L.-C.I.O., and its UNITED
BROTHERHOOD LOCAL NO. 75 (hereinafter called the Union), an organization of the
employees of Crown Vantage, Berlin and Gorham, New Hampshire
WITNESSETH:
PURPOSE AND RECOGNITION
1.1 The general purpose of this agreement is, in the mutual interest of the
Company and the employees, to provide for the operation of the Berlin, Gorham
and Shelburne plants of the Company under methods which will further to the
fullest extent possible the safety, welfare and health of the employee, economy
of the operation, quality and quantity of output, cleanliness of plants and
protection of property. It is recognized by this agreement to be the duties of
the parties to this contract to cooperate fully, individually and collectively,
for the advancement of these conditions.
1.2 In accordance with the certification of the National Labor Relations Board
dated July 16, 1954, the Company recognizes the Union as the sole and exclusive
representative of all the employees, hereinafter defined, in its manufacturing
plants, for the purpose of bargaining with respect to rates of pay, wages, hours
of employment, and other conditions of employment and for the adjustment of
grievances.
1.3 The term "employee" as used in this agreement shall refer to all of the
employees in the Company's manufacturing plants in Berlin and Gorham, New
Hampshire, and vicinity, excluding employees of outside contractors who may be
working on the Company's premises, executives, superintendents, secretaries and
salaried office employees, general office janitors, trainmen, locomotive
firemen, engine men, maintenance of way employees, guards (including watchmen,
professional employees and supervisors as defined in Section 2(11) of the
National Labor Relations Act.)
1.4 It is recognized that supervisory, office clerical and professional
personnel are excluded from the provisions of this labor agreement, and
accordingly, it is not proper for these employees to perform work which is
ordinarily performed by production and maintenance workers. It is recognized,
however, that there are times when it will be necessary for supervisors who are
outside the bargaining unit to perform minor work only in cases of emergency or
instruction. Such occasions must be temporary in nature.
1.5 The Union and the Management agree to provide Equal Opportunity for
employment, training and development, transfer, promotion and compensation
without regard to race, creed, color, National origin, sex, age or status as a
qualified individual with a disability.
UNION SECURITY
2.1 Membership in the Union shall be a condition of continued employment of all
employees who have completed thirty (30) days of employment with the company
subject, however, to the limitations upon this requirement set forth in Section
8 (a)(3) of the National Labor Relations Act.
2.2 The Union agrees to accept into membership any employee within said unit
without in any way
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discriminating against such employee, and that it will not make any condition to
join the Union against any new applicant for membership which will be more
burdensome that the conditions applicable to all present members of the Union.
If any application for membership is rejected by the Union, the employee
concerned shall not, because of such rejection, lose his/her rights or status as
an employee until otherwise determined through the arbitration procedure
provided in this agreement. The Union agrees that it will not discriminate
against employees who join the Union under provisions hereof and will not
arbitrarily or capriciously suspend or expel any member from the Union.
2.3 The Union agrees that it will not ask or require the Company to lay off or
discharge any employee pursuant to the Union Shop provision of this agreement
under circumstances which make the layoff or discharge, if put into effect, a
violation of the National Labor Relations Act. The Union further agrees that in
the event of any dispute arising between the Company and the Union as to the
propriety of any action taken by the Union against any employee which would
necessitate his/her layoff or discharge by the Company, the dispute shall be a
proper subject for arbitration under the Grievance Procedure set forth in this
agreement, and the employee shall remain at work until the case is settled by
arbitration.
2.4 Upon individual written authorization by an employee, which shall not be
irrevocable for more than a year, or the termination date of this agreement,
whichever occurs sooner, the Company agrees to deduct the Union dues, each
month, from the compensation of each employee who is a member of the Union. The
Company further agrees that this deduction shall be made from the first pay
check of each month. The Company also agrees to remit all Union dues deducted to
the Financial Secretary of the local Union.
2.5 The Union agrees for itself and its members that they will individually and
collectively perform loyal and efficient work and service, should be active and
willing participants in required safety and informational meetings and training
sessions, and will use their influence and best efforts to promote and advance
the interests and products of the Company at all times.
The Company and the Union jointly recognize the need and desire to have a
well-trained, informed, and proficient work force.
Employee Meetings
From time to time it may be necessary for management to schedule employee
meetings, which necessitate employee attendance, to discuss safety, quality,
etc. No more than three (3) such meetings will be scheduled per month.
They will normally be scheduled in the following manner.
a) There will be a minimum of 24 hours notice by posting a written memorandum
on the bulletin boards in the department(s) affected.
b) Meetings will be held either
1) after the close of the shift, or
2) just prior to the start of the shift
c) Employees will be reimbursed for time spent in attendance at such meetings
as hours worked.
d) Employees may be excused, from time to time, from attendance at such
meetings for valid reasons provided they get prior approval from their
supervisor.
Training Sessions
The Company recognizes the need to minimize disruption of employees' off-work
time, and will try to schedule training sessions within normal work hours.
However, it may be necessary to schedule employees for training sessions on
their normal off days.
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a) Employees scheduled to attend a training session on their day off will be
offered a compensating day off at a mutually agreeable time within thirty
(30) days.
b) Employees who are on vacation or who are out sick will not be required to
attend.
c) Employees will be reimbursed for time spent in attendance at such training
sessions as hours worked.
d) Employees may be excused, from time to time, from attendance at such
sessions for valid reasons provided they get prior approval from their
supervisor.
When practical, training sessions will be scheduled at the mill site or in the
local area. However, in some circumstances training will only be available
outside the local area. In this event, the Company will furnish suitable
transportation or expenses for reasonable transportation and living expenses per
Company policy. Employees will receive a full day's pay for each day of travel
and/or training attended.
NO STRIKES OR LOCKOUTS
3.1. The Union agrees that while this contract is in effect there shall be no
strike, slowdown, stoppage of work, or any interference with efficient
production. The Company agrees that there shall be no lockout of employees by
the Company. It is expressly agreed by the parties hereto that nothing contained
in this section or any part of this contract shall be construed or used in a
manner to form the basis for an allegation of violation of this contract for the
purpose of supporting any legal or court action, unless and until the party so
alleging or complaining has notified the other party hereto of the existence of
the complaint, or contention, and the latter party, after having been allowed a
reasonable opportunity to correct the same, shall refuse to do so.
UNION REPRESENTATION
4.1 The Union reserves the right to appoint full-time Business Agents at any
time to serve in conjunction with the Union Committee, and to call
representatives of the International Union in on any matter not pertinent to the
grievance procedure. The foregoing shall not exclude the International
Representative from the appropriate stages of the grievance procedure.
REGULAR CONFERENCES
5.1 The Union Committee and the Company Committee shall meet regularly on the
second Wednesday of each month and at such other times as is required to discuss
complaints, and grievances of a general nature arising out of this agreement on
matters concerning the working conditions of the employees. A representative of
the International Union may be present at the will of the Union.
PROCEDURE APPLICABLE TO DISPUTES
OF A GENERAL NATURE
6.1 Whenever a dispute exists over a question of a general nature arising out of
conflicting interpretations of this agreement, the matter shall be submitted to
a conference between the Union Committee, the Director of Human Resources, and
any other representatives of management whom the latter deems necessary to
consider the question. If the matter is not thereby settled, the procedures of
Step II and III shall be followed.
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EMPLOYEE GRIEVANCES
7.1 An employee grievance is a complaint as to his/her wages, hours, working
conditions or other conditions of employment, or his/her discharge, which an
employee must have brought to the attention of his/her immediate supervisor in
his/her department and which has not been adjusted to the employee's
satisfaction. In such cases the grievance must be submitted in writing by the
employee using the proper grievance forms. The time limits established for the
grievance steps shall not include Saturdays, Sundays, or Holidays.
7.2 All grievances must be brought to the attention of the appropriate
supervisor within ten (10) days after the cause for complaint has occurred. All
grievances shall be disposed of in accordance with the time limits set forth in
the Grievance procedure. Postponement may be arranged by mutual consent.
7.3 When a situation occurs when an employee feels an injustice has been done,
the aggrieved employee must (before any grievance is filed), approach his/her
immediate supervisor to discuss the complaint. If the parties cannot agree to
settle the complaint, then the aggrieved employee may file a grievance. The
grievance must specify what article of the Labor Agreement has been violated.
7.4 Step I of the grievance procedure is between the salaried supervisor,
superintendent, aggrieved employee, department steward and chief steward. The
grievance meeting will be arranged by the company. The company answer must be
given by the superintendent within three days of the meeting.
7.5 If no settlement is arrived at in Step I, then a Step II grievance meeting
will be arranged by the Human Resources Department between the aggrieved
employee, the Department Steward, the Chief Plant Steward, the Business Agent,
and anyone else the local union may deem necessary; for example, the
International Representative. The Company will be represented by the Division
Operations Manager, the Labor Relations Manager, Supervisor and any other
members of management whose presence is deemed necessary. The Company answer
will be given by the Operations Manager within four (4) days of the meeting.
7.6 Whenever a grievance is not processed within the time limits as specified in
each step of the grievance procedure, the grievance shall automatically proceed
to the next step in the grievance procedure, unless such time limits have been
extended by mutual consent of both parties.
7.7 In the event the dispute has not been satisfactorily settled by the above
method, either the Company or the Union must notify the other party of its
intention to appeal the matter to arbitration within thirty (30) days following
the date of the written answer at Step II, before an impartial arbitrator to be
appointed by the American Arbitration Association, upon written application by
either party, with a copy of said written application sent simultaneously to the
other party. The impartial arbitrator shall interpret and apply this agreement
but he/she shall not have power or authority to add to or subtract from this
agreement. His/her decision shall be final and binding on both parties and all
parties agree to abide by his/her award. Each party shall bear the expenses of
its own representatives at the arbitration proceeding and all other expenses of
the arbitration, including those of the impartial arbitrator, shall be shared
and paid equally by the parties. If either the Company or the Union fails to
notify the other party of the intention to appeal the matter to arbitration
within the thirty (30) days mentioned above, the grievance shall be considered
settled at Step II of the grievance procedure. The arbitration provisions
contained in this agreement are hereby specifically made subject to the
provisions of Section I, Chapter 415 of the revised Laws of New Hampshire 1942,
as amended by Section I, Chapter 191, of the Laws of New Hampshire 1945 (Chapter
542, RSA).
7.8 The retroactive effect of any claim arising out of any grievance shall be
limited to the date of
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presentation of the grievance. Liability for any grievance will be limited to
one hundred twenty (120) days from the date of the incident unless the union
formally files for arbitration with the AAA within this time frame.
WORK WEEK
8.1 Normal hours of work for day workers shall be as follows:
8:00 am. to 4:00 p.m.
Normal hours of work for tour workers shall be as follows:
7:00 a.m. to 3:00 p.m.
3:00 p.m. to 11:00 p.m.
11:00 p.m. to 7:00 a.m.
7:00 a.m. to 7:00 p.m.
7.OO p.m. to 7:00 a.m.
No tour worker, after being relieved, may punch out prior to fifteen (15)
minutes before the end of his/her shift.
The company will entertain requests to work different hours than those listed
above. However, for operating needs the company will designate the hours.
8.2 The regular pay week shall start on Sundays at 7:00 a.m. for tour workers
and 8:00 am. for day workers. The normal work day shall consist of eight (8)
hours or twelve (12) hours and the normal work week shall consist of any three
(3), four (4) or five (5) days Sunday through Saturday, that is, the Company may
direct continuous operations up to and including seven (7) days per week in any
or all of its plants or any or all departments thereof and the weekly work
schedule of individual employees may or may not include Sunday work as the
Company shall determine. Forty (40) hours of pay constitutes a complete work
week.
8.3 In all departments or groups where senior employees work every Sunday,
rotating schedules with a long weekend for each employee shall be put into
effect.
POSTING OF SCHEDULES
9.1 Schedules shall be posted when possible not later than Thursday noon showing
each employee's days to work for the ensuing week. These schedules may be
changed when operating conditions make it necessary. If a change is
contemplated, the employee will be notified of change before the end of his/her
preceding shift if it is possible to do so.
9.2 Unscheduled work shall not be deducted from regular scheduled work.
9.3 In any work week which includes an unworked holiday, forty (40) pay hours
constitutes a complete work week. In any work week which includes a worked
holiday forty (40) work hours constitutes a complete work week. Shift tradesmen
will remain intact on their normal shift during these weeks. If additional
employees are needed on holidays, they will be filled by canvassing from senior
person on down in the trade where the opening occurs. This article also covers
Yards, Cleaners and Stores.
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9.4 It is recognized that the daily and weekly schedules are subject to change
based on product demand and operating efficiencies, and that the Company
necessarily retains the right to determine work schedules, schedule straight
time and overtime hours and the number of shifts, and that it is the obligation
of employees to work as scheduled.
OVERTIME AND OVERTIME PAY
10.1 All employees will receive time and one-half for all hours worked after
accumulating forty (40) work hours. No employee shall refuse a request for
overtime work without a justifiable reason.
10.2 Tour workers with a justifiable reason for so doing may exchange shifts
with their mates within the same work week providing they first have permission
from the supervisor and providing, further that the exchange of shift does not
require the Company to pay overtime for any of the work involved.
10.3 Tour workers who have been absent from work on their regular shift and who
have not been excused by their supervisor shall first report to their supervisor
the reason for their absence before going to work on any succeeding shift.
Unexcused absences and absences without justifiable reason shall be subject to
corrective measures on the part of the Company.
10.4 Double time shall be paid for all work performed on Sundays.
10.5 No employee shall be forced or permitted to work more than eighteen (18)
hours within any twenty-four (24) hour period. Employee must have at least six
(6) consecutive hours outside the mill prior to returning to work to reset the
clock to make employees eligible for another eighteen-hour work period.
FILLING VACANCIES
11.1 The following procedures shall apply whenever a vacancy occurs for
scheduled work on any shift:
8-Hour Shifts
1. Supervisor will determine the need to fill.
2. Fill at straight time by pushing crew up, utilize pool.
3. Push up crew, fill bottom job with overtime list.
4. Force low qualified employee on shift in the department to work the
overtime.
5. If the employee has already worked sixteen (16) consecutive hours, force
the next low qualified employee on shift who hasn't worked sixteen (16)
consecutive hours.
* Employees forced to stay an additional shift shall have the option of finding
their own relief from qualified employees in or out of the mill.
12-Hour Shifts
1. The supervisor will determine the need to fill the vacancy.
2. Fill at straight time by pushing up crew, utilize pool.
3. Push up crew, fill bottom job with overtime list (six or twelve hours).
4. Force low qualified employee on shift in the department who has not worked
eighteen (18) consecutive hours.
5. Employees will be charged for all overtime hours they are eligible for not
to exceed eighteen hours.
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No bargaining unit employee will be forced to work overtime because of the
absence of a salaried supervisor.
EQUITABLE DISTRIBUTION OF OVERTIME
12.1 All overtime work in the various departments or employee groups shall be
distributed equally among eligible employees in accordance with overtime record,
low qualified employee being asked first. The record of overtime work hours
shall be posted daily in the departments.
12.2 In posting overtime, all overtime hours worked or refused will be utilized
in recording the overtime list, except as noted in Article 12.3.
12.3 The following items are not calculated in overtime chargeable hours:
- Safety meetings
- Task forces
- Emergency Response Team/Fire Brigade
- Training
- Union Business
- Reporting for scheduled work when no work is available as defined in
Paragraph 29.1 of this agreement.
- Employee meetings
- Day workers called in between the hours of 12 o'clock midnight and
8:00 am.
- Employees working outside their bid department on overtime.
12.4 Overtime posting sheets shall be renewed at the close of every 13-week
period. At that time the employee with the least amount of charged overtime will
start at zero and the charged overtime of all other employees in the department
will be reduced by the number of hours that have been canceled from the low
person's record.
EXAMPLE
Employee hours at end of 13
weeks Starting new sheet
A 75 30 hours
B 70 25 hours
C 65 20 hours
D 55 10 hours
E 80 35 hours
F 76 31 hours
G 45 (low person) 0 hours
H 56 11 hours
I 64 19 hours
J 49 4 hours
K 60 15 hours
12.5 For purpose of overtime distribution and Sunday work, according to
departmental policy, a new employee in a department or employee group must work
fifteen (15) days in that department of employee group before he/she becomes
eligible. These provisions will not apply in any department when the four-crew
schedule is in effect. When he/she does become eligible to participate in
overtime distribution and Sunday work in that department or employee group,
he/she shall be charged
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immediately with the average number of overtime hours which are charged to all
of the employees of that department of employee group and he/she shall not be
charged for any overtime hours thereafter worked by him/her in any other
department.
The above provisions shall not apply to maintenance employees who are
transferred from one department to another within the trade. Those employees
transferred will be averaged in on the overtime list the first day.
12.6 When a regular employee of a department or employee group is absent for
more than a calendar week by reason of sickness, suspension, injury, by reason
of layoff, or bidding to another department and returning to original department
after refusing bid jobs, he/she shall be charged with a refusal of all overtime
which he/she would have been entitled to work had he/she not been absent.
12.7 In the record of overtime hours, all overtime hours worked shall be charged
and considered on the same basis, regardless of the overtime premium which
applies.
12.8 The supervisor's record of overtime hours worked shall be checked by the
supervisor and steward daily. If the steward shows that the record is incorrect
it shall be corrected at once by the supervisor. If the steward shows that an
employee or employees were not given overtime when their turn came up, that
employee or those employees will be given a makeup for the time involved. It is
understood that in the administration of overtime as set forth above, however,
daily overtime shall be worked by the employee on the job, on the shift upon
which the overtime is being worked. Management will not switch employees on the
job for the sole purpose of being selective of employees to receive overtime.
HOLIDAYS
13.1 The days upon which New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Fourth of July, Labor Day, Thanksgiving Day, December 24 and Christmas Day
are observed shall be considered as paid holidays.
13.2 For the purpose of computing holiday pay, the holiday shall be measured by
a twenty-four (24) hour period beginning, for shift workers, at 7:00 am. on the
day observed as the holiday and continuing until 7:00 a.m. on the following day.
For day workers, the holiday shall begin at 8:00 am. and continue until 8:00
a.m. on the following day.
13.3 When an employee works on December 24(3-11 and 11-7 shifts), or Christmas,
he/she shall be paid triple times his/her regular hourly rate for all hours
worked by him/her on such a holiday.
13.4 When an employee works on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Thanksgiving Day Fourth of July, or Labor Day, he/she shall be
paid straight time for all hours worked on said holiday up to and including the
eighth hour of work, and time and one-half for all hours worked over forty (40)
work hours plus eight (8) hours straight time pay at his/her regular straight
time hourly rate, as it appears upon his/her time card.
13.5 When an employee works on the day observed as the holiday, he/she shall be
paid in accordance with articles 13.3 or 13.4 of this agreement
13.6 The Company may at its option schedule employees to work or not work on the
following holidays: New Year's Day, Fourth of July, Labor Day, Thanksgiving
Day, December 24 and Christmas Day. The company will give the employees the
option to work on Presidents' Day, Good
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Friday and Memorial Day.
For the Christmas holiday period (3-11 & 11-7 shifts or 7 p.m. to 7 a.m. on
December 24th and all shifts on December 25th), an employee scheduled to work
who would prefer not to work will inform his/her supervisor of this desire. The
Company will solicit qualified volunteers, by seniority, to replace the employee
who would prefer not to work the holiday. If a qualified volunteer is not
obtained, the Company and Union representatives for the affected department will
seek opportunities to work shorthanded, with safety being of primary concern. If
a qualified volunteer is not obtained and it is not practical to work
short-handed, the employee will work as scheduled.
13.7 When an employee is scheduled to work on the day observed as the holiday
and does not work as scheduled, he/she shall not be paid for the holiday unless
excused in writing by his/her department head.
13.8 Each employee who is not scheduled to work on any holiday and qualifies
therefore, or who is on vacation, shall be paid (8) hours straight time pay at
his/her regular straight time hourly rate, as it appears upon his/her time card,
for said holidays. In order to qualify for these unworked holidays, the
employee:
a. must have completed thirty(30) calendar days of employment with the
Company, and
b. must have worked for the company at some time within the sixty (60) days
immediately prior to the holiday; and
c. must have worked his/her last scheduled workday before the holiday is
observed and his/her first scheduled workday after the holiday is observed,
if any such days are scheduled for him/her, unless excused in writing by
his/her department head.
13.9 In applying the provisions of article 13.7 to employees in the Employment
Department, the following procedure shall be followed:
On all operating holidays, employees in the Employment Department who are
unassigned and who qualify for holiday pay under subparagraph "a" and "b" of
article 13.7, above, must report for work on the day before the holiday, on the
holiday and on the day after the holiday, and must accept work, if assigned, in
order to qualify under subparagraph "c" of article 13.7, unless otherwise
instructed by management.
13.10 * EXAMPLES OF OVERTIME CALCULATION FOR HOLIDAYS
Tuesday is the holiday
Su M Tu W Th F Sa TOTAL
EMPLOYEE WORKS 10 8 10 10 8 8 8 62 Hours
COMPANY PAYS 20 8 18 10 11 12 12 91 Hours
Tuesday is the holiday
Su M Tu W Th F Sa TOTAL
EMPLOYEE WORKS 10 8 0 10 8 8 8 52 Hours
COMPANY PAYS 20 8 8 10 8 10 12 76 Hours
Tuesday is the holiday
Su M Tu W Th F Sa TOTAL
EMPLOYEE WORKS 10 8 2 10 8 8 8 54 Hours
COMPANY PAYS 20 8 10 10 8 11 12 79 Hours
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* The foregoing examples are not intended to change the right of employees where
Paragraph 28.1 applies
MODERNIZATION
14.1 During the period of modernization the company will have to make changes in
equipment, operating processes and personnel that may result in adding some new
jobs, changing or eliminating others, consolidating duties and rearranging
crews. The need for change and the formulation of plans for changes and the
procedure to be followed in instituting any change will be determined by the
Company. The Union will be advised of any change that has been determined and
when it will be placed into effect. Any claimed violation of the contract will
be handled through the Grievance Procedure. In order to obtain the facts with
respect to any department, or any portion thereof or with respect to any job
operation, the Company reserves the right to use all available means or methods,
such as; job analysis, time study of both machines and employees, methods study,
motion study, the suggestions of supervisors, and the services of industrial
engineers and other consultants. The Union agrees to cooperate with the Company
on these studies and reserves the right to make suggestions. In any department,
or portion thereof, where the accumulated facts indicate that increased
efficiency and lower unit costs to the Company may be affected by an incentive
method of pay, the Union agrees to negotiate with the Company for a fair and
proper incentive plan for that department, or portion, thereof and its effective
date, and, in connection with the study and negotiation of an incentive plan,
may use its own consultants and engineers. Any such plan shall provide a
guaranteed hourly rate to each employee (which in no case shall be less than the
current hourly rate paid the affected employee or employees), increased earnings
for increased production, and no unreasonable work load. All employees affected
by incentive plans shall be given the benefit of all general increases (cost of
living or otherwise) on their guaranteed hourly rates and they shall also be
reflected in their incentives.
TEMPORARY AND PROBATIONARY
EMPLOYEES
15.1 All newly hired employees will be considered temporary employees until they
have accumulated ninety (90) days of actual work and shall have no seniority
rights during this period but shall be subject to all other clauses of this
contract, and if held over that period shall be considered permanent and shall
then be considered permanent and shall then be credited with ninety (90) days'
Company seniority. However, in case of absence due to accidental injury suffered
on the job before the ninety (90) days probationary period has been completed,
all work days that would have been worked by such employee or employees, had
such employee or employees not have been injured, shall be counted towards the
required ninety (90) days. However, regardless of the acquirement of Company
seniority, the employee or employees so affected will still have to work ninety
(90) work days before they will be considered permanent. Eligibility for
benefits will begin after the completion of thirty (30) days worked for newly
hired permanent employees. If an employee is terminated before his/her
probationary period is up, and in the event he/she is rehired before 180
calendar days, the previous time worked will be counted toward the 90 work day
probationary period. The pay for all newly hired employees will be 10% below the
base rate. All summer hires will be paid $8.00 per hour.
15.2 It is understood that any new employees who are successful in bidding a
department job and have not acquired Company seniority shall not be credited
with any departmental seniority until such time as they have acquired Company
seniority.
15.3 A seniority list for each department shall be furnished the Union showing
the seniority of each employee.
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CAUSES FOR LOSS OF SENIORITY
16.1 Employees with less than five years seniority at the time they are laid off
shall lose their seniority when they have been off the Company's payroll two (2)
years. Employees with five (5) years or more seniority at the time they are laid
off shall lose their seniority when they have been off the Company's payroll
three (3) years. Employees voluntarily leaving the Company's service, discharged
for cause, or who are absent for five (5) days without notifying the Company,
except for a reasonable cause, or who, after being laid off fail to report for
work inside of twenty-one (21) days after being notified, shall forfeit all
seniority previously established. Seniority, Pension and Insurance Benefits will
continue for up to thirty-six (36) months only, for any absence due to sickness
or accident. Changes in work status, such as retirement, would result in a
change of benefits.
16.2 No employees shall acquire dual departmental seniority, that is to say,
employees permanently curtailed from their departments to the Employment
Department shall forfeit their seniority in the departments from which they were
curtailed in the event they bid off a permanent job in another department and
are accepted for such a job.
RETENTION AND ACCUMULATION OF
SENIORITY-MILITARY SERVICE
17.1 Any employee who is conscripted or volunteers for service in the Armed
Forces of the United States, or in the National Guard for periods requires by
law shall not lose any seniority privileges which he/she had when he/she left
for such service provided (1) if he/she serves for not more than four (4) years,
unless extended by law, and (2) he/she has received his/her certificate of
satisfactory completion of his/her training and service as provided by the
Universal Military Training and Service Act, as amended, and (3) he/she is still
qualified to perform the duties of his/her own or some available position, and
(4) he/she makes application for reemployment within ninety (90) days after
being discharged. He/she shall be restored to his/her former position or a
position of like seniority and status unless the Company's status has so changed
as to make it impossible or unreasonable to do so. Any employee so restores
shall be considered as having been on leave of absence and shall be restored
with accrued seniority.
NEWLY APPOINTED SUPERVISORS
17.2 Salaried supervisors who promote from the bargaining unit before June 15,
1980, shall hereafter retain Company seniority only if by Company action they
are returned to the bargaining unit.
Employees newly appointed from the bargaining unit to any salaried position
shall retain all seniority, both departmental and company, for six (6) months
from the date they begin their new position, with the understanding that at any
time within the six-month period they may return or be returned to the
bargaining unit. After the six-month period, if they are returning to the
bargaining unit, credited service accumulated while on salary shall not count
toward Company seniority except for pension and vacation purposes. Before the
Company assigns an employee to a supervisory position in any department, it will
advise the Business agent or other authorized officer of the Union of such
proposed action and will give the Union an opportunity to present its views on
the qualifications of any employee that may have been bypassed within the
department where the assignment is to be made; it is understood, however, that
the Company will have the final decision on the assignment and that its
selection will not be subject to review under the grievance procedure. No
temporary demotions in supervisory positions will be made during temporary
layoffs and no supervisory employee discharged for cause shall be transferred
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to the bargaining unit.
17.3 An employee whose bid or application for the position of Apprentice in the
Maintenance Department is accepted shall retain his/her seniority, both
departmental and Company, as of the time he/she becomes an apprentice and shall
accumulate seniority, both departmental in the department from which he/she bid
or applied and Company, while he/she is serving as an apprentice for a period
not to exceed six (6) months during which time he/she may return to his/her
former department in the event of the termination of his/her Apprenticeship
Agreement for any cause. Thereafter, in such event, he/she shall have only
his/her accumulated Company seniority and a right to return only to the
Employment Department, except in the case of a Helper holding that status as of
the date of this agreement, who shall retain his/her previous seniority.
NOTE: Whenever an employee is promoted to a supervisor or apprentice position,
the vacancy thereby created shall be filled temporarily for such time as his/her
seniority is protected under 17.2 or
17.3 The vacancy created at the bottom of the sequence will be posted
temporarily and if the promoted employee does not come back after six (6) months
the bid will be considered permanent.
17.4 The Company agrees to grant to employees of the Company who are officers or
delegates of the Union such reasonable leaves of absence for transacting Union
business in such numbers and for such lengths of time as may be deemed
necessary. Any member of the Union employed in any official capacity by the
Union, either International or Local, shall not lose his/her seniority in the
department of the Company in which he/she is employed at the time of taking such
leave of absence, and upon being relieved of the official duties shall be
reinstated with accrued seniority. It is understood that where this works an
undue hardship on the Company, a mutually satisfactory arrangement will be
worked out. Effective June 15, 1972, Pension, Insurance, Health and Welfare
benefits shall not be available to any member of the Union who becomes employed
in an official capacity of the International Union. However, they shall be
covered during the trial period.
17.5 The Company agrees to grant to employees of the Company who are officers of
the Credit Union such reasonable leaves of absence for transacting Credit Union
business in such numbers and for such lengths of time as may be deemed
necessary. Any member of the union employed full-time by the Credit Union shall
not lose his/her seniority in the department of the Company in which he/she is
employed at the time of taking such leave of absence, and upon being relieved of
his/her official duties shall be reinstated with accrued seniority. It is
understood that where this works an undue hardship on the Company, a mutually
satisfactory arrangement will be worked out.
17.6 The Company agrees upon individual written authorization from an employee
to deduct from the weekly compensation of such employee contributions towards
the purchase of shares of United Brotherhood Credit Union or L'Ange Gardien
Credit Union and to remit weekly the total deductions so collected from our
employees to the respective treasurer.
17.7 Any member who is elected or appointed to a public office requiring full
time effort shall be granted a leave of absence, up to a maximum of two (2)
years, with accrued seniority, both department and Company.
SENIORITY - DEPARTMENTAL AND
COMPANY - USE IN LAYOFFS
18.1 In reducing the working force in any department, departmental seniority
shall govern, that is,
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employees with the least seniority in that department shall be laid off first.
Thereafter, to the extent necessary, each remaining employee will be assigned,
in accordance with his/her departmental seniority, to an available job within
the department which he/she is suited for and which he/she has not refused on a
temporary or permanent basis. All demotions will be in the reverse order of
promotions in your line of progression on your shift. In cases where an employee
has waived his/her rights to a job or jobs in his/her department, he/she shall
not be allowed to claim the waived job during curtailment unless no other job is
available to him/her in the department.
PERMANENT LAYOFF PROCEDURE
19.1 Whenever it becomes necessary to permanently curtail the working force in
any department, or departments, the general procedure shall be as follows:
a. Those employees with the least amount of departmental seniority in the
department shall be transferred to the Employment Department where Company
seniority shall govern.
b. The Company will then permanently lay off the equivalent number, on the
basis of their Company seniority, from the Company-wide seniority list and
regardless of the department in which they are employed, those with the
least company seniority being laid off first. It is understood, however,
that the Company will not effect this permanent layoff until qualified
employees are available to fill the available jobs. These jobs will be
posted Company-wide.
19.2 In applying the permanent layoff procedure set forth in the preceding
paragraph to maintenance employees, each of the following maintenance employees
trade groups shall be considered as a separate department and each shall have a
master seniority list upon which each employee shall be credited with the total
of his/her last period of continuous service, unbroken by any of the causes for
loss of seniority, as a member of his/her maintenance trade group, but present
departmental seniority lists shall be retained for all other purposes:
a Machine Shop (Burgess, Cascade).
b. Millwrights (Burgess, Cascade, Heine Boiler, Cascade Boilers). (Also
includes Power House Repairs).
c. Pipers (Burgess, Cascade).
d. Tinsmiths (Burgess and Cascade).
e. Electricians (Burgess, Cascade, Power). Also includes (Power Maintenance
and Line Crew).
f. Lubricating (Burgess, Cascade).
g. Welders (Burgess, Cascade).
h. Painters (Burgess, Cascade).
i. Service Garage Mechanics
j. River Crew.
k. Masons.
l. Instrumentation (Burgess and Cascade)
RECALL OF EMPLOYEES AFTER
PERMANENT LAYOFF
20.1 Employees permanently curtailed off the payroll, and who have call-back
rights under paragraph 16.1, shall be rehired in the inverse order of their
layoff and before any new help is hired, those with greater Company seniority
being rehired first. Employees who are recalled after being laid off must advise
the company of their intent to return to work within ten (10) days after being
notified, and must report for work within twenty-one (21) days after being
notified.
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RECALL OF CURTAILED EMPLOYEES
20.2 Employees curtailed from a maintenance trade group, and not working at
their trade, shall be recalled to their trade on the basis of their total trade
seniority and may claim any open permanent job within their trade group until
rehired in their own particular trade group on the basis of the departmental
seniority within that mill trade group. Permanent departmental openings in any
trade, in any department, not belonging to any trade employee by virtue of
departmental seniority, shall be posted tradewide.
20.3 Maintenance trade group employees in the Employment Department shall
exercise their trade seniority in filling temporary maintenance department jobs
within their trade group to which no employee in the department where the job is
located is entitled by virtue of his/her departmental seniority.
20.4 For employees in the Employment Department, Company seniority shall govern
in the event of temporary jobs for which they are qualified which open up in any
department other than their own, and to which no employee in the department
where the job is located is entitled by virtue of his/her departmental
seniority. (See Article 21.3.)
FILLING VACANCIES AND PROMOTIONS
21.1 As permanent vacancies occur in regular jobs or permanent new jobs are
created in any department, the jobs shall be filled, if possible from qualified
employees within that department, and as between qualified employees in the
department, the one with the most departmental seniority shall have preference.
In the event the employee next in line of departmental seniority is deemed not
qualified for the job, the supervisor shall notify the steward and the job shall
not be filled permanently until the matter of the available qualified employees
in the department is settled. In the event the job is not filled by anyone in
the department, the job shall be posted for a period of ten (10) days (excluding
Saturdays, Sundays and Holidays).
If there is insufficient response to a job posting, a notice will be placed on
all bulletin boards holding the posting open for a period of ten (10) days. In
the event there still is inadequate response within the maintenance trade
groups, selection of first class trades people from outside the bargaining unit
will be by a selection process, the panel of which will consist of one
Maintenance Supervisor, one Human Resources Department representative and two
Local 75 members selected by the Union President. As to all jobs except those in
the maintenance trade groups, providing qualifications are satisfactory, Company
seniority shall govern. Bidders with greater seniority will be notified of the
selection made and the reason for the selection.
Placement of the successful bidder/bidders will be initiated within twenty-one
(21) days from the date the posting is removed from the board.
Successful bidders shall have the right during this fifteen (15) day trial
period to refuse the bid job and return to their former jobs. Employees who bid
on a job and are accepted for a trial period may do so only twice in any twelve
(12) month period. The Company shall have the right during the fifteen (15) day
period to remove any employee from the job and return him/her to his/her former
job. Before such action is taken, the employee and the Union will be notified.
Acceptance or rejection of an employee's bid for a job will occur immediately at
the time of contact by the Human Resources Department. Bids will not be held up
for more than four (4) months for employees out on Sickness and Accident or
Worker's Compensation. Qualified employees on part time or in the Employment
department shall be
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given consideration before help from outside the Company is hired. A list of
applicants bidding for each posted job shall be furnished to the Union promptly
after the expiration of the posting period on each job. When an employee from
another department is chosen to fill a posted job in a department, he/she shall
commence to accumulate departmental seniority in the new department on the
expiration date of the job posting.
If an employee is retained on a position after fifteen (15) work days, he/she
shall be considered as qualified unless an extension of this maximum training
period has been agreed upon for him/her by the Company and the Union, in which
event he/she shall be considered as qualified if he/she is retained on that job
after the end of the extended training period. If an employee or the Union feels
that an injustice has been done, the case may be brought up in accordance with
the grievance procedure provided for in this contract. In the Employment
Department, company seniority shall prevail provided qualifications are
acceptable. In the weekly assignment of employees in the Employment Pool, the
Company will make reasonable effort to assign employees to Sunday work according
to seniority and ability to perform the jobs and production requirements. (See
Article 21.3) Whenever any employee works in any department for a period of
ninety (90) work days, the vacancy shall be considered as permanent, and posted
Company-wide, except where such vacancies are caused by reason of sickness or
injury, and the case of a salaried supervisor whose departmental seniority is
protected for six (6) months.
21.2 In filling vacancies that management determines to fill within the
bargaining unit in any department, whether temporary or permanent, the vacancies
shall be awarded to the employee with the greatest seniority in that department
or in the line of promotion providing they are qualified. Employees in the line
of promotion (a line of promotion for the Cascade Paper Machine department is
defined as a unit of operation. Examples: PM#l -PM#2-PM#3-PM#4-PM#9, shall not,
except for physical disability, refuse to accept promotion. Where employees are
unqualified due to lack of training the Company shall provide training. In cases
where medical evidence prevents the employee from promoting to the next position
in the line of promotion, the employee will be required to sign a waiver form.
To unfreeze (void the waiver) an employee must sign a form indicating same,
keeping the principle that "once around, always around". Only written
freezes/waivers will be recognized. All such documents shall be signed by the
employee in the presence of a union representative. A copy will be given to the
Union representative of Local 75 and the Human Resources Department. In the case
an employee refuses to sign a waiver, the supervisor shall notify a staff member
of the Human Resources Department who shall so inform the Union by letter. This
action shall constitute a waiver.
21.3 It is understood that in assigning employees from the Employment Department
the following procedures will be observed subject to the requirements that the
employees' qualifications are suitable.
1) For a given week, employees will be assigned in the order of their Company
seniority to a complete work week to the extent that such jobs are
available and the employee is qualified. Assignments for lesser number of
days will be handled in the same manner. These assignments shall not be
changed during the week except in the following cases:
2) In the case where an employee already assigned is called back to his/her
department, he/she will, following the release from his/her department
before completion of his/her complete work week, be re-assigned to his/her
original job, provided that the job is still continuing.
3) Any employee scheduled for less than a complete work week in his/her
department will be assigned for the balance of their work week providing
he/she has enough Company seniority and qualifications. (See Article 9.3.)
4) If, following the making of initial assignments for the week, a complete
work week becomes available, the Company will arrange for the senior
employee previously assigned for less than a complete work week to be
assigned this work, providing he/she has enough Company seniority and
qualifications.
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TEMPORARY PROMOTION TIME LIMIT
21.4 Refusing to jump shift for a temporary opening will not constitute a
waiver.
21.5 Whenever any employee in the line of promotion is not qualified for
promotion and he/she therefore stands in the way of another employee and is
preventing the latter employee from being promoted in the line of promotion, the
Company shall promote the latter employee and will train the former employee as
soon as possible contingent upon operational needs and requirements.
21.6 When an employee is going to be absent for a long period of time by reason
of sickness or injury, shiftwise scheduling shall be used for the remainder of
the work week in which his/her absence commences, and for the next twelve (12)
weeks. However, if it then appears that his/her absence will be continued beyond
those twelve (12) weeks, management will in that twelfth week, at the request of
the affected employees, schedule for the next work week a senior qualified
employee in the department to the vacancy resulting from the first employee's
absence. Whenever an employee has been absent for a period of eleven (11)eleven
(11) weeks, because of sickness or injury, a notice of this effect shall be
posted in the department. After the above change, other senior qualified
employees in the department affected by the change may individually request
promotion on a departmental basis provided such requests are filed at least
forty-eight hours before the weekly schedule is posted. This change in
scheduling will then continue until the return of the absent employee. However,
if the absent employee upon his return should for some unavoidable reason work
less than two (2) weeks, the waiting period shall be waived and the senior
employees will be reassigned. In cases where the Company elects to relieve a
salaried supervisor with an hourly paid employee, the foregoing procedure will
be followed.
21.7 The Company will continue its policy of promoting to supervisory positions
outside the bargaining unit from the employees in the bargaining unit, when
qualified employees are available, however, the final selection shall be the
Company's.
TRANSFERS
22.1 Employees may be temporarily transferred from one department to another
(including mill to mill) as defined by business needs. The duration of such
transfers shall be subject to discussion by the Company and the Union. Temporary
transfers shall cause no loss of seniority in an individual's department, or
should work be transferred from one department to another, any employee
transferred shall not lose his/her seniority. This will not affect in any way
assignments from the Employment Department.
22.2 The Company may assign tradesmen to work in other than their regular
departments. If an employee or employees with exceptional skills or training is
or are required, the Company may make such assignment regardless of departmental
seniority for so long as the exceptional skill or training is needed.
When possible, the Maintenance Shop Stewards will be advised of the details, not
less than two (2) weeks in advance, of a planned major shutdown. The Stewards
will in turn review the details of the shutdown schedule with the tradesmen.
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REVIEW - REVISION - WAIVER
OF SENIORITY
23.1 The seniority provisions of this agreement may be reviewed and revised by
the Company and the Union during the term of the agreement by mutual consent.
23.2 These seniority provisions may be waived by mutual agreement between the
Company and Union in cases of disabled employees. Any employee who has been
permanently or temporarily incapacitated by injury or sickness and is unable to
continue his/her regular work may be transferred to a job designated as a
rehabilitation job in any department which he or she can do. However, any such
employee will continue to maintain department seniority in his/her original
department and not in any other department to which he/she is assigned.
The Company agrees that in the cases of job-related injuries or illnesses
resulting in an employee being permanently or temporarily incapacitated, it
will, in cooperation with the Union, make every effort to place him/her in a
position he/she is physically capable of filling. The Business Agent/Local Union
will be notified when an employee who had a serious injury is authorized to
return to work.
23.3 An employee who is disabled as a result of an industrial accident or
sickness and returns to work on a rehabilitation job will be paid the rate of
the job (red circled) if higher than card rate he/she held at the time of the
accident, plus all future adjustments for up to one year provided he/she
cooperates fully with all efforts made to rehabilitate and train him/her to
overcome his/her disability, or to develop alternate skills that would permit
him/her to return to his/her original job or a comparable job.
VACATION
24.1 Employees completing one (1) year of continuous service in the employ of
the Company shall receive one (1) week of vacation with pay upon their first
anniversary date. Effective January 1st of each year thereafter, employees shall
be entitled to the following vacation benefits based upon continuous service:
One (1) year to three (3) years - I week of vacation with pay.
Three (3) years to seven (7) years - 2 weeks of vacation with pay.
Seven (7) years to twelve (12) years -3 weeks of vacation with pay.
Twelve (12) years to eighteen (18) years -4 weeks of vacation with pay.
Eighteen (18) years to twenty-eight (28) years - 5 weeks vacation with pay.
Twenty- eight (28) years or more -6 weeks vacation with pay.
24.2 Employees completing their third, seventh, twelfth, eighteenth, and
twenty-eighth year of service during the calendar year shall become eligible for
the additional week of vacation accruing in those years upon January 1st of the
year in which they attain such years of service.
24.3 Employees shall be entitled to select their weeks of vacation according to
their departmental seniority and established Company policies.
The canvassing process will start no later than the second Sunday in January.
The first two (2) weeks are to be selected before 7:00 a.m., February 1 of each
year with the senior person selecting first. The process will then repeat with
the next senior person until all employees have selected their first-choice
week(s). The remaining week(s) of vacation will be selected before 7:00 am.,
February 16. The process will be as above with the senior person selecting
his/her remaining week(s) in accordance with
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Company policy and department quotas. After February 16th, any unscheduled weeks
of vacation that any employee has remaining will be scheduled on a first come,
first served basis, as allowed by unfilled department quotas.
No person shall take more than twenty-four (24) hours time in selecting vacation
weeks when it is his/her turn. If a person wishes to change vacation week(s),
the employee cannot exercise seniority rights over those who have already
selected vacations. The Company will make reasonable efforts in the first round
of vacation scheduling to grant eligible employees two weeks vacation during
school out - school in period.
When an employee changes shifts or departments, he/she will not automatically
carry his/her scheduled vacations with him/her. The vacation(s) may be
transferred if they do not violate established department quotas.
Employees who change shifts for permanent openings will be entitled to pick
weeks left open by vacated employees. Selecting open weeks will be in accordance
with Article 24.3.
24.4 Vacation pay will be paid at 45 hours times the employee's regular
straight-time card rate unless he/she has worked consistently at a higher rated
job for the ninety day period prior to the scheduled vacation (bid employees
only).
24.5 To be eligible for vacation in any year, employees except in the event of
sickness or disability, shall have worked not less than eleven hundred (1,100)
hours at straight time in the previous calendar year. Employees who have five
hundred (500) to one thousand ninety nine (1,099) work hours will receive two
weeks vacation. The Company shall not be obligated to pay vacation pay to any
person who has rendered no service whatsoever to the Company during the twelve
(12) months preceding the anniversary of his/her hiring date.
24.6 Vacations shall be taken at times mutually agreeable to the employees and
their supervisor. Because of the necessity of avoiding undue interruption of
production and the exigencies of business, it is recognized that the Company
retains the right of final determination for all vacations.
24.7 Vacation pay shall be paid during the week prior to that in which the
vacation is taken.
24.8 Employees who are eligible must take at least (3) weeks of vacation per
year, but may (at their option) sell any additional weeks back to the Company in
lieu of time off Employees who sell vacation time will work at their regular job
and be eligible for overtime according to other articles.
24.9 Employees who take leave to attend summer training periods as members of
the National Guard or other military reserve units shall be permitted to use
such leave as part of their vacation.
24.10 Employees who are disabled as a result of an industrial accident or
industrial sickness and who have not rendered any service whatsoever to the
Company during the last twelve months, shall be entitled to their eligible
vacation pay in the one calendar year following their last day of work.
24.11 Vacation pay for Pool Employees shall be computed at the regular straight
time hourly rate of pay of the job the employee worked during the week prior to
the vacation.
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WAGE RATES
(See Attachment)
25.1 Year 1 Effective June 25, 1997 a 3% wage increase will be granted.
Year 2 Effective June 25, 1998 a $0.30 per hour increase and based on
the Free Cash Flow formula, and additional 2% will be granted.
Year 3 Effective June 25, 1999 a 2% wage increase, and based on the
Free Cash flow formula, an additional 2% will be granted.
Year 4 Effective June 25, 2000 a $0.30 per hour increase, and based on
the Free Cash flow formula, an additional 2% will be granted.
Year 5 Effective June 25, 2001 a 2.5% wage increase, and based on the
Free Cash Flow formula, an additional 2%, will be granted.
The formula is based on Free Cash Flow calculation as described in the Cash
Sharing Plan, Article 25.3. If the Free Cash flow is between $8MM and $10MM, 50%
of the 2% raise will be awarded. If the Free Cash flow is between $ 10MM and $
12MM, 75% of the 2% raise will be awarded. If the Free Cash Flow is greater than
$12MM 100% of the 2% raise will be awarded.
25.2 Individual rates and classifications of any group may be changed by consent
of the parties hereto.
CASH SHARING
Statement of Purpose
25.3 The purpose of the Cash Sharing Plan is to promote a sense of ownership and
enthusiasm that will focus the thinking and energy of employees at Berlin-Gorham
on the key result areas that have the greatest impact on mill performance. This
plan will provide an opportunity to recompensate employees for negotiated
reductions due to economic conditions and will also provide an additional means
for employees to increase their earnings by sharing in the mill's positive cash
flow.
Beliefs
This application of the Cash Sharing Plan enters into a new philosophy that
enables employees to increase their earnings, share in the positive cash flow of
the mill and be a partner in productivity and quality.
The amount of cash sharing pool will depend upon our combined efforts to
continually improve performance in key areas.
The amount of cash sharing dollars will depend on the generation of positive
cash flow for the mill. The plan can significantly enhance the ability of each
employee to increase annual earnings.
A Cash Sharing Plan has the potential to produce more income for all employees
than industry pattern settlements. Cash Sharing distribution begins when the
operation reaches positive free cash flow. Free cash flow is a financial
measurement used by Crown Vantage to determine viability of a facility.
Free Cash Flow is the cash that is generated or needed by the business. The
calculation is:
Operating profit
Less: Interest expense
and Corporate Indirects
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= Pre-tax Profit
Less: Income Tax
= Net Income
Add: Depreciation and other non-cash expenses
Add/Subtract Working Capital Changes
Add/Subtract Other Corporate Charges
Less: Dividends and Capital Spending
= Free Cash Flow
Definitions
Assets = Property, plant equipment, accounts receivable, inventories
Working Capital = Receivables and inventories (finished goods, work-in-progress,
stores, raw materials - wood, chemicals, fuel oil)
Distribution of the cash sharing pool will be calculated on a quarterly basis
with 75% of quarterly pool distributed quarterly and 25% distributed at the end
of the Crown Vantage fiscal year based on annual free cash flow. Quarterly
payments will be made by the end of the calendar month following the last month
of the fiscal quarter.
All L-75 employees who are on the payroll as of the close of the quarter will be
eligible to participate in the quarterly distributions. All L-75 employees who
are on the payroll at the end of each fiscal year will participate in the annual
distribution.
The distribution is proportioned on W-2 earnings for the respective time
periods. In the event of any question concerning the calculation of Free Cash
Flow under this Cash Sharing Plan, a mutually agreeable CPA firm may be retained
to verify that all calculations are in accordance with generally accepted
accounting principles, with expenses to be shared equally by the parties.
All payments will be paid by separate check and will not be factored into any
other contractual benefit plan for any purpose.
If management decides to shutdown any of the following production assets -
hardwood/softwood pulp lines, paper machines 1,2,3,4,9, the Cash Flow Plan will
be reformulated with L-75.
Calculation
The Cash Sharing pool is determined by multiplying the Free Cash Flow of a
fiscal quarter by 20%.
There will be no pool if cash flow is zero or negative.
SHIFT DIFFERENTIAL
26.1 Employees working on a shift job from 3 p.m. to 11 p.m. shall receive $0.40
per hour in addition to their regular rate of pay for the hours worked during
the shift.
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Employees working on a shift job from 11 p.m. to 7 a.m. shall receive $0.50 per
hour in addition to their regular rate of pay for the hours worked during the
shift.
Employees working on a shift job from 7 p.m. to 7 a.m. shall receive $0.60 per
hour in addition to their regular rate of pay for the hours worked during the
shift.
WORKING LUNCH HOUR
TRAVELING - LUNCHES
27.1 Employees who are required by the Company to travel between plants shall
travel on Company time and be furnished suitable transportation or paid mileage
according to Company policy for use of their personal automobile.
Travel outside the Berlin/Gorham area will be paid as follows at the employee's
scheduled rate.
1) Minimum pay will be at least eight (8) hours, whether for travel or work.
2) Minimum pay for employees in departments working the 12 hour (compressed
week) schedule will be 12 hours for scheduled days, eight hours for
scheduled off days.
3) Employees who work and/or work-and-travel in excess of their minimums in 1)
and 2) will receive pay for all hours, worked and traveled.
27.2 Day workers who are required to work more than five (5) hours beyond a
normal meal time will be allowed twenty (20) minutes paid time to eat.
CALL IN
28.1 Any shift employee called in to work between 8:00 am. and 5:00 p.m.
receives two hours' minimum straight time pay, except that on Sundays, the
minimum straight time pay shall be four (4) hours.
Any shift worker called in to work between 5:00 p.m. and 8:00 a.m. receives four
(4) hours' minimum straight time pay.
Any day worker called in to work between 8:00 a.m. and 4:00 p.m. receives two
(2) hours' minimum straight time pay except that on Sundays, the minimum
straight time pay shall be four (4) hours.
Any day worker or any employee in a normal day working department who is working
shifts and is called in to work between the hours of 4: 00 p.m. and 8:00 a.m.
will receive six hours minimum straight time pay.
This provision shall not apply in the case of any employee already at the plant
waiting to start their regular shift. Except for emergencies, employees called
in to work shall perform the specific job for which they are called.
FAILURE TO PROVIDE WORK
29.1 Employees reporting for regular scheduled work will be allowed four (4)
hours' straight time if no work is available. If the Company has made a
legitimate effort to notify employees affected at least
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two hours before the starting time that there shall be no work, then no time
will be paid. The method of notification to be agreed upon between the Company
and Union for each department.
RATES FOR ASSIGNED JOBS
30.1 Employees temporarily or permanently assigned to higher rated jobs shall
receive the higher rate of pay while occupying such positions. This does not
apply to employees temporarily up-graded for training purposes. This does not
apply when an employee is enabled.
30.2 Employees temporarily assigned to lower rated jobs at a time when there is
work available for them on their regular jobs shall retain their regular rate of
pay. Otherwise, they shall be paid the rate of the job to which they are
assigned.
INSURANCE BENEFITS - PENSIONS
DEATH IMMEDIATE FAMILY - JURY DUTY
31.1 For detailed information concerning insurance benefits, namely, Group
Hospital and Medical, Major Medical, Retiree Group Hospital and Medical Plan,
Weekly Sickness and Accident Benefits, and Life and Accidental Death and
Dismemberment Insurance, Prescription Drug Plan and Dental Care Plan, refer to
Exhibits B & C.
31.2 Whenever an employee sustains an injury on company premises during working
hours, and is sent home, he/she shall be paid the balance of whatever hours
he/she was unable to work on the day of injury, and these paid hours shall be
counted towards his/her forty hours for overtime purposes.
In cases where the employee is hospitalized due to inhalation of toxic gases
while at work, the Company agrees to compensate lost wages at the Workmen's
Compensation rate. The period of time considered will be the three (3) days
following the injury. The Company doctor will decide when the employee is able
to return to work.
31.3 For information pertaining to Crown Vantage Pension Plan 10 and its
benefits, refer to Exhibit D.
31.4 The details of an Apprentice Training Program will be the subject of a
separate agreement between the Company and the union. Hereafter Apprentices
shall be hired and trained in accordance therewith.
31.5 In the event of the death of a relative in the immediate family of an
employee who has completed the probationary period, the employee will be
compensated in accordance with the following schedule while attending funeral
services, with the understanding that payment under this provision is for lost
pay from regular, consecutive straight time work days from the date of death.
Should any of the days of the funeral leave occur on Sunday pay is at straight
time. These hours will not be used in overtime calculations.
Stepmother )
Stepfather )
Stepbrother )
Stepsister )Day of
Grandchildren )Funeral
Spouses' grandparents )
Spouses' brothers and sisters )
Brothers' and sisters' spouses )
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Father )
Mother )
Sister )
Brother )Up to
Mother-in-law )3 days
Father-in-law )
Grandparents )
Son )
Daughter )Up to
Wife )5 days
Husband )
31.6 In the event an employee is selected for Jury Duty, the Company will pay
the employee the difference between his/her regular pay and the amount received
by him/her while serving on Jury Duty. It is understood and agreed that the
employee will be required to return to work the day following his/her or her
release from Jury Duty. Should any of the days of the jury duty occur on Sunday
pay is at straight time. These hours will not be used in overtime calculations.
31.7 Employees who have completed their probationary period of Company service
and who are required to attend annual National Guard training camp or Reserve
training shall be reimbursed the difference between their military pay and forty
hours straight time pay at their regular rate by the Company, for a maximum of
two weeks duty per year.
31.8 Employees serving as members of the New Hampshire State Legislature shall
be provided with sixteen (16) hours pay at straight time in lieu of two
scheduled work days per week to attend legislative meetings. Employees are
responsible for notifying their supervisor in advance of the scheduled work day
they will be absent.
PROTECTION OF COMPANY PROPERTY
32.1 When required by the Management, engineers, firemen, power plant operators,
essential maintenance men and watchmen shall under no condition suspend work,
but shall at all times protect all the Company's property under their care and
perform the necessary work needed to avoid damage and keep the plant in
operating condition.
NOTICE OF ABSENCE OR RETURN TO WORK
33.1 Employees not expecting to work because of emergencies or other justifiable
causes must notify their respective supervisors two (2) hours before scheduled
time. This provision shall not be interpreted as condoning repeated absences
from work on the part of an employee.
33.2 In the event any employee who has been absent from any shift which he/she
was scheduled to work fails to notify supervision of his/her return immediately
preceding the start of his/her next regular scheduled shift, in accordance with
the time listed below, the Company may assume his/her absence continuing for
that shift and may replace him/her with any available qualified employee
a. By 5:00 am., if scheduled for the 7:00 a.m. to 3:00 p.m. shift or for the
day shift (8:00 a.m. to 4:00 p.m.)
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b. By 1:00 p.m., if scheduled for the 3:00 p.m. to 11:00 p.m. shift
c. By 5:00 p.m., if scheduled for the 11:00 p.m. to 7:00 a.m. shift.
d. By 5:00 a.m., if scheduled for the 7:00 a.m. to 7:00 p.m. shift.
e. By 5:00 p.m., if scheduled for the 7:00 p.m. to 7:00 a.m. shift.
Note: (for a, b, d & e above) Employees who are going to be absent must call two
(2) hours prior to the start of the normal relieving time in the department
where the employee is scheduled to work.
SAFETY AND HEALTH
34.1 The Company and Union shall cooperate fully on the safety, health and
sanitation of the employees. In accordance with the Williams-Steiger
Occupational Safety and Health Act (OSHA) of 1970, employees shall not be
required to work under conditions of immediate danger to safety and health.
Conditions that affect the safety and health of the employees shall be
considered a legitimate subject for mutual consideration.
34.2 No employee shall be discharged or disciplined for refusing to work on a
job when he/she has a good and sincere reason to believe that it may be
dangerous to life and limb. If the matter cannot be resolved between the
employee and his/her supervisor, the matter will be referred to the department
superintendent. If the issue is still unsettled, it will be referred to the
Union business agent, the plant manager, and a representative of the Human
Resources Department for consideration.
34.3 Clothing and safety equipment will be furnished by the Company to employees
in accordance with the Statement of Policy dated June 16, 1965. The company will
provide a safety shoe allowance to be paid each January in the amount of $72.00
per year.
34.4 Each employee shall cooperate with the other employees in keeping the area
in the department in which they work neat and clean.
34.5 Employees will immediately report to management all incidents resulting in
employee injury, environmental release or near hit and/or damage to company
property.
BULLETIN BOARDS
35.1 The Company shall provide suitable locations for bulletin boards in the
different mills for the posting of official notices from the Union to its
members.
DISMISSALS
36.1 It is agreed the Company has the right to discipline or discharge employees
for just cause.
36.2 In cases of discharge or disciplinary layoffs, the Human Resources
Department shall promptly arrange for a hearing with the business agent of the
Union.
36.3 It is agreed that when an employee is wrongfully discharged and is proved
so, he/she or she may be reinstated and compensated for all lost time at his/her
regular rate of pay.
36.4 Discharge and discipline cases shall be disposed of in accordance with the
grievance and
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arbitration procedure provided for in this agreement.
MANAGEMENT
37.1 This agreement is entered into by the parties with the full understanding
that the facilities of the Company and its equipment are undergoing
modernization and rehabilitation and that the situation calls for the closest
cooperation between the Company and all of its employees. The Company shall
manage the plant and direct the working forces, including the right to plan,
direct, and control the plant operations, to hire, promote, demote, transfer,
suspend or discharge employees for just cause, to relieve employees from duty
because of lack of work or other legitimate reasons, and to introduce new or
improved production methods or facilities, provided, however, that all of its
actions shall be in conforming with all of the provisions of this agreement. It
is further agreed that nothing contained herein shall be used for the purpose of
discrimination against employees because of membership in the Union or for the
purpose of undermining the Union.
COMPANY RULES
37.2 The Company may adopt rules for the operation of the plant and the conduct
of employees, provided such rules do not conflict with any of the provisions of
the Contract.
ENABLING AGREEMENT
37.3(a) In order to achieve efficiency of mill operations, employees may be
required to perform work outside of their traditional job duties from time to
time as operating conditions warrant. Examples of such assignments may include,
but shall not be limited to: employees may help out in other progression ladders
and departments as well as their own; operate fork trucks and other mobile
equipment; clean, lubricate, inspect, and adjust equipment they operate; use
tools; and perform other tasks within their skills and capabilities. Safety and
capability will be of primary concern in the application of this section. In all
cases, this section should be applied to improve business effectiveness in a way
that maximizes the contribution employees make to the success of the operation.
This ENABLING AGREEMENT will not be used to transfer permanent bid employees
between operating areas. For the purposes of this agreement, operating areas are
defined as:
Area A - Burgess
Area B - Cascade
No employee will lose his/her employment as a result of this enabling agreement.
Any reduction in the work force as a result of these concepts will be by
attrition.
In the application of this section, employees will not be hindered from
maximizing their contribution by agreements or past practices entered into prior
to this Labor Agreement.
37.3(b) MAINTENANCE
PREAMBLE
It is recognized and understood, by both parties, that B-G's future
competitive position depends largely on the development of a flexible work force
which has exceptional skills and
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motivation. We agree to actively cooperate to reach this state.
The intent and spirit of this agreement is directed toward that end by
satisfying the following objectives:
o Provide flexibility while maintaining fairness on work assignments and
seniority rights.
o Reduce friction among all employees.
o Improve safety/productivity/efficiency/quality.
o Improve skills of tradesmen.
o Improve job satisfaction through increased challenge and rewards.
o Provide employment security.
o Participate together to develop enhanced work practices.
It is agreed that no permanent Maintenance Department employee (as listed
below), will lose his/her employment in his/her department as a result of the
concepts contained herein and any reduction in force as a result of these
concepts will be by attrition. Tradesmen as listed on the attached sheet
currently scheduled on their present shift schedule or who are currently on a
Sunday rotation will be grandfathered on that rotation. (Shift trade
representation will be maintained.)
Furthermore, our intent is to continue with our joint effort to develop a
relationship of openness, honesty and respect with each party accepting
ownership in developing a "Win-Win" working atmosphere.
Team Concept
o Present trades will not be eliminated as a result of this agreement.
o Over the course of any year, tradesmen will work the majority of their time
in their trade expertise. However, any tradesman will work in other trades
as required, safety being the primary concern.
o Even though from time to time tradesmen may be required to spend the major
portion of a job in another trade, these concepts will not be used to cause
work assignment abuse to any tradesmen or trade.
o Any tradesman will do a job if he has the skills to do it.
o Trades do not have to be represented.
o Minimum level of employees assigned to a job.
AREA WORK ASSIGNMENTS
o Mechanical tradesmen in the Berlin Maintenance Department, on long term
area assignments, will remain in those areas as in the past. Future
assignments will be made on the basis of senior
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man who is interested.
o Electrical and Instrument tradesmen are assigned on the basis of system
familiarity, prior training and experience. This will continue as in the
past.
o Cascade Maintenance Department will continue to man areas by assignment.
Except that long-term (one week or more) truck shop assignments will be
made on the basis of senior man who is interested.
o Capital crew work assignments. (See language on area work assignments.)
o The Company and Union agree to discuss Working Leaders/Hourly Foremen in
the future at a time mutually agreeable.
WAGES/ADJUSTMENTS
Part I $1.05 05/03/87
Part II .50 08/30/87
o Any percentage increase in June will also apply to the $0.50 increase in
Part II.
o Maintenance Yard employees will receive $0.70 (Crew Concept) effective
05/03/87.
--* Yard employees will assist tradesmen to accomplish any job but not to
supplement.
--* Supplementing the trades will continue to be done through the
employment pool and the third class rate will be paid.
o A wage reopener will be in effect if other major mills in NH, ME and VT pay
more than 13% for cross trading.
o Zipper clause.
COOPERATION FOR CONTINUOUS IMPROVEMENT
37.3(c) In our efforts to place the Berlin-Gorham mills in the best possible
position for continued productive life, a Continuous Improvement effort is
essential. It is understood by the parties that the sole intention of this
concept is for the long-term good and welfare of our employees, the company, and
the community we live in.
Given the current business conditions, both parties mutually agree to
reduce waste which includes the redistribution of work to the remaining workers
due to positions that are vacated through attrition.
The primary goals of this effort are:
a) to ensure operations viability and increase economic effectiveness, the
Berlin-Gorham effort must be in a participative management style;
b) for management and union to mutually discuss how the work is to be
redistributed or eliminated in order to streamline the operation without
jeopardizing the safety of the employees or quality of our
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products;
c) to recognize that operational effectiveness is dependent upon empowering
employees at all levels, we must provide the skills and knowledge to
partake in this endeavor.
Any reduction in the total workforce as a result of these efforts will be
through attrition.
STATEMENT OF POLICY
38.1 It will be Crown Vantage policy to accomplish its General Maintenance work
with its own employees insofar as equipment and manpower skills, manpower
availability and operational runability permit. A joint Labor/Management
Maintenance Review Committee (including but not limited to Maintenance,
Engineering and Local 75) will develop a structure to evaluate the scope of work
involved with capital or maintenance projects being considered for outsourcing.
This committee will review bids and recommend who will perform planned or
scheduled work based upon cost effectiveness, timeliness and qualifications.
38.2 Outside contractors will be required to furnish their own equipment (except
specialized equipment on hand in the Company) on normal construction contract
projects, as established by past practice.
38.3 Employees of yard departments shall be considered as part of the
Maintenance Department.
CONTINUATION OF CONTRACT OBLIGATION
39.1 The Company agrees that this labor agreement will be binding on its assigns
and successors in interest and upon any other persons or entity which may
undertake the management and direction of Berlin-Gorham operations, whether by
merger, acquisition, or otherwise.
GOVERNMENT REGULATIONS
40.1 It is mutually agreed and understood that none of the provisions of the
contract shall be interpreted to conflict with any State or Federal law,
regulation, decree or directive now in operation or passed during the term of
this agreement. It is the duty of both the Company and the Union to cooperate in
any changes required by such regulations.
DURATION AND TERMINATION
41.1 The terms of this agreement shall be effective from June 25, 1997 to
midnight of the 24th of June, 2002, and it shall automatically renew itself for
yearly periods thereafter. If either party to the agreement wishes to negotiate
changes in the agreement, the party desiring such changes shall notify the
other party, in writing, at least sixty (60) days prior to the expiration date
of this agreement, or at least sixty (60) days prior to the expiration date of
any subsequent renewal period.
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IN WITNESS WHEREOF, the Company and the Union have executed this Agreement the
day and year first above written.
UNITED BROTHERHOOD
LOCAL UNION NO.75
JOHNNY BARRON, JR.
President
ED DEBLOIS
TED MILLER
DENIS GAGNE
RICHARD DUBE
ROBERT MOORES
(Committeemen)
CARL TURNER
United Paperworkers International Union,
AFL-CIO
CROWN VANTAGE
BERLIN/GORHAM GROUP
DAVID A. NELSON
Senior Vice President
WILLIAM A. LOCKARD
Director, Human Resources
GREGORY F. NOLIN
Manager, Labor Relations
JAMES T. WAGNER
Vice President of Operations
A. BRADFORD WYMAN
Manager, Woodlands
NORMAND FORTIER
Financial Services and Systems Manager
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EXHIBIT A
COMPANY RULES
The purposes of these rules is not to restrict the rights of anyone, but to
define them, and thereby to protect the rights of all and to insure cooperation
in accordance with the accepted standards of good citizenship.
The management will mutually discuss with and inform the Union in writing of any
new rules which are to be included in this exhibit of the Labor Agreement prior
to the new rules being posted.
Union contract violations and violation of the following rules are considered as
grounds for disciplinary action from reprimand or warning to discharge:
Personal Offenses
1. Repeated lateness or repeated absence from work.
2. Reporting for work under the influence of liquor or illegal drugs.
3. The use, possession, or sale of illegal drugs or alcoholic beverages on
Company property.
4. Immoral or indecent behavior on Company property.
5. Horseplay on Company property.
6. Smoking in the areas where smoking is not allowed.
7. Sleeping on the job.
8. Walking off the job during working hours or leaving Company premises
without permission.
9. Dishonesty.
10. Contributing to unsanitary conditions by failure to use, or improper use
of, toilet facilities, and refuse or garbage cans.
11. Operation of machines, tools, or equipment to which an employee has not
been specifically assigned.
12. Firearms are not permitted on company property.
13. Employees must report all mobile equipment incidents immediately to their
supervisor.
Offenses Against Other Employees
14. Intimidation or coercion of other employees on Company property.
15. Fighting on Company property.
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Offenses Against Supervision
16. Insubordination.
17. Failing to follow the working instructions of supervisors.
18. Abuse of supervisors or other supervision on Company property.
Offenses Against Company Property
19. Theft of Company property.
20. Willful defacement, damage, or destruction of Company property.
21. Willful waste of company materials or supplies.
Offenses Against Property of Other Employees
22. Theft of the property of a fellow employee while on Company property.
23. Willful defacement, damage, or destruction of the property of a fellow
employee while on Company property.
Offenses Against Company Records
24. Willful misstatements of falsification of record in application for
employment.
25. Falsifying own or another employee's personnel, medical, or production
records.
26. Willfully punching another employee's time card or tampering
with any time card.
27. Posting or removal of notices, signs, or materials in any form on company
bulletin boards or Company property without the specific authorization of
Management. (Union bulletin boards are governed by paragraph 35.1 of the
contract.)
Offenses Against Efficient Work
28. Failure to be at work stations ready and prepared to start work when shift
starts or at end of lunch period.
29. Slowing down or interfering with
work.
30. Delaying or handicapping the work of fellow employees.
31. Producing excessive rejects or inferior work through carelessness.
32. Loafing on the job, or loitering on Company property, during work hours.
33. Leaving your regular working place, or visiting around the plant away from
your usual or assigned place of duty, during regular working hours without
permission of supervision.
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34. Quitting early without permission.
Offenses Against Safety
35. Willful or careless disregard of safety rules or safety instructions.
36. Failure to report all injuries promptly.
Enforcement
The foregoing rule will be enforced impartially by supervision in accordance
with the disciplinary procedure established by the Company. They may be changed
or added to as needs require.
All complaints as to the rules or as to their enforcement will be handled and
adjusted in accordance with the procedure established by the Union contract.
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EXHIBIT B
THE PRESCRIPTION DRUG WILL BE COVERED UNDER THE POINT OF SERVICE HEALTH CARE
PLAN.
The employee cost of prescription drugs will be $10.00 for brand name, $5.00 for
generic and $1.00 for mail order.
ELIGIBILITY: All active employees, their spouse and unmarried, dependent
children up to the age of 19, or age 25 if a full-time student.
WAITING PERIOD: The first of the month following the completion of 30 days
worked.
TERMINATION OF COVERAGE: The last day of work upon termination of employment, or
the end of the month in which and employee retires.
COVERAGE: May be on employee only, employee and spouse, or full family.
BERLIN/GORHAM DENTAL CARE PROGRAM
BENEFIT PERCENTAGE: Co-insurance of 80/20.
COVERED DENTAL EXPENSE:
Basic Service - dental examinations, diagnoses and X-rays
Preventative Services - prophylaxis, fluoride treatment, sealants
Restorative Services - dental fillings, crowns and gold restoration
Oral Surgery - extraction and all other oral surgery procedures
Periodontics - scaling, heavy cleanings
Dentures and Partials - a separate benefit that allows a maximum payment of
$175.00 for each denture, $200.00 for each partial (no change in the 70/30
co-insurance of July 1, 1984). Any denture replacement is not covered until
after a period of five (5) years.
MAXIMUM BENEFITS: (Plan year from July 1st to July 1st)
Effective June 25, 1997,
Employee and Spouse - $300.00
All eligible children - $300.00
Effective June 25, 1998, benefit will be increased to $350.00.
Effective June 25, 1999, benefit will be increased to $400.00
EMPLOYEE CONTRIBUTION: None
ELIGIBILITY: All active employees, their spouse and unmarried, dependent
children up to the age of 19, or age 25 if a full-time student.
WAITING PERIOD: The first of the month following the completion of 30 days
worked.
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TERMINATION OF COVERAGE: The last day of work upon termination of employment, or
the end of the month in which and employee retires.
COVERAGE: May be on employee only, employee and spouse, or full family.
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EXHIBIT C
HEALTH CARE PLAN
THE HEALTH CARE PLAN IS A POINT OF SERVICE PLAN.
The Point of Service Health Care Plan has two components:
1) Primary Care Physician Referred Benefits,
2) Self-Referred Benefits
Increases in years 2-5 will be shared equally by the company and the union.
Active Employees, Spouse and
Dependent Children*
ELIGIBILITY: The first day of the month following the completion of 30 days
worked. Those employees who are hired as vacation replacements are not covered
by this provision.
* Unmarried children are covered from date of birth to the end of the month in
which they reach age 19 or are between ages of 19 and 25, unmarried and
full-time students.
MENTAL HEALTH AND SUBSTANCE ABUSE
Please refer to Point of Service Health Care Plan Benefit Summary.
RETIREE GROUP HOSPITAL
AND MEDICAL PLAN
All retirees after June 25, 1997 will be covered under a Point of Service Care
Plan. The company retains the right to change and modify the retiree health care
plans.
Retiree and/or dependent spouse who is not eligible for Medicare. Dependent
children -- Same as active employees and dependents at time of retirement except
Major Medical is limited to $25,000.
COST: During the first year of retirement, the cost of medical insurance
premiums for the retired employee is paid by the Company and the retiree pays
25% of the balance for dependent coverage. After one year of retirement, retiree
pays 25% of the full cost for himself and dependents. Note: This does not
include those retired employees or their spouses who are covered by Medicare and
Medi-Comp.
Retiree and/or dependent spouse who is eligible for Medicare-Medi-Comp
Supplemental Plan.
COST: During first year of retirement, Company pays cost of retiree; and retiree
pays dependent cost. After one year of retirement, retiree pays full cost for
himself and spouse.
Effective June 25, 1986, employees (age 65) who retire before July 1, 1986
shall have their Medicare and Medi-Comp premium reduced by $3.50 per month.
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Effective June 25, 1986, employees (age 65) who retire after July 1, 1986
shall have their Medicare and Medi-Comp premium reduced by $7.80 per month.
SICKNESS AND ACCIDENT BENEFITS
ELIGIBILITY: The first day of the month following the completion of 30 days
worked. Those employees who are hired as vacation replacements are not covered
by this provision.
WAITING PERIOD:
Accident - First Day
Sickness - Eighth Day
DURATION: Maximum of 26 weeks per period of disability.
BENEFITS: Effective June 25, 1997 $270.00 PER WEEK
Effective June 25, 1998 $280.00 PER WEEK
Effective June 25, 1999 $290.00 PER WEEK
Effective June 25,2000 $300.00 PER WEEK
Effective June 25,2001 $310.00 PER WEEK
COST: Premium is paid by Company
LIFE INSURANCE
BASIC PLAN-A.D.& D.
ELIGIBILITY: The first day of the month following the completion of 30 days
worked. Those employees who are hired as vacation replacements are not covered
by this provision.
BENEFITS: $20,000 A.D. & D.
Effective June 25, 1998, the benefit plan will be increased to $21,000.
Effective June 25,2000, the benefit plan will be increased to $22,000.
COST: Company pays full cost
OPTIONAL PLAN
Employees have the option of purchasing additional life insurance in the
amount of $14,000 at a cost of $6.00 per month.
If an employee retires due to disability the optional life will be carried
at no cost to him/her until he/she reaches age 65.
TOTAL & PERMANENT DISABILITY BENEFIT
This benefit is available to employees prior to age 60, who are not able to
continue their employment because of medical reasons. This benefit is available
by converting the Basic Life
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Insurance to payments of:
$18.00 for each $1,000 of insurance for 60 months
SUPPLEMENTAL PLAN - A.D.& D.
ELIGIBILITY: Same as under the BASIC PLAN noted above.
BENEFITS: Employees may elect coverage from $10,000 to $50,000 in multiples of
$10,000. If an injury results in death or dismemberment within one year of the
accident, the plan will pay a benefit up to the maximum insured.
Employees can elect to cover their family (spouse and children) or only
their children. A spouse must be under age 70 and cannot be an employee of Crown
Vantage. Children must be between the ages of 14 days and 23 years, fully
dependent on the employee for support and maintenance.
A spouse is insured for 40% of the principal sum, and children are each
insured for 10% of same. If there are no children, the spouse is insured for
50%.
COST: The employee's weekly contribution per $10,000 coverage is approximately
.7(cent) on self .8(cent) on children and self and .10(cent) on family and self.
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EXHIBIT D
PENSION
BENEFIT RATE: Employee Weekly Premium
-----------------------
06/25/97-- $25.25 $ 5.00
06/25/98-- $26.00 $ 6.13
06/25/99-- $27.00 $ 7.63
06/25/00--$27.75 $ 8.76
06/25/01-- $28.75 $10.26
The company and union will split the cost of the negotiated increases.
NORMAL RETIREMENT: Age -- 65
Credited years of service.
No maximum.
Age 62 to 64 with 30 years of credited service will receive full retirement
benefits.
EARLY RETIREMENT: Age - 55 to 64 with 10 years or more of credited service.
Actuarial reduction:
Age 62-65 .1% per month
Age 58-62 .2% per month
Age 55-58 .3% per month
DISABILITY RETIREMENT: No age requirement but 10 years or more of credit service
is required. Credited service is accrued to a maximum of thirty-six (36) months
after date last work. Employee must make contribution in accordance with
subsection 10.2 of Pension Plan 10.
NOTE: Return to work for less than one week after being on disability will
not constitute a break in continued disability status.
BENEFIT RATE: Same as above.
"If an individual is not disabled to the extent that he/she is eligible for
Social Security Benefits, he/she will receive an additional $60 per month until
he/she is eligible for Social Security Benefits."
VESTING: No age requirement.
A minimum of five (5) years of credited service required.
Benefit payable beginning any time after age 55 with ten (10) or more years
of credited service at time of termination.
Benefit payable beginning at age 65 with less than ten (10) years of
credited service at time of termination.
SOCIAL SECURITY MAKE-UP PROVISIONS:
Age -- between 55 and 58
Service - 30 years or more of credited service. Early retirement benefit
plus a supplemental benefit of up to $500.00 which combined will provide a total
benefit to a maximum of $850.00 per month up to age 62, at which time the
employee's Social Security benefit replaces the supplemental benefit.
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Age -- between 59 and 62
Service - 30 years or more of credited service. Early retirement benefit of
up to $500.00 which combined will provide a total benefit to a maximum of
$1,000.00 per month up to age 62, at which time the employee's Social Security
benefit replaces the supplemental benefit.
OPTIONAL FORMS OF BENEFITS:
1. Life Annuity - Payments stop upon retiree's death.
2. Five Year Certain - Payments are guaranteed for five years from the day of
retirement. If retiree's death occurs before five years, the balance of the
payments will be paid to retiree's beneficiary.
3. Ten Year Certain - Same as five year certain except the guarantee period is
for ten years.
4. 50% Joint & Survivor - This benefit is guaranteed for both retiree's
lifetime and retiree's spouse's lifetime. Retiree receives a reduced
monthly benefit and upon retiree's death, retiree's spouse receives
one-half of that amount for his/her lifetime. If retiree's spouse should
die before retiree does, the amount of the retiree's pension benefit
remains the same.
5. Widow's Benefit (Minimum of $275.00)
With a $275 minimum in effect, an employee's early retirement or normal
retirement benefit would not be reduced unless he/she desires his/her
surviving spouse to get more than a $275 per month benefit after his/her
death. If he/she wishes his/her survivor to be eligible for more than the
$275, the standard joint & survivor option table would be used based on
his/her early or normal retirement benefit and both of their ages.
The $275 guarantee will only be covered for a period of 10 years from
the employee's retirement, and only those employees who have 30 or more
years of service are eligible for this benefit.
Anyone taking a 5-or 10-year certain option would not be covered by
the $275 minimum because the survivor's benefit in these cases is much
greater.
The employee's spouse at the time of his/her retirement is the single
person eligible for a $275 10-year certain benefit.
DEATH BENEFIT: Normal Retirees, Early Retirees and Disability Retirees who do
not receive the Total & Permanent Disability Benefit provided for under Group
Life Insurance in Exhibit C, will be eligible for a death benefit equal to
$7,000.00 payable to their beneficiary.
39
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RATES OF PAY -- Effective June 25, 1997
Pay Code Description
Cascade Paper Machines
0101 Machine Leader $ 17.93
0102 Block 3-2 Jobs $ 16.51
0103 Block 3-1 Job $ 16.03
0104 Block 2-2 Jobs $ 14.89
0105 Block2-l Job $ 14.41
0106 Block l-2 Job $ 13.47
0107 Utility Man $ 12.99
0108 Trainee-#l PM $ 12.43
0203 Machine Tender-#2 PM $ 15.24
0204 Back Tender-#2 PM $ 14.37
0205 Third Hand-#2 PM $ 13.52
0206 Fourth Hand-#2 PM $ 12.64
0207 Utility Man-#2 PM $ 12.47
0208 Trainee-#2 PM $ 11.53
0303 Machine Tender-#3 PM $ 15.24
0304 Back Tender-#3 PM $ 14.37
0305 Third Hand-#3 PM $ 13.52
0306 Fourth Hand-#3 PM $ 12.64
0307 Utility Man-#3 PM $ 12.47
0308 Trainee-#3PM $ 11.53
0403 Machine Tender-#4 PM $ 15.24
0404 Back Tender-#4 PM $ 14.37
0405 ThirdHand-#4PM $ 13.52
0406 Fourth Hand-#4 PM $ 12.64
0407 Utility Man-#4 PM $ 12.47
0408 Trainee-#4PM $ 11.53
6100 Hrly Supervisor-#9 PM $ 16.72
6903 Machine Tender-#9 PM $ 15.46
6904 Back Tender-#9 PM $ 14.47
6905 Third Hand-#9 PM $ 13.52
6906 Fourth Hand-#9 PM $ 12.64
6907 PM Utility $ 12.47
6909 Cleaner-#9 PM $ 11.32
40
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0500 PPR Mach Super $ 17.47
0600 Hrly Supervisor-CascMG (Spare Crew) $ 13.52
0607 Spare Crew Helper $ 12.47
0608 HI Pressure Clean $ 12.47
Stock Prep
0700 Hrly Supervisor-StkPrp $ 15.61
0802 Colorist A $ 14.24
0803 Colorist B $ 13.88
0702 Panel Operator $ 13.77
0904 Furnisher No.9 $ 13.40
0905 #9 Helper $ 13.29
0805 Furnisher No.3 $ 13.24
0804 Furnisher No.l $ 13.16
0715 Dry Fiber Coordinator $ 13.15
0706 Utility Trucker $ 12.52
0708 Trainee-Stk Prep $ 11.48
0701 Leader - Chemical Crew $ 13.02
0703 Chemical Crew $ 13.01
0704 High Press Clean $ 12.84
0709 Chemical Crew Cleaner $ 12.25
Cascade Shipping
1100 Hrly Supervisor-Ship $ 15.72
1102 Dispatcher $ 14.34
1103 Warehouse Worker $ 14.34
1105 Inventory Control Ck $ 13.79
1104 Trucker Checker $ 13.18
1109 Elevator Operator/Trucker $ 13.18
1203 Wrapper Operator $ 13.18
1204 Wrapper Oper Asat $ 12.66
1205 Stenciler Utility $ 12.66
1106 Trk Driver#1 $ 12.34
1107 Trk Driver#2 $ 12.29
1108 Car Bracer $ 12.25
1206 Roll Handler $ 11.71
Cascade Converting
1300 Hrly Supervisor-Conv $ 13.52
1503 No.5 Rewinder0per $ 13.12
1603 No.4 Emboss Oper $ 12.75
1312 Sheeter Operator $ 12.75
1504 5 Rewd Helper $ 12.37
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1604 No.4 Emboss Helper $ 12.10
1314 Utility/Entry Sheeter $ 12.10
1701 Leader-CoreRm $ 12.35
1703 1st Helper - Core $ 12.00
1704 2nd Helper-Core $ 11.82
1303 Elec Trk Oper-Conv $ 11.78
Cascade Yard
1800 Hrly Supervisor-Maint $ 13.71
1801 Material Handldr $ 13.35
1802 Rigging Leader $ 12.99
1804 Rigger $ 12.69
1805 Equipment Operator $ 12.14
1806 Laborer A $ 11.78
1807 Laborer B $ 11.33
1808 Power Sweeper $ 11.47
1809 Cleaner $ 11.33
Cascade Tech
1902 Product Dev Tech-Casc $ 13.79
2001 Leader-Casc Tech $ 13.75
0806 Tub Size $ 13.23
2005 Tub Asst $ 13.02
2003 Tester #4 $ 13.01
2004 Tester #2 $ 12.96
2006 Sample Clerk $ 13.17
2007 Sample Person $ 12.96
Cascade Systems Group
2021 SR Systems Tech $ 15.43
2020 JR Systems Tech $ 14.43
Cascade Stores
2100 Hourly Superv $ 13.39
2101 Head Storesman $ 12.91
2102 Storekeeper 1st Cl $ 12.46
2103 Storekeeper 2nd Cl $ 11.63
2107 Apprentice $ 11.32
Maintenance
2200 Hrly Supervisor-Machin $ 16.05
2201 Leader-Machinist $ 15.75
2202 Machinist 1st Cl $ 15.43
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2203 Machinist 2nd Cl $ 14.43
2204 Machinist 3rd Cl $ 14.03
2205 Machinist Helper A $ 13.28
2206 Machinist Helper B $ 12.99
2207 Machinist Helper C $ 12.94
2210 Mach Cal Grinder C $ 13.95
2300 Hrly Superv-Millwright $ 16.05
2301 Leader-Millwright $ 15.75
2302 Millwright 1st Cl $ 15.43
2303 Millwright 2nd Cl $ 14.43
2304 Millwright 3rd CI $ 14.03
2305 Millwright Helper A $ 13.28
2306 Millwright Helper B $ 12.99
2307 Millwright Helper C $ 12.94
2309 Shift Millwright $ 15.64
2313 Shift Millwright Burg $ 15.43
2372 Millwright 1st Cl-Power $ 15.43
2373 Millwright 2nd Cl-Power $ 14.43
2374 Millwright 3rd Cl-Power $ 14.03
2375 Millwright Helper A-Power $ 13.05
2376 Millwright Helper B-Power $ 12.99
2377 Millwright Helper C-Power $ 12.94
2400 Hrly Superv-Piper $ 16.05
2401 Leader-Piper $ 15.75
2402 Piper 1st Cl $ 15.43
2403 Piper 2nd Cl $ 14.43
2404 Piper 3rd Cl $ 14.03
2405 Piper Helper A $ 13.28
2406 Piper Helper B $ 12.99
2407 Piper Helper C $ 12.94
2409 Shift Pipefitter $ 15.43
2501 Mason Special $ 16.54
2502 Mason 1st Cl $ 16.09
2505 Mason Appr B $ 15.26
2506 Mason Appr C $ 14.87
2507 Mason Appr D $ 14.28
2509 Mason Tender $ 13.05
2510 Mason-Laborer $ 12.55
2600 Hrly Superv-Painter $ 15.59
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2601 Leader-Painter $ 15.31
2602 Painter 1st Cl $ 15.03
2603 Painter 2nd Cl $ 14.00
2604 Painter 3rd Cl $ 13.69
2605 Painter Helper A $ 13.10
2801 Leader-Tinsmith $ 15.75
2802 Tinsmith 1st Cl $ 15.43
2803 Tinsmith 2nd Cl $ 14.43
2804 Tinsmith 3rd Cl $ 14.03
2805 Tinsmith Helper A $ 13.28
2806 Tinsmith Helper B $ 12.99
2807 Tinsmith Helper C $ 12.94
2900 Hrly Superv-Elect $ 16.05
2902 Electrician 1st Cl $ 15.43
2903 Electrician 2nd Cl $ 14.43
2904 Electrician 3rd Cl $ 14.03
2905 Electrician Helper A $ 13.28
2906 Electrician Helper B $ 12.94
2907 Electrician Helper C $ 12.94
2909 Shift Electric. 1st Cl $ 15.64
2910 Special-Electrician $ 15.68
2971 Leader-Electrician-Power $ 15.75
2972 Electrician 1st Cl-Power s 15.43
2973 Electrician 2nd Cl-Power $ 14.43
2974 Electrician 3rd Cl-Power $ 14.03
2975 Electrician Helper A-Power $ 13.28
2976 Electrician Helper B-Power $ 12.99
2977 Electrician Helper C-Power $ 12.94
3000 Working Leader-Welder $ 16.05
3001 Leader-Welder $ 15.75
3002 Welder 1st Cl $ 15.43
3003 Welder 2nd Cl $ 14.43
3004 Welder 3rd Cl $ 14.03
3005 Welder Helper A $ 13.28
3006 Welder Helper B $ 12.99
3007 Welder Helper C $ 12.94
3010 Special-Welder $ 15.68
3100 Hrly Supervisor-Oiler $ 14.80
3101 Leader-Oiler $ 14.50
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<PAGE>
3102 Oiler 1st Cl $ 14.10
3108 Oiler Learner $ 12.95
3118 Hourly Mech Planner A $ 15.43
3119 Hourly Mech Planner B $ 14.43
3120 Hourly Mech Planner C $ 14.03
3200 Hrly Supervisor-Inst $ 16.06
3201 Leader-Inst $ 15.75
3202 Inst Repair 1st Cl $ 15.43
3203 Inst Repair 2nd Cl $ 14.43
3204 Inst Repair 3rd Cl $ 14.03
3205 inst Repair Helper A $ 13.28
3206 Inst Repair Helper B $ 12.99
3207 Inst Repair Helper C $ 12.94
3209 Shift Inst 1st Cl $ 15.64
3210 Temp Foreman-Inst $ 15.89
3213 Shift Inst-Special $ 15.43
3214 Stock Inv Man-Inst $ 13.71
3218 Hourly Tech Planner A $ 15.43
3219 Hourly Tech Planner B $ 14.43
3220 Hourly Tech Planner C $ 14.03
3302 Pipe Coverer lst Cl $ 15.43
3303 Pipe Coverer 2nd Cl $ 14.43
3304 Pipe Coverer 3rd Cl $ 14.03
3305 Pipe Coverer Helper A $ 13.28
3306 Pipe Coverer Helper B $ 12.99
3307 Pipe Coverer Helper C $ 12.94
3400 Hrly Supervisor-Garage $ 16.05
3402 Garage Mech 1st Cl $ 15.43
3403 Garage Mech 2nd Cl $ 14.43
3404 Garage Mech 3rd Cl $ 14.03
3405 Garage Helper A $ 13.28
3406 Garage Helper B $ 12.99
3407 Garage Helper C $ 12.94
3600 Hourly Asbestos Supervisor $ 16.05
Wood Prep
4001 Hourly Superv Wood Prep $ 19.23
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4042 Chief Oper - Debark/Chip $ 14.53
4043 Asst Oper - Debark/Chip $ 13.94
4025 Chip Pile Operator A $ 12.95
4046 Utility - Debark/Chip $ 12.60
4050 Auxiliary Operator $ 11.85
4067 Trainee - Purch Chips $ 11.48
4077 Trainee - Bark Reclaim $ 11.48
4601 Leader-Roundwood Recv $ 13.93
4602 Valmet Operator 1st Cl $ 13.62
4064 Dump Truck Operator $ 13.26
Scaling
4100 Hrly Superv-Mill Scaling $ 13.08
4102 Weigh Master $ 12.89
4103 Weigh Master Apprentice $ 11.48
Burgess Lab
4200 Working Leader $ 14.44
4212 Senior Technician $ 14.13
4203 Shist Process Tester $ 13.49
4211 Burgess Lab Beginner $ 11.33
Burgess Stores
4300 Hourly Supervisor $ 13.39
4301 Head Storesman - Stores $ 12.91
4302 Storekeeper 1st Cl $ 12.46
4303 Storekeeper 2nd Cl $ 11.63
4307 Storekeeper Apprentice $ 11.32
Environmental
4402 WWTP Operator-Cascade $ 13.25
4403 Stack Tester-EnvirSvc $ 14.42
4404 Stack Tester-Trainee $ 13.02
4406 Pollution Tester-Trainee $ 11.48
4422 WWTP Operator-Burgess $ 13.98
4425 Pollution Tester-WWTP $ 12.58
4427 Pollut Stack Tester-WWTP $ 12.84
Burgess Yard
4520 Hrly Superv-Laborers $ 14.28
4523 Maintenance Helper $ 13.64
4522 Equipment Operator $ 13.64
4524 Cleaning Crew Leader $ 13.64
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4510 Truck Driver-Trk Grandftr $ 12.85
4509 Truck Driver-Trucking $ 12.55
4525 Cleaning Crew Labor $ 12.55
4526 Laborer A $ 12.14
4528 Cleaners $ 11.32
Bleach Plant
4540 Hourly Superv Uns BIch Plant $ 19.23
4542 Chief Oper-Uns BIch Plant $ 15.36
4544 Auxil Oper-Uns BIch Plant $ 14.79
4543 Assist Oper-Uns BIch Plnt $ 14.43
4545 Chem Unloader-Un BIch PIt $ 12.78
4563 Filter Plant Operator $ 11.72
4547 Trainee - Uns BIch Plant $ 11.48
#11 Dryer
4580 Hrly Superv-#1 I PIp Dryer $ 19.23
4581 Chief Oper-#l I PIp Dryer $ 15.22
4582 Back Tender-#1 I PIp Dryer $ 14.62
4583 1st Assist-#l 1 PIp Dryer $ 14.04
4584 2nd Assist-#1 I PIp Dryer $ 13.34
4585 3rd Assist-#l I Plp Dryer $ 12.17
Digesters
4620 Hourly Superv Unspc Digester $ 19.23
4621 Chief Oper-Unspc Digester $ 16.47
4622 Operator A-Unspc Digester $ 15.11
4633 Operator B-Unspc Washer $ 14.87
4644 Operator C-Unspc Screen $ 13.85
4645 Trainee - Unspc Screen $ 11.48
4668 Cleaner $ 11.32
Recovery
4680 Hrly Superv-#8+11 RecvBlr $ 19.23
4681 Recovery Chief $ 17.84
4682 Recovery Crew $ 15.68
4683 Demi Operator $ 15.68
4684 Operator C-#8+11 Recv Blr $ 13.85
4685 Trainee Recovery $ 11.48
Central Steam
4800 Hrly Superv-Cent Steam $ 16.35
4801 Chief Operator-Cent Steam $ 15.58
4802 1st Assistant Operator $ 14.47
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4803 2nd Assistant Operator $ 14.01
4805 Demineralizer Operator $ 13.62
4806 Trainee - Cent Steam $ 11.48
Cascade Steam
4820 Hrly Superv-Cascade Steam $ 15.02
4822 Power PIt Oper-Casc Steam $ 14.86
4823 Boiler/Turbine Operator $ 13.91
4824 Boiler Assist Operator $ 13.32
4826 Trainee - Casc Steam $ 11.48
Hydro Stations & Steam Turbines
7106 Operator - Sawmill $ 13.26
7107 Utility-Sawmill $ 11.83
7108 Racks-Sawmill $ 11.33
7126 Operator - Riverside $ 13.26
7127 Utility-Riverside $ 11.76
7128 Racks-Riverside $ 11.33
7146 Operator - Cross Power $ 12.96
7148 Racks-Cross Power $ 11.33
7166 Operator - Cascade $ 12.96
7168 Racks-Cascade $ 11.33
7186 Operator - Gorham $ 12.96
7206 Operator - Shelburne $ 12.96
7406 Operator-Power Trans/Swit $ 13.78
7408 Laborer-Power Trans/Swit $ 11.33
7502 Temp Power Dispatcher $ 14.98
7507 Utility - Power General $ 11.83
7608 Laborer $ 12.14
7711 Elect Insulcleaner HI $ 17.31
7801 Leader - Rivercrew $ 15.75
7802 Repairman 1st Cl-River $ 15.43
7803 Repairman 2nd Cl-River $ 14.43
7804 Repairman 3rd Cl-River $ 14.03
7805 Repairman Helper A-River $ 13.05
7806 Repairman Helper B-River $ 12.99
7807 Repairman Helper C-River $ 12.94
Landfill
9410 Mechanical Equipment Operator $ 14.12
9450 Mechanical Equipment Operator $ 14.12
4703 Mechanical Equipment Learner $ 12.98
8000 Pool $ 11.32
48
AGREEMENT
THIS AGREEMENT is made and entered into at Berlin, New Hampshire this fifteenth
day of July, 1997, by and between CROWN PAPER CO., d/b/a CROWN VANTAGE,
Berlin-Gorham, (hereinafter collectively called the Company), and OFFICE &
PROFESSIONAL EMPLOYEES INTERNATIONAL UNION, Local 6, (hereinafter referred to as
the Union).
GENERAL PURPOSE OF AGREEMENT
AND RECOGNITION
1.1 The general purpose of this Agreement is in the mutual interest of the
employer and employee to provide for the operations of the offices and plants of
the Company under methods which will further to the fullest extent possible the
safety, welfare and health of the employee, economy of operation, quality and
quantity of output, cleanliness of plants, and protection of property. It is
recognized by this Agreement to be the duty of the Company and the employee to
cooperate fully, individually and collectively for the advancement of said
condition.
1.2 Pursuant to certification by the National Labor Relations Board dated
January 16, 1957, in case No. l-RC-4725, the Company recognizes the Union as the
sole and exclusive representative for collective bargaining with respect to the
rates of pay, wages and salaries, hours and working conditions, of all office
and plant clerical employees of the Company's Gorham and Berlin, New Hampshire
operations in the following departments:
Traffic Stores
Accounting Office Services
Timekeeping Maintenance
Cascade Production Planning
*Internal Audit & Office Methods Budget & Financial
Order Billing General Accounting
Stenographic Research & Development - Tech.
Data Processing Woods Accounting
Manufacturing - General Burgess General Office
Cascade General Office Engineering Office
Power & Steam Office Production Controls Office
Quality & Process Control Office Towel & Tissue
Purchasing
(* old departments per the certification of the National Labor Relations Board)
but excluding the employees of all other departments, professional employees,
technical employees, registered nurses, guards, buyers in the Purchasing
Department, confidential employees which category includes the employees who
prepare the confidential executive payroll and the secretaries to the Group Vice
President, Operations Managers, Group Controller, Human Resources Director,
Materials Manager, Woodlands Manager, Technical Director, and Manager of all
Pulp and Paper Plants and Maintenance Departments, and all supervisory employees
as defined in the National Labor Relations Act, as amended.
1
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1.3 The Union and Management agree to provide equal opportunity for employment,
training and development, transfer, promotion and compensation without regard to
race, creed, color, national origin, sex, age, religion and status as a
qualified individual with a disability (as per ADA guidelines).
Whenever the male gender is used or indicated, the female gender is also
intended. Whenever the female gender is used or indicated, the male gender is
also intended.
1.4 Any additions to, deletions from or modifications of the terms of this
Agreement shall be mutually agreed upon by the parties.
UNION SECURITY
2.1 All present employees within the bargaining unit who are now members or
hereafter become members of the Union shall remain members in good standing in
Local No. 6 as a condition of employment. All new employees shall be required,
not later than thirty (30) calendar days after being hired, to join and maintain
membership in good standing as a condition of continued employment.
2.2 Upon individual written authorization by the employees which shall not be
irrevocable for more than a year or the termination date of this Agreement,
whichever occurs sooner, the Company agrees to deduct from the compensation of
each employee who is a Union member the union initiation fees and dues for the
current month in such amount as was last certified to the company in writing by
the Secretary/Treasurer of the Local Union. The Company further agrees that
effective November, 1985, this deduction shall be made on a weekly basis. The
Company also agrees to remit all Union initiation fees and dues deducted to the
Secretary/Treasurer of the Local Union.
MANAGEMENT
3.1 The Company shall manage the plant and offices, and direct the working
forces. The Management of the Plants and offices includes the right to plan,
direct and control all office and/or plant operations, or hire, promote, demote,
transfer, suspend or discharge employees for proper cause; to relieve employees
from duty because of lack of work or for other legitimate reasons; and to
introduce and use new or improved methods, office machinery or equipment or
processes. It is agreed that nothing contained herein shall be used for the
purpose of discrimination against employees because of membership in the Union,
and further agreed that all action pursuant to the provisions of this paragraph
shall be in conformity with the provisions of this contract. On behalf of any
aggrieved employee, the Union may challenge in the grievance procedure any
reasonable change of existing rules and practices not specified in this
Agreement.
REPRESENTATION
4.1 Representatives of the employees in the bargaining unit shall be by a Union
Committee, one of whom shall be the Chief Steward.
4.2 In addition to the Union Committee, the Union may designate a steward for
the employees in the bargaining unit at each of the following locations:
Steward No. 1 Administration and Pulp Mill
Steward No. 2 Paper Mill
2
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4.3 The foregoing paragraphs are not intended to bar any authorized
representative of the International Union from any meeting of Company and Union
representatives where his presence has been requested by either the Company or
the Union Committee, or where it is required by the grievance procedure.
4.4 Promptly after the date of this Agreement, the Union shall certify to the
Company a list of its officers, committeemen and stewards who are authorized to
function as representatives of the Union and shall keep said information up to
date.
4.5 Stewards and members of the Union Committee shall suffer no loss of pay by
reason of time spent by them during their regular shift in the adjustment of
grievances with Management provided, however, that no steward committeeman shall
leave his department for that purpose without reporting to his supervisor before
he leaves the time and place of the meeting and the representatives of
Management with whom the meeting is to be held, and receiving his permission to
leave. If a negotiating committee member's vacation is scheduled during the
negotiating period, he may reschedule it to a time mutually agreeable to himself
and his supervisor.
4.6 It is understood that Union officials or stewards shall, with permission
from supervision (which shall not be unreasonably denied), be permitted to make
necessary investigation of employee grievances or attend scheduled meetings with
Management representatives provided it does not interfere with the efficient
operation of the department. All Union representatives shall report back to
their supervisor as per Paragraph 4.5.
4.7 The Union and Management Committee will meet once every month or at such
other times as is required to discuss matters of mutual concern or of a general
nature arising out of the Agreement. A representative of the International Union
may be present at such meetings at the request of the Union.
4.8 The Union's international representative must receive permission from the
Company's Human Resources Department in order to enter the Company offices or
mills for the purpose of investigating grievances or working conditions. The
Company reserves the right to have a representative accompany the Union's
international representative.
GRIEVANCE PROCEDURE
5.1 A grievance within the meaning of the Agreement shall be any difference of
opinion, controversy or dispute arising between the parties hereto relating to
the wages, hours and working conditions established by this Agreement, or any
dispute between the parties involving the interpretation or application of any
provisions of this Agreement. The aggrieved employee must (before any grievance
is filed), approach his immediate supervisor to discuss the complaint. Any
settlement at this point shall not create a precedent or past practice. If the
parties cannot agree to settle the complaint, then the aggrieved employee may
file a grievance within five working days of the supervisor's answer and must
specify which article of the Labor Agreement has been violated. If the company
believes it has not violated the Labor Agreement, it must specify the reasons
why.
5.2 In the event of such grievances in any department, the following procedure
shall apply:
Step I - Between the immediate supervisor the aggrieved employee,
accompanied by a Union representative within five (5) days after receipt of the
written grievance.
Step II - If no settlement is arrived at in Step I, the Human Resources
Department shall promptly arrange for a meeting between the same persons
designated in Step I, a Human Resources representative, the member of Management
next highest in authority, the Union president and the International
Representative. Every effort will be made between the parties to settle any
grievance within ten (10) days after the time limit in Step I.
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Whenever a grievance is not processed within the time limits as specified
in each step of the grievance procedure, the grievance shall automatically
proceed to the next step in the grievance procedure, unless such time limits
have been extended, in writing, by mutual consent of both parties.
Step III - In the event the dispute shall not have been satisfactorily
settled by the above method, either the Company or the Union must notify the
other party in writing of its intention to appeal the matter to arbitration
within thirty (30) days following the date of the written answer in Step II,
before an impartial arbitrator to be appointed by the American arbitration
Association upon written application sent by either party, with a copy of said
written application sent simultaneously to the other party. The impartial
arbitrator shall interpret and apply this Agreement, but he shall not have power
or authority to add to or subtract from this Agreement. His decision shall be
final and binding on both parties, and all parties agree to abide by his award.
Each party shall bear the expenses of its own representative at the arbitration
proceeding; and all other expenses of the arbitration, including those of the
impartial arbitrator, shall be shared and paid equally by the parties. If either
the Company or the Union fails to notify the other party, in writing, of its
intention to appeal the matter to arbitration within thirty (30) days mentioned
above, the grievance shall be considered settled at Step II of the grievance
procedure. The arbitration provisions contained in this contract are hereby
specifically made subject to the provisions of Section 1, Chapter 415, of the
Revised Laws of New Hampshire, 1942, as amended by Section I, Chapter 191, of
the Laws of New Hampshire, 1945. (Chapter 542, RSA)
DISCHARGES AND DISCIPLINARY LAYOFFS
6.1 No employee shall be discharged, suspended or disciplined except for
sufficient and reasonable cause.
6.2 If upon joint investigation by the Union and the Company, or by decision of
an arbitrator appointed pursuant to the terms of this Agreement, it shall be
found that the employee was unjustly laid off or discharged, such employee shall
be reinstated to his former position without any loss of rank, seniority or
reduction in salary, and shall be compensated by the Company for lost time in
such amount as shall be agreed upon by the parties or determined by the
arbitrator.
NO STRIKES OR LOCKOUTS
7.1 The Company agrees that it will not lock out the employees, and Union agrees
that there shall be no strike, slowdown or work stoppage during the life of this
Agreement.
7.2 It is recognized that the Company has contracts with other labor
organizations and must engage in negotiations with such labor organizations.
Nothing in this Agreement is intended to require performance by either the
Company or the Union when by reason of strike or lockout conditions then
existing outside of and in the vicinity of the plants performance is practically
impossible or physically dangerous to the employees or the members of
Management. There shall be no liability in damages on the part of the Company or
the Union for non-performance under such circumstances.
SENIORITY - DEFINITION AND APPLICATION
8.1 All employees in the bargaining unit as of the date of this Agreement shall
retain the credits of unit-wide seniority with which they are credited as of
that date, regardless of department or status or bargaining unit where it was
accumulated. Commencing with the date of this Agreement, said employees, new
employees, and employees transferred into this bargaining unit from jobs not
within this bargaining unit shall accumulate unit-
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wide seniority only for continuous service in this bargaining unit unbroken by
any of the causes for loss of seniority set forth in Paragraph 12.3.
8.2 In the event of the promotion, demotion, layoff and recall of employees
within this bargaining unit, whenever qualifications are equal, unit-wide
seniority will be the determining factor. (Qualifications include education,
essential job skills, and experience as required to perform the duties as
specified on job postings.)
8.3 The Company shall supply the Union each week with a list of all new hires,
transfers, terminations and such other changes which may occur.
NEW EMPLOYEES IN THE UNIT
8.4 An employee newly hired into this bargaining unit may be terminated at any
time during the first ninety (90) calendar days of employment without recourse
to the grievance procedure. However, if circumstances warrant, the Company may
request the Union for an extension of not more than thirty (30) additional days.
Upon completion of thirty (30) days, such employee shall be entitled to all
rights and privileges under this agreement unless specified otherwise. Seniority
of such employee shall be retroactive to the original date of hire.
8.5 The Company shall not hire temporary employees. However, employees subject
to recall may be needed to fill temporary vacancies/positions.
STUDENTS
8.6 It shall be understood that summer students (May 15 to September 15) are
excluded from the provision of this collective agreement. Students working
outside the above dates (May 15 to September 15) will pay a working assessment
fee per week. Assessment fee to be $4.00 per week, increasing by $0.25/week on
the 15th of September in each of the contract years.
The Company will not utilize summer students while regular employees with recall
rights are willing and able to perform available work.
FILLING OF VACANCIES - PROMOTIONS
9.1 The Company will attempt to fill vacancies from within the Company before
hiring new employees.
9.2 Notice of job vacancies shall be posted on all office bulletin boards of the
Company as soon as the supervisor has determined the need to fill this vacancy.
This notice shall remain on the bulletin boards for ten (10) working days and
shall include job title, the salary range of the classification in which the job
falls, the length of the probationary period, and a brief description of the job
duties, including necessary qualifications or equivalent. In those cases in
which Management considers it appropriate, it may indicate on the notice of job
vacancy, a level (kind and duration) of work experience which will be accepted
in lieu of the education requirements.
Selected employees who have the experience, but do not meet the educational
requirements, will be expected to take and successfully complete the Company
suggested courses or they will be disqualified.
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9.3 The parties recognize that filling each job vacancy requires approximately
two (2) months to post the job and select the replacement. It is understood that
training may vary depending upon the position.
In case of multiple job vacancies resulting from an original job vacancy, the
two months' allowance will apply to each vacancy progressively and cumulatively.
The above allowances may be extended by agreement of the parties if extenuating
circumstances exist, such as disqualification during training, etc.
9.3a While the process of selection is being carried out the Company may fill
the job temporarily from any source. If the job is not filled in thirty (30)
days, the Company will inform the Union of the reason for the delay. It is the
intent of the Company to fill job openings at the earliest possible date. All
bidders will be notified by Human Resources Department of the results of the
bid, upon completion of the selection.
9.4 An employee promoted to a higher position shall receive the learner's rate
of the new classification. All employees so promoted shall receive a maximum
probationary period of six (6) months, at the discretion of the Company. In the
event an employee fails to satisfactorily complete his probationary period, he
shall be relieved by Management and returned to his former job, which shall be
considered to have been filled temporarily during his probationary period. This
procedure will be followed, unless the employee's former job has either been
eliminated or substantially changed so that it no longer exists as his former
job. In the event an employee requests to be returned to his former job during
the probationary period, he shall be returned to his former job which shall be
considered to have been filled temporarily during his probationary period,
provided that his former job has not been eliminated or substantially changed so
that it no longer exists as his former job.
In either case mentioned above, if an employee cannot return to his former job,
the employee shall proceed to the pool. (See Article 11.)
When management decides that the employee has satisfactorily completed the
probationary period, the employee shall have no more than the next two (2)
working days to either accept or reject the position. Present language and past
practice concerning disqualification will not be modified by this paragraph.
9.5 It is understood that any employee bidding into a job and starting work on
that job must remain on that job for a period of time not less than the posted
probationary period, unless the provision is waived by the Company. An employee
who accepts and then refuses a bid will not be eligible to bid again for the
next twelve months.
9.6 If an employee is retained on a job past the posted probationary period,
he/she shall be considered as qualified unless an extension of this period has
been agreed upon by the Company and the Union.
It is understood that, if Union representation is requested by the employee,
such representation will be made available during any meetings held to discuss
such extensions.
9.7 Whenever an employee is temporarily assigned for any reason to a higher
classification within the bargaining unit for periods of five (5) consecutive
work days, or longer, that employee will be paid an additional amount equal to
ten percent (10%) of his rate (weekly salary divided by 40 hours) or the
relieved employee's rate, whichever is the lesser, for all hours worked during
the temporary assignment. Whenever an employee is temporarily assigned as a
replacement for a supervisory or any other non-bargaining unit employee for
periods of five (5) consecutive work days or longer, that employee will be paid
an additional amount equal to ten percent (10%) of his regular rate (weekly
salary divided by 40 hours) for all hours worked during the temporary
assignment. Once an employee has met the conditions stated above and has been
compensated accordingly for
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replacing on a specific job, that employee is eligible to receive such
compensation for each full day worked thereafter, when replacing on that same
specific job.
It is intended that the higher rates of pay will be paid only when the employee
has performed fifty percent (50%) or more of the job of the person being
replaced.
Whenever an employee is temporarily assigned as a replacement for a supervisory
or any other non-bargaining unit employee for six (6) continuous months,
thereafter that employee will be paid either
(A) An additional amount equal to ten percent (10%) of his regular rate,
or
(B) The experienced rate one classification above the highest
classification supervised, whichever is higher, providing that the
employee is performing substantially all of the duties of the
supervisor or other non-bargaining unit employee.
PROMOTIONS TO POSITIONS OUTSIDE THE BARGAINING UNIT
10.1 An employee promoted to a job outside the bargaining unit shall, at his
option, have the right to return to his former job within a period of ninety
(90) work days after such promotion. In addition, the Company has the option to
return employee to his former job within a period of ninety (90) work days after
such promotion. Such employee shall retain and accumulate Company and bargaining
unit seniority during the ninety (90) work day period in a job outside the
bargaining unit.
If a person promoted to a non-Union position returns to his former position
within a period of ninety (90) work days after the promotion, the employees who
have been affected by the move shall return to their former positions.
This procedure will be followed unless the employee's former job has been
eliminated or substantially changed so that it no longer exists as his or her
former job, in which case, the employee shall proceed to the pool procedure.
If such employee is relieved of his non-Union position by Management after the
ninety (90) work day period, such employee shall be given preference before a
new employee is hired.
It is understood if such employee is rehired, he shall be given credit for past
Company service for purposes of pension, vacations and all other benefits based
on Company service.
10.2 Non-bargaining unit employees shall not perform any of the work customarily
performed by employees within the bargaining unit, except in minor cases, cases
of instruction, or emergency. Such occasions must be temporary in nature.
PROCEDURE FOR JOB PLACEMENT OF
PERMANENT EMPLOYEES DUE TO JOB ELIMINATION
11.1 The intent and spirit of this concept is directed toward satisfying the
following objectives:
o Improve safety/quality/efficiency/productivity
o Provide employment security
o Provide flexibility while maintaining fairness in work assignments and
seniority rights
o Improve job satisfaction through increased challenge and rewards
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o Improve and utilize skills of all employees
o Reduce friction among all employees
o Eliminate the need for temporary positions.
Eligibility: Any permanent employee whose position is eliminated.
Pay Rate: Employees will maintain their current rate of pay until they promote
to an equal or higher pay rate position. (See Red Girded.) Article 9.7 does not
apply.
Assignment: Pool employees scheduled will be coordinated by management for
vacation relief, temporary openings, training, special projects and other work
as required, within the employee's capabilities.
Pool employees must bid on open positions within the bargaining unit, if
qualified. In the event no one within the bargaining unit accepts an open
position, management has the right to assign a pool employee to the open
position.
Pool Limit: The intent of the Company is to manage any reduction in the work
force by attrition. However, in the event the pool exceeds an efficient
operating level those employees will be released and given the option of either
being laid off or exercising their rights to bump the least senior bargaining
unit employee.
Red Circled: When a permanent employee's position is eliminated, that employee
will enter the pool and be red circled. Red circled employees shall retain all
rights and privileges of this agreement. However, red circled employees will
receive 50% of wage increases. The employee will continue to maintain his/her
salary (plus wage increase) until the general wage scale has been reached. When
this level is reached the individual will then receive the normal negotiated
increases.
The Human Resources Department will provide counseling for employees with
respect to training, education and testing parameters for jobs in which they may
have an interest.
NOTICE OF LAYOFF/RECALL
12.1 An employee to be laid off shall receive two (2) weeks notice and shall be
placed on the recall list for a period of three years. Employees shall be
recalled in order of their seniority providing they are qualified for the
vacancy. Notice of recall to work after a layoff shall be by registered mail to
the last address of the employee appearing upon the Company's records.
12.2 An employee recalled after layoff within the same classification in which
he was employed at the time of being laid off, shall upon returning receive the
salary which he had at the time of layoff, plus any increases applied to the
classification during his layoff period.
CAUSES FOR LOSS OF SENIORITY
12.3 After the date of the Agreement, an employee shall lose all seniority
rights for the following reasons:
1. Quit,
2. Layoff for continuous period of more than three years,
3. Discharged for just cause,
4. Absence for five (5) days without reasonable cause, and without notifying
the Company within that time,
5. Failure to contact the Company inside of ten (10) days after being laid off
and after being notified to return to work, and to make arrangements for
his return to work.
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6. Absence due to illness or injury beyond 36 months for those employees with
three (3) or more years of service.
7. Absence due to illness or injury beyond the employee's length of service
for those employees with less than three (3) years of service.
12.4 It is understood that, in reference to the loss of seniority due to #6 and
#7 above, the Company and Union will meet before the date of termination to
review the case for any special circumstances which should be considered.
WORK SCHEDULE
13.1 Notwithstanding the fact that Saturday or Sunday work may be required by
the nature of the job, the normal day's work shall be eight (8) hours, Monday
through Friday.
If an employee is absent on funeral leave, jury duty or ward representative duty
during a normal work week, any hours worked on a sixth day will be paid at
straight time.
13.2 The normal hours of employment of the employees of this bargaining unit
shall be between the hours of:
7:30 a.m. and 4:30p.m. - Monday through Friday
As scheduled--Saturdays and Sundays
The company reserves the right, based on operating needs, to schedule straight
time and overtime hours and start and stop times.
13.3 There shall be a rest period of 15 minutes within each four (4) hours
worked.
OVERTIME
14.1 All employees will receive time and one-half for all hours worked after
accumulating forty (40) work hours. Overtime hours will not be deducted from
normal hours. No employee shall refuse a request for overtime without a
justifiable reason.
14.2 Double time shall be paid for all time worked on Sundays.
14.3 There shall be no duplication of overtime payments.
14.4 Overtime work shall be distributed as equally as practicable within the
various departmental groups and among employees regularly performing the type of
work requiring the overtime.
HOLIDAYS
15.1 The days upon which New Years Day, Presidents Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving,
Christmas Eve, and Christmas Day are observed shall be considered as paid
holidays.
15.2 Employees who are not scheduled to work on the holiday shall be credited
with eight (8) hours' straight-time pay, provided: (a) He has completed sixty
(60) calendar days of employment with the Company;
and
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(b) He had worked for the Company at some time within the sixty (60) calendar
days immediately prior to the holiday; and
(c) Must have worked his last schedule work day before the holiday is observed
and his first scheduled work day after the holiday is observed, if any such
days are scheduled for him, unless excused in writing by his immediate
supervisor and approved by the Director of Human Resources.
15.3 For the purpose of computing holiday pay, the holiday shall be measured by
the twenty-four (24) hour period beginning at 7:30 a.m. on the day observed as
the holiday, and continuing until 7:30 a.m. on the following day.
15.4 When an employee is scheduled to work on the day observed as the holiday
and does not work as scheduled, he shall not receive the credit for the holiday
provided for in Paragraph 15.2 unless excused in writing by her immediate
supervisor and approved by the Director of Human Resources. When an employee
works the holiday he shall be paid for the hours worked and will receive holiday
pay, except Christmas Day which shall be paid at double-time.
CALL-IN PAY
16.1 In the event a member of this bargaining unit without prior notice on the
previous day is called in to work outside his regular working schedule, he shall
be paid a minimum of four (4) hours at his straight time rate, or at time and
one-half for the actual hours worked, whichever is greater.
16.2 In the event a member of this bargaining unit is called at home during
hours when he is not scheduled to work, for the purpose of obtaining
information, he shall be paid one hour at his straight-time rate as bonus time.
This penalty will not be paid for information which the employee should have
made available during his scheduled work hours.
LEAVES OF ABSENCE
17.1 Leaves of absence, without loss of seniority and without pay, for
justifiable reasons, but not in excess of two (2) weeks, will be granted upon
written request stating the length of the leave and reason for it. Additional
two (2) week periods may be granted for extraordinary reasons. The request must
be addressed to the employee's immediate supervisor and a copy thereof given to
the Union's steward having jurisdiction. The request will not be effective
unless and until approved by the supervisor and the Director of Human Resources.
17.2 The policy of the Company with respect to maternity leave permits a leave
without loss of seniority during that period of disability as determined by
medical evidence. Failure to return to work after expiration of a maternity
leave of absence will result in the employee being considered a voluntary quit
and such job will be posted in accordance with Paragraph 9.2.
17.3 Union stewards and committeemen involved in the Adjustment of grievances
with Management will be excused from their jobs while they are so engaged, as
provided in Paragraph 4.5.
17.4 The Policy of the Company with respect to leave of absence for sickness or
injury in effect as of the date of this Agreement will be continued.
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BULLETIN BOARDS
18.1 Bulletin boards will be made available by the Company to the Union for the
posting of Union notices relating to meetings, dues, entertainment, health and
safety, and general Union activities. All notices shall be submitted to the
Director of Human Resources before being posted. Approval shall not be withheld
unreasonably by the Company.
RATES OF PAY
19.1 Wage rate changes shall be as follows:
Effective July 15, 1997, a 3% wage increase will be granted. Effective July 15,
1998, a $0.30 per hour increase, and based on the Free Cash Flow formula, an
additional 2% will be granted. Effective July 15, 1999, a 2% wage increase, and
based on the Free Cash How formula, an additional 2% will be granted. Effective
July 15, 2000, a $0.30 per hour increase, and based on the Free Cash Flow
formula, an additional 2% will be granted. Effective July 15, 2001, a 2.5% wage
increase, and based on the Free Cash Flow formula, an additional 2% will be
granted.
The formula is based on Free Cash Flow calculation as described in the Cash
Sharing Plan, Article 26. If the Free Cash Flow is between $8MM and $10MM, 50%
of the 2% raise will be awarded. If the Free Cash Flow is between $1OMM and
$12MM, 75% of the 2% raise will be awarded. If the Free Cash Flow is greater
than $12MM 100% of the 2% raise will be awarded.
19.2 For overtime computation, the hourly rate of each employee shall be his
weekly salary divided by forty (40).
19.3 The weekly rate range that shall be applicable for the term of this labor
agreement is listed in Exhibit C. Any new positions created by the Company a
rate will be assigned. Any dispute concerning any such newly established rate
range shall be subject to adjustment through the grievance procedure.
19.4 In the event of a classification resulting in a claimed inequity, the Union
and Company will meet to discuss the matter and, if an inequity exists, correct
it.
19.5 Nothing herein shall prohibit the Company from paying the experienced rate
in any position sooner than the established time on the wage schedule.
VACATIONS
20.1 The following vacation plan shall be in effect during the term of this
Agreement. Employees completing their second, seventh, twelfth, eighteenth, and
twenty-eighth year of service during the calendar year shall become eligible for
the additional week of vacation accruing in those years upon January 1st of the
year in which they attain such years of service. The additional week of vacation
may only be taken upon reaching the anniversary date
0 years but less than 2 years -no vacation 2 years but less than 7 years
-2 weeks of vacation with pay 7 years but less than l2 years -3 weeks of
vacation with pay
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12 years but less than 18 years -4 weeks of vacation with pay
18 years but less than 28 years -5 weeks of vacation with pay
28 years and over -6 weeks of vacation with pay
20.2 A week's vacation pay shall be the employee's regular weekly rate of pay as
of the time the vacation is taken.
20.3 The Company shall not be obligated to pay vacation pay to any person who
has rendered no service whatever to the Company during the twelve (12) months
preceding January 1st of the vacation year. However, employees who are disabled
as a result of an industrial accident or sickness shall be entitled to their
eligible vacation pay in the one (1) calendar year following their last day of
work.
To be eligible for vacation in any year, employees, except in the event of
sickness or disability, shall have worked not less than eleven-hundred (1,100)
hours in the previous calendar year.
20.4 In the event a holiday named in this Agreement falls during the employee's
vacation period, such employee shall receive the holiday pay.
20.5 Employees shall be entitled to select their weeks of vacation according to
their bargaining unit seniority and established Company policies.
The canvassing process will start no later than the second Sunday in January.
The first two (2) weeks are to be selected before 7:00 a.m., February 1 of each
year with the senior person selecting first. The process will then repeat with
the next senior person until all employees have selected their first-choice
week(s). The remaining week(s) of vacation will be selected before 7:00 a.m.,
February 16. The process will be as above with the senior person selecting
his/her remaining week(s) in accordance with Company policy and department
quotas. After February 16th, any unscheduled weeks of vacation that any employee
has remaining will be scheduled on a first come, first served basis, as allowed
by unfilled department quotas.
No person shall take more than twenty-four (24) hours time in selecting vacation
weeks when it is his/her turn. If a person wishes to change vacation week(s),
the employee cannot exercise seniority rights over those who have already
selected vacations. The Company will make reasonable efforts in the first round
of vacation scheduling to grant eligible employees two weeks vacation during
school out - school in period.
When an employee changes jobs, he/she will not automatically carry his/her
scheduled vacations with him/her. The vacation(s) may be transferred if they do
not violate established department quotas.
Employees who change jobs for permanent openings will be entitled to pick weeks
left open by vacated employees. Selecting open weeks will be in accordance with
the above.
20.6 By agreement between the employee and his supervisor, an employee may take
two weeks vacation in half days (minimum of 4 hours).
RETIREMENT PLAN
21.1 Eligible members of Local 6 shall be covered by Crown Vantage Pension Plan
No. 7 as set forth in the provisions therein, and as outlined in Exhibit B.
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All permanent employees shall, as a condition of employment, join the Pension
Plan on the first day of their employment.
21.1a Under terms of the Retirement Equity Act of 1984, a pre-retirement joint
and survivor option is provided to all vested employees, which allows you to
provide your spouse with financial security in the event your death occurs
before you retire and before you reach age 55.
This option will cause a reduction in your pension benefit if you so elect it
and survive to retirement age. This benefit may be waived only if the spouse
approves in writing the employee's refusal of this option and you are at least
35 years old. Such spousal approval of this waiver must either be witnessed by a
Company representative or be notarized.
For each year that this pre-retirement joint survivor option remains in effect,
the reduction to your accrued Pension benefit is as follows:
.13% for each year your option is in force, between the date you complete
10 years of service and the date you become eligible for early retirement.
After you become eligible for early retirement, the Company pays the cost
of the option for you.
FUNERAL LEAVE
22.1 In the event of the death of the spouse of an employee who has been in the
employ of the Company for one (1) year or more, the employee is to receive up to
five (5) days pay while off attending funeral services. It is understood that
the two (2) days after the funeral shall be included in this five-day period.
In the event of the death of a son or daughter of an employee who has been in
the employ of the Company for one (1) year or more, the employee is to receive
up to five (5) days pay while off attending funeral services.
In the event of the death of father, mother, sister, brother, mother-in-law,
father-in-law, paternal and maternal grandparents of an employee who has been in
the employ of the Company for one (1) year or more, the employee is to receive
up to three (3) days pay while off attending funeral services.
In the event of the death of a brother-in-law, sister-in-law, son-in-law,
daughter-in-law, or grandchild of an employee who has been in the employ of the
Company for one (1) year or more, the employee will be excused from work with
pay on the day of the funeral.
It is understood that these days must be regular straight time scheduled work
days for the employee. (In order to be eligible for this pay, the employee must
be on the active payroll at the time of the death).
JURY DUTY AND WARD REPRESENTATIVE PAY
23.1 In the event an employee is selected for jury duty or is required to serve
as an elected ward representative, the Company will pay the employee the
difference between his regular pay and the amount received by him while serving
on jury duty or as a ward representative.
23.2 Employees who have completed six calendar months of Company service and who
are required to attend National Guard Training Camp or Reserve Training shall be
reimbursed the difference between their military pay and forty (40) hours
straight-time pay at their regular rate by the Company for a maximum of two (2)
weeks duty per year.
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COMPANY/UNION COMMUNICATIONS
24.1 It is the intention of the Company to communicate with the Union in all
instances of technological and other changes involving job eliminations and
reclassifications. The Union will be given prior notice in order that the Union
Committee can discuss with the Company the reasons for such changes.
GOVERNMENT REGULATIONS
25.1 It is mutually agreed and understood that none of the provisions of this
Agreement shall be interpreted to conflict with any State or Federal law,
regulation, decree or directive now in operation or passed during the term of
this Agreement. It is the duty of both the Company and the Union to cooperate in
any changes required by such regulations. It is the express intention of the
parties hereto that all other provisions not declared in conflict shall remain
in full force and effect.
25.2 The Company and the Union shall cooperate fully on the safety, health and
sanitation of the employees in accordance with the Williams-Steiger Occupational
Safety and Health Act (O.S.H.A.) of 1970 and any amendments hereto. Conditions
that affect the safety and health of the employees shall be considered a
legitimate subject for mutual consideration.
CASH SHARING
Statement of Purpose
26. The purpose of the Cash Sharing Plan is to promote a sense of ownership and
enthusiasm that will focus the thinking and energy of employees at Berlin-Gorham
on the key result areas that have the greatest impact on mill performance. This
plan will provide an opportunity to recompensate employees for negotiated
reductions due to economic conditions and will also provide an additional means
for employees to increase their earnings by sharing in the mill's positive cash
flow.
Beliefs
This application of the Cash Sharing Plan enters into a new philosophy that
enables employees to increase their earnings, share in the positive cash flow of
the mill and be a partner in productivity and quality. The amount of cash
sharing pool will depend upon our combined efforts to continually improve
performance in key areas.
The amount of cash sharing dollars will depend on the generation of positive
cash flow for the mill. The plan can significantly enhance the ability of each
employee to increase annual earnings.
A Cash Sharing Plan has the potential to produce more income for all employees
than industry pattern settlements. Cash Sharing distribution begins when the
operation reaches positive free cash flow. Free cash flow is a financial
measurement used by Crown Vantage to determine viability of a facility.
Free Cash Flow is the cash that is generated or needed by the business. The
calculation is:
Operating profit
Less: Interest expense
and Corporate Indirects
-----------------------------
= Pre-tax Profit
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Less: Income Tax
----------------
= Net Income
Add: Depreciation
Add/Subtract Working Capital Changes
Add/Subtract Other Corporate Charges
Less: Dividends
and Capital Spending
--------------------------
= Free Cash Flow
Definitions
Assets = Property, plant equipment, accounts receivable, inventories
Working Capital = Receivables and inventories (finished goods, work-in-progress,
stores, raw materials-wood, chemicals, fuel oil)
Distribution of the cash sharing pool will be calculated on a quarterly basis
with 75% of quarterly pool distributed quarterly and 25% distributed at the end
of the Crown Vantage fiscal year based on annual free cash flow. Quarterly
payments will be made by the end of the calendar month following the last month
of the fiscal quarter.
All L-6 employees who are on the payroll as of the close of the quarter will be
eligible to participate in the quarterly distributions. All L-6 employees who
are on the payroll at the end of each fiscal year will participate in the annual
distribution.
The distribution is proportioned on W-2 earnings for the respective time
periods.
In the event of any question concerning the calculation of Free Cash Flow under
this Cash Sharing Plan, a mutually agreeable CPA firm may be retained to verify
that all calculations are in accordance with generally accepted accounting
principles, with expenses to be shared equally by the parties.
All payments will be paid by separate check and will not be factored into any
other contractual benefit plan for any purpose.
If management decides to shutdown any of the following production assets -
hardwood/softwood pulp lines, paper machines 1, 2, 3, 4, or 9, the Cash Flow
Plan will be reformulated with L-6.
Calculation
The Cash Sharing pool is determined by multiplying the Free Cash Flow of a
fiscal quarter by 20%. There will be no pool if cash flow is zero or negative.
This Cash Sharing Plan begins when cash sharing is available millwide.
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DURATION
27.1 This Agreement shall be in effect July 15, 1997, and from year to year
thereafter, unless terminated in accordance with the provisions of (D) and (E)
below.
(A) If either party shall desire to change any provisions of this Agreement, it
shall give written notice of such desire to the other party at least sixty
(60) days in advance of any anniversary date; provided however, that such
notice shall not be effective before May 15,2002.
(B) The giving of notice in subsection (A) above shall constitute an obligation
upon both parties to negotiate in good faith all questions at issue, with
the intent of reaching written agreement prior to the anniversary date.
(C) If the parties have not reached agreement on or before the anniversary
date, all the provisions of the agreement shall remain in effect unless
specifically terminated in accordance with the provisions below.
(D) At any time after the anniversary date, if no agreement on the question at
issue has been reached, either party may give written notice to the other
party of intent to terminate the agreement in (not less than) ten days. All
the provisions of the agreement shall remain in full force and effect until
the specified time has elapsed. During this period, attempts to reach an
agreement shall be continued.
(E) If the parties have failed to resolve their differences before the
specified time has elapsed, all obligations under this Agreement are
automatically canceled.
28.1 The Company agrees that it will not sell or otherwise transfer the business
to another employer unless the new employer agrees to review with OPEIU, Local 6
the existing collective bargaining agreement as part of the transfer agreement.
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EXHIBIT A
Alcohol/Drug Abuse Policy Statement
Crown Vantage believes that a working environment unaffected by alcohol and
drugs fosters safety, quality, service and productivity, and is in the best
interest of all employees. Every employee shares in the responsibility to
support a drug and alcohol-free environment.
The following policy and rules on alcohol and drug abuse are aimed toward
reaching this goal:
> Possession, use or offering of alcohol or drugs while on the job, in Crown
Vantage Mills, Plants, technical Centers, Laboratories and Offices
(including associated parking lots and entry roads) is prohibited.
Violation of this policy will constitute grounds for immediate termination
of employment.
"Drugs" are defined to include both "illegally-used controlled substances"
(illegal drugs or other controlled substances as defined under state or
federal law, including narcotic and non-narcotic drugs, and prescription
drugs used abusively) and "non-controlled" (over-the-counter) medicines if
they render one unfit for duty. Additionally, the abuse of any substance
for the purpose of achieving a drug-like effect will fall under the
prohibition against "drugs". "possession" includes the presence of drugs or
alcohol in the possession or control of the employee or in the employee's
desk, locker, toolbox, lunch box, automobile on Company property or other
personal area.
> An employee who reports to work or who is observed at work under the
influence of alcohol or drugs, or who is incapable of safely performing
his/her job, will be subject to severe disciplinary action which may
include immediate termination of employment. "Under the influence" includes
the presence of any alcohol or drug in the body, which may be verified by
laboratory tests, or impairment to any degree, which may be verified by
appropriate field test.
> An employee who, under a proper medical authority, is taking prescription
drugs or other medication which may affect his/her ability to work safely
is responsible for bringing this matter to his/her supervisor's attention
before beginning work. Whether or not an employee is taking a prescription
drug, non-prescription drug, or other medication an employee who reports to
work or who is observed at work and is incapable of safely performing
his/her job may, depending on the circumstances, be subject to severe
disciplinary action which may include immediate termination of employment.
> Crown Vantage will take reasonable steps to search for and detect use of,
possession of and impairment by alcohol and drugs. Because Crown Vantage is
committed to maintaining a drug and alcohol-free working environment, prior
to making a job offer, applicants for employment will be screened to avoid
hiring persons who use drugs or who abuse alcohol. In addition, Crown
Vantage may require any employee suspected of being under the influence of
alcohol or drugs to submit to a breath test, or urinalysis by
Company-designated physician or qualified test process. The type of testing
will be at the Company's discretion and expense. Refusal to submit to the
examination will be considered an admission of being under the influence of
alcohol or drugs.
> Crown Vantage will work actively to educate employees about the drug and
alcohol problem by working closely with employee groups and unions
representing its employees. Crown Vantage will strive to develop a
cooperative approach with all employees in dealing with the problem of
drugs and alcohol.
17
<PAGE>
> The Company offers various Employee Assistance Programs to help employees
and their families with alcohol and drug-related problems, as well as other
personal problems. All employees are encouraged to seek assistance for
alcohol and drug abuse or other personal problems. Participation in these
programs is voluntary, and assistance is provided on a confidential basis.
However, participation does not relieve employees of their responsibility
to comply with the Company's alcohol and drug rules and to meet work
performance requirements.
18
<PAGE>
EXHIBIT B
HEALTH CARE PLAN
Active Employees, Spouse and
Dependent Children*
THE HEALTH CARE PLAN IS A POINT OF SERVICE PLAN.
The Point of Service Health Care Plan has two components:
1) Primary Care Physician Referred Benefits,
2) Self-Referred Benefits
Increases in years 2-5 will be shared equally by the company and the union.
ELIGIBILITY: The first day of the month following the completion of 30 days
worked. Those employees who are hired as vacation replacements are not covered
by this provision.
* Unmarried children are covered from date of birth to the end of the month in
which they reach age 19 or are between ages of 19 and 25, unmarried and
full-time students.
PRESCRIPTION DRUG PLAN
THE PRESCRIPTION DRUG WILL BE COVERED UNDER THE POINT OF SERVICE HEALTH CARE
PLAN.
The employee cost of prescription drugs will be $10.00 for brand name, $5.00 for
generic and $1.00 for mail order.
ELIGIBILITY: All active employees, their spouse and unmarried, dependent
children up to the age of 19, or age 25 if a full-time student.
WAITING PERIOD: The first of the month following the completion of 30 days
worked.
TERMINATION OF COVERAGE: The last day of work upon termination of employment, or
the end of the month in which and employee retires.
COVERAGE: May be on employee only, employee and spouse, or full family.
BERLIN/GORHAM DENTAL CARE PROGRAM
BENEFIT PERCENTAGE: Co-insurance of 80/20.
COVERED DENTAL EXPENSE:
Basic Service - dental examinations, diagnoses and X-rays
Preventative Services - prophylaxis, fluoride treatment, sealants
Restorative Services - dental fillings, crowns and gold restoration
19
<PAGE>
Oral Surgery - extraction and all other oral surgery procedures
Periodontics - scaling, heavy cleanings
Dentures and Partials - a separate benefit that allows a maximum payment of
$175.00 for each denture, $200.00 for each partial (no change in the 70/30
co-insurance of July 1, 1984). Any denture replacement is not covered until
after a period of five (5) years.
MAXIMUM BENEFITS: (Plan year from July 1st to July 1st)
Effective July 15, 1997,
Employee and Spouse $300.00
All eligible children $300.00
Effective July 15, 1998, benefit will be increased to $350.00. Effective July
15, 1999, benefit will be increased to $400.00
EMPLOYEE CONTRIBUTION: None
ELIGIBILITY: All active employees, their spouse and unmarried, dependent
children up to the age of 19, or age 25 if a full time student.
WAITING PERIOD: The first of the month following the completion of 30 days
worked.
TERMINATION OF COVERAGE: The last day of work upon termination of employment, or
the end of the month in which and employee retires.
COVERAGE: May be on employee only, employee and spouse, or full family.
MENTAL HEALTH AND SUBSTANCE ABUSE
Please refer to Point of Service health Care Plan Benefit Summary.
RETIREE GROUP HOSPITAL
AND MEDICAL PLAN
All retirees after July 15, 1997 will be covered under a Point of Service Care
Plan.
The company retains the right to change and modify the retiree health care
plans.
Retiree and/or dependent spouse who is not eligible for Medicare. Dependent
children -- Same as active employees and dependents at time of retirement except
Major Medical is limited to $25,000.
COST: During the first year of retirement, the cost of medical insurance
premiums for the retired employee is paid by the Company and the retiree pays
25% of the balance for dependent coverage. After one year of retirement retiree
pays 25% of the full cost for himself and dependents. Note: This does not
include those retired employees or their spouses who are covered by Medicare and
Medi-Comp.
20
<PAGE>
Retiree and/or dependent spouse who is eligible for Medicare-Medi-Comp
Supplemental Plan.
COST: During first year of retirement, Company pays cost of retiree; and retiree
pays dependent cost. After one year of retirement, retiree pays full cost for
himself and spouse.
Effective July 15, 1986, employees (age 65) who retire before July 1, 1986
shall have their Medicare and Medi-Comp premium reduced by $3.50 per month.
Effective July 15, 1986, employees (age 65) who retire after July 1, 1986
shall have their Medicare and Medi-Comp premium reduced by $7.80 per month.
SICKNESS AND ACCIDENT BENEFITS
ELIGIBILITY: The first day of the month following the completion of 30 days
worked. Those employees who are hired as vacation replacements are not covered
by this provision.
WAITING PERIOD:
Accident - First Day
Sickness - Eighth Day
DURATION: Maximum of 26 weeks per period of disability.
BENEFITS: Effective July 15, 1997 $270.00 PER WEEK
Effective July 15, 1998 $280.00 PER WEEK
Effective July 15, 1999 $290.00 PER WEEK
Effective July 15, 2000 $300.00 PER WEEK
Effective July 15, 2001 $310.00 PER WEEK
LIFE INSURANCE
BASIC PLAN-A. D. & D.
ELIGIBILITY: The first day of the month following the completion of 30 days
worked. Those employees who are hired as vacation replacements are not covered
by this provision.
BENEFITS: $20,000 A. D. & D.
Effective July 15, 1998, the benefit plan will be increased to $21,000.
Effective July 15, 2000, the benefit plan will be increased to $22,000.
COST: Company pays full cost
OPTIONAL PLAN
Employees have the option of purchasing additional life insurance in the
amount of $11,000 at a cost of $5.50 per month.
If an employee retires due to disability the optional life will be carried
at no cost to him/her until he/she reaches age 65.
21
<PAGE>
TOTAL & PERMANENT DISABILITY BENEFIT
This benefit is available to employees prior to age 60, who are not able to
continue their employment because of medical reasons. This benefit is available
by converting the Basic Life Insurance to payments of:
$18.00 for each $1,000 of insurance for 60 months
SUPPLEMENTAL PLAN - A.D.& D.
ELIGIBILITY: Same as under the BASIC PLAN noted above.
BENEFITS: Employees may elect coverage from $10,000 to $50,000 in multiples of
$10,000. If an injury results in death or dismemberment within one year of the
accident, the plan will pay a benefit up to the maximum insured.
Employees can elect to cover their family (spouse and children) or only
their children. A spouse must be under age 70 and cannot be an employee of Crown
Vantage. Children must be between the ages of 14 days and 23 years, fully
dependent on the employee for support and maintenance.
A spouse is insured for 40% of the principal sum, and children are each
insured for 10% of same. If there are no children, the spouse is insured for
50%.
COST: The employee's weekly contribution per $10,000 coverage is approximately
.70 on self .80 on children and self, and .100 on family and self.
PENSION PLAN 7 SUMMARY
BENEFIT RATE: Employee Weekly Premium
-----------------------
06/25/97-- $25.25 $5.00
06/25/98-- $26.00 $6.13
06/25/99-- $27.00 $7.63
06/25/00-- $27.75 $8.76
06/25/01-- $28.75 $10.26
The company and union will split the cost of the negotiated increases.
NORMAL RETIREMENT: Age -65
Credited years of service.
No maximum.
Age 62 to 64 with 30 years of credited service will receive full
retirement benefits.
EARLY RETIREMENT: Age -55 to 64 with 15 years or more of credited service.
Actuarial reduction:
Age 62-65 .2% per month
Age 55-62 .5% per month
DISABILITY RETIREMENT: No age requirement but 15 years or more of credit service
is required. Credited service is accrued to a maximum of thirty-six (36) months
after date last work. Employee must make contribution in accordance with
subsection 3.3 of Pension Plan 7.
22
<PAGE>
NOTE: Return to work for less than one week after being on disability will
not constitute a break in continued disability status.
BENEFIT RATE: Same as above.
"If an individual is not disabled to the extent that he/she is eligible for
Social Security Benefits, he/she will receive an additional $60 per month until
he/she is eligible for Social Security Benefits."
VESTING: No age requirement.
A minimum of five (5) years of credited service required. Benefit payable
beginning any time after age 55 with ten (10) or more years of credited
service at time of term nation. Benefit payable beginning at age 65 with
less than ten (10) years of credited service at time of termination.
OPTIONAL FORMS OF BENEFITS:
1. Life Annuity - Payments stop upon retiree's death.
2. Five Year Certain - Payments are guaranteed for five years from the day of
retirement. If retiree's death occurs before five years, the balance of the
payments will be paid to retiree's beneficiary.
3. Ten Year Certain - Same as five year certain except the guarantee period is
for ten years.
4. 50% Joint & Survivor - This benefit is guaranteed for both retiree's
lifetime and retiree's spouse's lifetime. Retiree receives a reduced
monthly benefit and upon retiree's death, retiree's spouse receives
one-half of that amount for his/her lifetime. If retiree's spouse should
die before retiree does, the amount of the retiree's pension benefit
remains the same.
5. Widow's Benefit (Minimum of $275.00) With a $275 minimum in effect, an
employee's early retirement or normal retirement benefit would not be
reduced unless he/she desires his/her surviving spouse to get more than a
$275 per month benefit after his/her death. If he/she wishes his/her
survivor to be eligible for more than the $275, the standard joint &
survivor option table would be used based on his/her early or normal
retirement benefit and both of their ages.
The $275 guarantee will only be covered for a period of 10 years from
the employee's retirement, and only those employees who have 30 or more
years of service are eligible for this benefit.
Anyone taking a 5-or 10-year certain option would not be covered by
the $275 minimum because the survivor's benefit in these cases is much
greater.
The employee's spouse at the time of his/her retirement is the single
person eligible for a $275 10-year certain benefit
DEATH BENEFIT: Normal Retirees, Early Retirees and Disability Retirees who do
not receive the Total & Permanent Disability Benefit provided for under Group
Life Insurance Program will be eligible for a death benefit equal to $7,000.00
payable to their beneficiary.
SOCIAL SECURITY MAKE-UP PROVISION
Age: Between 55 and 62
Service: 30 years or more of credited service. Early retirement benefit
plus a supplemental benefit of up to $500.00 which combined will provide a total
benefit to a maximum of $900.00 per month up to age 62, at which time the
employee's Social Security benefit replaces the supplemental benefit.
23
<PAGE>
EXHIBIT C
RATES OF PAY
INCREASE
JOB CLASSIFICATION 1997 RATE INTERVAL
------------------ ---- ---- --------
Classification II $325.61 - $349.08 2 Years
Custodian
Classification III $352.46 - $380.02 2 Years
Switchboard/Receptionist
Mail Clerk
Lead Custodian
Classification IV $383.77 - $414.11 2 Years
Accounts Payable Clerk B
Accounts Payable Clerk C
Classification V $417.42 - $447.33 2 Years
Electrical Coordinator (Casc)
Classification VI $451.08 $481.00 3 Years
Maintenance Scheduler (Burg)
Financial Services Floater
Distribution Planner
Billing Clerk
Asst. Dist. Planner/Billing Clerk
Woods Cost Clerk
Electrical Coordinator (Burg)
Accounts Payable Clerk A
Classification VII $484.73 $520.28 3 Years
Inventory Clerk
Equipment & Parts Clerk
Raw Materials Clerk -
Statistical Accountant -
Time Data Leader
Classification VIII $524.75 $559.55 3 Years
Maintenance Scheduler (Casc)
Inventory Control Clerk
Paper Machine Trimmer
Traffic Services Rep
Senior Accounting Clerk (M.O.)
Classification IX $563.30 $599.78 3 Years
Cap. Fixed Property Accountant
Senior Accounting Clerk (Casc)
* At the conclusion of the "Increase Interval" as set forth in the last column,
the employee's rate will be adjusted from "Learner's Rate" to "Experienced
Rate."
24
<PAGE>
IN WITNESS WHEREOF, the Company and the Union have executed this Agreement the
day and year first written above
OFFICE AND PROFESSIONAL
EMPLOYEES INTERNATIONAL UNION CROWN VANTAGE
LOCAL NUMBER 6 (AFL-CIO) BERLIN/GORHAM GROUP
/s/ Richard Breton /s/ David A. Nelson
- --------------------------- -----------------------------
RICHARD BRETON DAVID A. NELSON
President Senior Vice President
/s/ Joseph Croteau /s/ William Lockard
- --------------------------- -----------------------------
JOSEPH CROTEAU WILLIAM LOCKARD
Vice President Director Human Resources
/s/ Charles McDermott /s/ Gregory F. Nolan
- --------------------------- -----------------------------
CHARLES McDERMOTT GREGORY F. NOLAN
International Representative Manager, Labor Relations
/s/ Normand Fortier
-----------------------------
NORMAND FORTIER
Financial Services and Systems Manager
26
AGREEMENT entered into by and between, AMERICAN TISSUE CORPORATION,
hereinafter known as THE OWNER; and AMERICAN TISSUE DE MEXICO, S.A.DE C.V.,
hereinafter known as THE CONTRACTOR, and which is formalized in accordance with
the following Antecedents and Clauses:
A N T E C E D E N T S :
I. THE CONTRACTOR is a Mexican mercantile corporation, organized in
accordance with the laws of the Republic of Mexico, with residence in the City
of Mexicali, Baja California, Mexico, and which has as corporate object, amongst
others, the manufacture of facial tissues and napkins.
II. THE OWNER is an American corporation, with residence in Hauppauge,
State of New York, United States of America, and which has as corporate object,
amongst others, the manufacture of facial tissues and napkins.
III. This Agreement proposes to establish the basis upon which THE OWNER
will remit the necessary raw materials to THE CONTRACTOR so that the later, in
its plants located in the City of Mexicali, Baja California, may assemble them
in accordance with the instructions received from THE OWNER.
Pursuant to the above, the parties agree as follows:
C L A U S E S :
FIRST: THE CONTRACTOR agrees to receive from THE OWNER, the raw materials
or components, which previously and in each case have been expressly determined
by the parties, and to process these in accordance with instructions received
from THE OWNER.
SECOND: It is expressly understood that the components and raw materials
that may be remitted by THE OWNER to THE CONTRACTOR, for processing, as well as
the final product, are and will remain, at all times, the sole property of THE
OWNER.
THIRD: The price for the services to be rendered by THE CONTRACTOR to THE
OWNER, will be, for the first year, a five per cent (5%) over the total
operating costs and expenses, excluding the losses in financial exchanges. The
parties may fix new prices by means of simple correspondence between them.
The parties may establish provisional unit prices for work orders and
periodically review invoice amounts, therefore, issuing, in each case, a debit
or credit note to adjust the price of services to the total referred to in the
above paragraph.
FOURTH: THE OWNER will pay THE CONTRACTOR the price of services in
accordance to the estipulations herein stated, or in its event, on each order,
or in the manner the parties may agree from time to time.
FIFTH: It is perfectly understood and established that due to the technical
process
<PAGE>
followed in the industrial operation and to the kind of materials used, losses
for up to ten per cent (10%) are estimated.
SIXTH: THE CONTRACTOR will not use any of the components and raw materials
provided by THE OWNER for any purpose whatsoever, except as directed by THE
OWNER either during or after the term of this Agreement. All raw materials which
THE CONTRACTOR may have in its possession on the termination of this agreement
shall be returned to THE OWNER. Furthermore, all information received from THE
OWNER regarding its sources of components and raw materials, manufacturing
processes and customers, will be held in strict confidence and will not be
disclosed to any person or corporation, either during or after the term of this
Agreement.
SEVENTH: THE OWNER and any of its agents, officials or employees may enter
THE CONTRACTOR's building at any time during the working hours and examine the
merchandise, working process, and the finished product, and through direct
supervision, insure that all the production and quality control rules, provided
by THE OWNER are diligently observed.
EIGHTH: The expenses to be incurred, for the better execution of the work
to be performed under the terms of this Agreement, such as in the training of
CONTRACTOR's personnel within or outside the plant and related travel expenses
thereof, shall be CONTRACTOR!s responsibility.
NINTH: The term of this Agreement is indefinite.
TENTH: All the work orders that THE OWNER accepts from THE CONTRACTOR will
be performed under the terms herein established, unless otherwise agreed.
IN WITNESS WHEREOF, this document is signed in duplicate:
In the City of Mexicali, Baja California, on December 12, 1994.
AMERICAN TISSUE DE MEXICO, S.A.
DE C.V.
/s/ Mehdi Gabayzadeh
-------------------------------
In Hauppauge, State of New York, United States of America, on December 12, 1994.
AMERICAN TISSUE CORPORATION
/s/ Mehdi Gabayzadeh
-------------------------------
- 2 -
AMERICAN TISSUE
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
9 months 9 months LTH
1994 1995 1996 1997 1998 6/30/98 6/30/99 3/31/99
---- ---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before taxes 4,901 (1,733) 13,182 6,873 (1,474) (1,589) 8,237 3,388
Add Fixed Charges
Interest expenses 4,945 6,822 9,175 12,272 14,672 9,641 10,890 15,346
Est interest on rent 757 816 547 670 688 509 516 695
------------------------------------------------------------------------------
10,603 6,005 22,904 19,815 13,886 8,561 19,643 19,429
------------------------------------------------------------------------------
5,702 7,738 9,722 12,942 15,360 10,150 11,406 16,616
Ratio 1.9 0.8 2.4 1.5 0.9 0.8 1.7 1.2
times times times times times times times times
---------------
Rent Expense 2,270 2,447 1,642 2,010 2,065 1,528 1,548 2,086
(Unrelated parties ONLY
Apply factor 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33
------------------------------------------------------------------------------
757 816 547 670 686 509 516 695
==============================================================================
</TABLE>
PRO FORMA COMBINED FOR A LTM PERIOD (12 months 3/31/99):
Normal Calculations:
Income before taxes (126,316)
Add Fixed Charges:
Interst expense 24,640
Est. interest on Rent 1,058
--------
EBT plus Fixed Charges (100,619)
--------
Total Fixed Charges 25,698
RATIO (3.9)
times
Adjusted Calculation:
Income before taxes 22,261
Add Fixed Charges
Interest expense 24,640
Est. interest on Rent 1,058
--------
47,958
--------
25,698
RATIO 1.9
times
EBT, AS ADJUSTED
Net income (57,268)
Tax benefit (69,048) (126,316)
NRV-adjustement 16,175
Asset impairment 143,632
Severance (2,273)
Property Tax (8,957)
--------
22,261
========
Estimated interest on Rent:
ATI 695
BG
1100 0.33 363
--------
1,058
========
EXHIBIT 21.1
SUBSIDIARIES OF AMERICAN TISSUE INC.
State or other
jurisdiction of
incorporation or
Name of Subsidiary organization
------------------ ----------------
100 Realty Management LLC New York
American Cellulose Mill Corp. New York
American Tissue Corporation New York
American Tissue Mills of Greenwich LLC New York
American Tissue Mills of Neenah LLC New York
American Tissue Mills of New Hampshire, Inc. New York
American Tissue Mills of New York, Inc. New York
American Tissue Mills of Oregon, Inc. New York
American Tissue Mills of Wisconsin, Inc. New York
American Tissue-New Hampshire Electric Inc. New Hampshire
Berlin Mills Railway, Inc. New Hampshire
Calexico Tissue Company LLC New York
Coram Realty LLC New York
Engineers Road LLC New York
Fabricaciones Metalicas Mexicanas, S.A. Mexico
Gilpin Realty Corp. New York
Grand LLC New York
Hydro of America LLC Delaware
Landfill of America LLC Delaware
Markwood LLC New York
Paper of America LLC Delaware
Pulp & Paper of America LLC New York
Pulp of America LLC Delaware
Railway of America LLC Delaware
Saratoga Realty LLC New York
Tagsons Papers, Inc. New York
Unique Financing LLC New York
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 19, 1999 (except for the matters discussed in Note 15, as to
which the date is August 10, 1999) and to all references to our Firm included in
or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Melville, New York
September 27, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated December 23, 1996 and to all references to our Firm included in or made a
part of this registration statement.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
September 24, 1999
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and in the
section titled "Selected Historical Financial Data" in the Registration
Statement Form S-4 and related the Prospectus of American Tissue Inc. for the
registration of $165,000,000 12 1/2% Series B Senior Subordinated Notes due 2006
and to the inclusion of our report of April 23, 1999, with respect to the
financial statements of the Crown Paper, Inc. Berlin-Gorham Pulp and Paper Mills
included in the Registration Statement.
ERNST & YOUNG LLP
San Francisco, CA
September 28, 1999
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
American Tissue Inc.
(Exact name of obligor as specified in its charter)
Delaware 22-3601876
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
135 Engineers Road
Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
---------------------------------------------------------------
12 1/2% Senior Secured Discount Notes due 2006
---------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 25th day of August, 1998.
THE CHASE MANHATTAN BANK
By /s/ Sheik Wiltshire
-----------------------------------------------
/s/ Sheik Wiltshire, Second Vice President
-----------------------------------------------
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1999, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin............................................. $15,364
Interest-bearing balances .................................... 3,811
Securities.......................................................
Held to maturity securities ..................................... 1,084
Available for sale securities ................................... 49,894
Federal funds sold and securities purchased under
agreements to resell ......................................... 27,683
Loans and lease financing receivables:
Loans and leases, net of unearned income $131,839
Less: Allowance for loan and lease losses 2,642
Less: Allocated transfer risk reserve 0
--------
Loans and leases, net of unearned income,
allowance, and reserve ....................................... 129,197
Trading Assets................................................... 45,483
Premises and fixed assets (including capitalized
leases) ......................................................... 3,124
Other real estate owned.......................................... 242
Investments in unconsolidated subsidiaries and
associated companies............................................. 171
Customers' liability to this bank on acceptances
outstanding...................................................... 974
Intangible assets................................................ 2,017
Other assets..................................................... 12,476
------
TOTAL ASSETS..................................................... $291,476
========
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices................................................ $102,273
Noninterest-bearing........................................$39,135
Interest-bearing .......................................... 63,138
------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's............................................. 74,586
Noninterest-bearing.........................................$4,221
Interest-bearing............................................70,365
Federal funds purchased and securities sold under agree-
ments to repurchase .................................................. 41,039
Demand notes issued to the U.S. Treasury.............................. 1,000
Trading liabilities................................................... 32,929
Other borrowed money (included mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ..................... 4,353
With a remaining maturity of more than one year
through three years ............................................ 14
With a remaining maturity of more than three years................. 92
Bank's liability on acceptance executed and outstanding .............. 974
Subordinated notes and debentures..................................... 5,427
Other liabilities..................................................... 9,684
TOTAL LIABILITIES..................................................... 272,371
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ........................ 0
Common stock ......................................................... 1,211
Surplus (exclude all surplus related to preferred stock).............. 11,016
Undivided profits and capital reserves................................ 7,040
Net unrealized holding gains (losses)
on available-for-sale securities...................................... (179)
Accumulated net gains (losses) on cash flow hedges.................... 0
Cumulative foreign currency translation adjustments................... 17
TOTAL EQUITY CAPITAL.................................................. 19,105
------
TOTAL LIABILITIES AND EQUITY CAPITAL.................................. $291,476
========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G.LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-END> Jun-30-1999
<CASH> 597
<SECURITIES> 0
<RECEIVABLES> 35,486
<ALLOWANCES> 408
<INVENTORY> 57,219
<CURRENT-ASSETS> 100,076
<PP&E> 200,953
<DEPRECIATION> 37,053
<TOTAL-ASSETS> 288,422
<CURRENT-LIABILITIES> 144,351
<BONDS> 0
0
0
<COMMON> 1,605
<OTHER-SE> 42,850
<TOTAL-LIABILITY-AND-EQUITY> 288,422
<SALES> 183,487
<TOTAL-REVENUES> 183,487
<CGS> 143,468
<TOTAL-COSTS> 143,468
<OTHER-EXPENSES> 21,966
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,890
<INCOME-PRETAX> 8,247
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,247
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,247
<EPS-BASIC> 41.235
<EPS-DILUTED> 41.235
</TABLE>
American Tissue Inc.
Offer to Exchange
12 1/2% Series B Senior Secured Notes due 2006
for any and all outstanding 12 1/2% Series A Senior Secured Notes due 2006
Pursuant to Its Prospectus Dated
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
___________________________________, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M, NEW YORK CITY
TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
Delivery To: The Chase Manhattan Bank, Exchange Agent
By Mail or Hand/Overnight Delivery: By Facsimile Transmission:
The Chase Manhattan Bank
Corporate Trust Securities Window (For Eligible Institutions Only)
Room 234, North Building
55 Water Street (212) 638-7380 or 7381
New York, New York 10041
Confirm by Telephone:
Carlos Esteves: (212) 638-0828
(212) 638-0454
The undersigned acknowledges receipt of the Prospectus dated __________
(the "Prospectus") of American Tissue Inc. (the "Company") which, together with
this Letter of Transmittal (the "Letter of Transmittal"), describes the
Company's offer (the "Exchange Offer") to exchange its 12 1/2% Series B Senior
Secured Notes due July 15, 2006, (the "Exchange Notes") for an equal principal
amount of the Company's outstanding 12 1/2% Series A Senior Secured Notes due
July 15, 2006 (the "Old Notes").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE AND FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, continue on a separate signed schedule
affixed hereto.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -----------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) Certificate Aggregate Principal Principal Amount
(Please fill in, if blank) Number(s)* Amount of Old Notes Tendered**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
TOTAL
-----------------------
- -----------------------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the
Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes
tendered hereby must be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
By crediting the Old Notes to the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with the Book Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") and by complying with
applicable ATOP procedures with respect to the Exchange Offer, including
transmitting to the Exchange Agent a computer generated message (an
"Agent's Message") in which the holder of the Old Notes acknowledges and
agrees to be bound by the terms of, and makes the representations and
warranties contained in, this Letter of Transmittal, the participant in the
Book-Entry Transfer Facility confirms on behalf of itself and the
beneficial owners of such Old Notes all provisions of this Letter of
Transmittal (including any representations and warranties) applicable to it
and such beneficial owner as fully as if it had completed the information
required herein and executed and transmitted this Letter of Transmittal to
the Exchange Agent.
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)____________________________________________
Window Ticket Number (if any) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery_________________________
Name of Institution which guaranteed delivery _____________________________
If Delivered by Book-Entry Transfer, Complete the
Following: ________________________________________________________________
Account No. _______________________________________________________________
Transaction Code No. ______________________________________________________
Name of Tendering Institution _____________________________________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR
YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING
ACTIVITIES AND WISH TO RECEIVE COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES
OF EXCHANGE NOTES RECEIVED FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH
OLD NOTES.
Name: _____________________________________________________________________
Address: __________________________________________________________________
Aggregate Principal Amount of Old Notes so held: $_________________________
- --------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE,
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WELL NOT CONSTITUTE A VALID DELIVERY.
- 2 -
<PAGE>
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its sole discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the holders of the Old Notes of any extension
by oral or written notice prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be completed by a holder of Old Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Old Notes, if available, is to be made by book-entry transfer
to the account maintained by the Exchange Agent at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
"The Exchange Offer-Procedures for Tendering Old Notes" section of the
Prospectus. Tenders by book-entry transfer may also be made by delivering an
Agent's Message in lieu of this Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to,
and received by, the Exchange Agent and forming a part of a Book-Entry
Confirmation (as defined below), which states that the Book-Entry Transfer
Facility has received an express acknowledgement from the tendering participant
in the Book-Entry Transfer Facility, which acknowledgment states that such
participant has received and agrees to be bound by, and makes each of the
representations and warranties contained in, this Letter of Transmittal and that
the Company may enforce this Letter of Transmittal against such participant.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility (a "Book-Entry Confirmation") and all other documents required
by this Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer-Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. DELIVERY OF DOCUMENTS
TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, certificates for such nonexchanged or nontendered Old Notes will
be returned (or, in the case of Old Notes tendered by book-entry transfer, such
Old Notes will be credited to an account maintained at the Book-Entry Transfer
Facility), without expense to the tendering holder, promptly following the
expiration Or termination of the Exchange Offer.
- 3 -
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of Old Notes. Subject to, and effective upon, the acceptance for exchange of the
Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers
to, or upon the order of, the Company, all right, title and interest in and to
such Old Notes as are being tendered hereby and hereby irrevocably constitutes
and appoints the Exchange Agent as attorney-in-fact of the undersigned (with
full knowledge that the Exchange Agent is also acting as agent of the Company in
connection with the Exchange Offer) with respect to such Old Notes, with full
power of substitution (such power of attorney being an irrevocable power coupled
with an interest), to:
(a) deliver such Old Notes in registered certificated form, or
transfer ownership of such Old Notes through book-entry transfer at the
Book-Entry Transfer Facility, to or upon the order of the Company, upon
receipt by the Exchange Agent, as the undersigned's agent, of the same
aggregate principal amount of Exchange Notes; and
(b) receive, for the account of the Company, all benefits and
otherwise exercise, for the account of the Company, all rights of
beneficial ownership of the Old Notes tendered hereby in accordance with
the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that, when the same are accepted for exchange, the Company
will acquire good, marketable and unencumbered tide thereto, free and clear of
all security interests, liens, restrictions, charges, encumbrances, conditional
sale agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any Exchange Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, that neither the holder of such Old Notes nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and that neither the
holder of such Old Notes nor any such other person is an "affiliate," as defined
in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"),
of the Company. The undersigned has read and agrees to all of the terms of the
Exchange Offer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder (x) that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (y) who purchased such Old Notes directly from the Company to resell
pursuant to Rule 144A under the Securities Act (or another exemption under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such
Exchange Notes. However, the Company does not intend to request the SEC to
consider, and the SEC has not considered, the Exchange Offer in the context of a
no-action letter, and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in other
circumstances.
The undersigned represents that: (i) it is not engaged in, and does not
intend to engage in, a distribution of Exchange Notes and has no arrangement or
understanding to participate in a distribution of Exchange Notes and (ii) it is
not an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act. If any holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, such holder (i) could not rely on the applicable interpretations of the
staff of the SEC and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
- 4 -
<PAGE>
If the undersigned is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Old Notes acquired as a result of market-making
or other trading activities (a "Participating Broker-Dealer"), it represents
that the Old Notes to be exchanged for the Exchange Notes were acquired by it as
a result of market-making or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes,
which contains a plan of distribution with respect to such resale transactions;
however, by so acknowledging and by delivering a prospectus, such Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of Exchange Notes received for Old Notes where such Old Notes
were acquired by a broker-dealer as a result of market-making or other trading
activities (other than Old Notes acquired directly from the Company).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Old Notes which were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities, for a period ending one year after the Expiration Date
or, if earlier, when such Exchange Notes have been disposed of by such
Participating Broker-Dealer. In that regard, each Participating Broker-Dealer,
who acquired Old Notes for its own account as a result of market-making or
trading activities, by tendering such Old Notes and executing this Letter of
Transmittal, agrees that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained in the Prospectus untrue in any material respect or which causes the
Prospectus to omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading, such Participating Broker-Dealer will suspend the
sale of Exchange Notes pursuant to the Prospectus until the Company has amended
or supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the Participating
Broker-Dealer or the Company has given notice that the sale of the Exchange
Notes may be resumed, as the case may be.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer-Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the Exchange Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer-Procedures for Tendering Old
Notes" in the Prospectus and in the instructions attached hereto will, upon the
Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered thereby.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED
THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.
- 5 -
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------ -------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for Old To be completed ONLY if certificates for
Notes not exchanged and/or Exchange Notes are to Old Notes not exchanged and/or Exchange
be issued in the name of and sent to someone other Notes are to be sent to someone other than
than the person or persons whose signature(s) the person or persons whose signature(s)
appear(s) below on this Letter of Transmittal, or if appear(s) below on this Letter of Transmittal,
Old Notes delivered by book-entry transfer which or such person or persons at an address other
are not accepted for exchange are to be returned by than shown above in the box entitled
credit to an account maintained at the Book-Entry "Description of Old Notes" on this Letter of
Transfer Facility other than the account indicated Transmittal.
above.
Mail: Exchange Notes and/or Old Notes to:
Issue: Exchange Notes and/or Old Notes to:
Name(s) _________________________________________
Name(s) _________________________________________ (Please Type or Print)
(Please Type or Print)
_________________________________________________
_________________________________________________ (Please Type or Print)
(Please Type or Print)
Address _________________________________________ Address _________________________________________
_________________________________________________ _________________________________________________
_________________________________________________ _________________________________________________
(Zip Code) (Zip Code)
Credit unexchanged Old Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility account
set forth below.
(Book-Entry Transfer Facility
Account Number, if applicable)
- ------------------------------------------------------------ -------------------------------------------------------
</TABLE>
- 6 -
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WI
THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER
REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO 5:00 P.M, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETION.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on reverse side)
_____________________________________ ___________________________________
_____________________________________ ___________________________________
_____________________________________ ___________________________________
Signature(s) of Owner Date
Area Code and Telephone Number _________________________
If a holder is tendering any Old Notes, this Letter of Transmittal must be
signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the Old Notes or on a securities position listing or by any
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
Name(s): _______________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by an Eligible Institution: ____________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name and Firm)
Dated: _______________________________________________________________________
- --------------------------------------------------------------------------------
- 7 -
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Notes
1. Delivery of this Letter of Transmittal and Notes; Guaranteed Delivery
Procedures.
This Letter of Transmittal is to be completed by holders of Old Notes
either if certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for delivery by book-entry transfer set forth in "The
Exchange Offer-Book-Entry Transfer" section of the Prospectus. Certificates for
all physically tendered Old Notes, or Book-Entry Confirmations, as the case may
be, as well as a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the address set
forth herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below. Old Notes
tendered hereby must be in denomination of a principal amount of $1,000 and any
integral multiple thereof.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer-Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three business days after the Expiration Date, the certificates for all
physically tendered Old Notes, or a Book-Entry Confirmation, and any other
documents required by this Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by this
Letter of Transmittal, are received by the Exchange Agent within three business
days after the Expiration Date.
The method of delivery of this Letter of Transmittal, the Old Notes and all
other required documents is at the election and risk of the tendering holders,
but the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. Instead of delivery by mail, it is recommended that holders
use an overnight or hand delivery service, properly insured. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date. Do not send this
Letter of Transmittal or any Old Notes to the Company.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender. See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to holders of Old Notes who tender by
book-entry transfer); Withdrawal Rights.
Tender of Old Notes will be accepted only in a principal amount of $1,000
and integral multiples thereof. If less than all of the Old Notes evidenced by a
submitted certificate are to be-tendered, the tendering holder(s) should fill in
the aggregate principal amount of Old Notes to be tendered in the boxes above
entitled "Description of Old Notes-Principal Amount Tendered". A reissued
certificate representing the balance of nontendered Old Notes will be sent to
such tendering holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, promptly after the Expiration Date. All of the Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to 5:00 p.m. New York City time on the Expiration Date.
In order for a withdrawal to be effective or prior to that time, a written or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth above on or prior to 5:00
p.m. New York City time on the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Old Notes to be withdrawn,
the aggregate principal amount of Old Notes to be. withdrawn and (if
certificates for such Old Notes have been tendered) the name of the registered
holder of the Old Notes as set forth on the certificate for the Old Notes, if
- 8 -
<PAGE>
different from that of the person who tendered such Old Notes. If certificates
for the Old Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such certificates for the Old
Notes, the tendering holder must submit the serial numbers shown on the
particular certificates for the Old Notes to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution, except
in the case of Old Notes tendered for the account of an Eligible Institution. If
Old Notes have been tendered pursuant to the procedures for book-entry transfer
set forth in "The Exchange Offer-Procedures for Tendering Old Notes" section of
the Prospectus, the notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawal
of Old Notes, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly
withdrawn will not be deemed to have been validly tendered for purposes of the
Exchange Offer, and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes
may be retendered at any subsequent time on or prior to the Expiration Date by
following the procedures described in the Prospectus under "The Exchange
Offer-Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any employees, agents, affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give such notification. Any Old Notes which have been
tendered but which are withdrawn will be returned to the holder thereof without
cost to such holder as promptly as practicable after withdrawal.
3. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder of the Old
Notes tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates or on a securities position listing
without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sip this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates or securities positions listings, it will be necessary to complete,
sign and submit as many separate copies of this Letter of Transmittal as there
are different registrations.
When this Letter of Transmittal is signed by the registered holder or
holders of the Old Notes specified herein and tendered hereby, no endorsements
of certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Old Notes are to be reissued, to a
person other than the registered holder, then endorsements of any certificates
transmitted hereby. or separate bond powers are required.
Signatures on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate bond powers, in
either case, signed exactly as the name or names of the registered holder or
holders appear(s) on the certificate(s), and the signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a. fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by an institution or firm
which is a member of the Medallion system (an "Eligible Institution").
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution, unless the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holders of such Old Notes) who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this letter or (ii) for the account of an Eligible Institution.
- 9 -
<PAGE>
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the applicable box, the
name and address to which Exchange Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing this
Letter of Transmittal. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. A holder of Old Notes tendering Old Notes by book-entry transfer may
request that Old Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such holder may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name or address of the person signing this Letter of Transmittal.
5. Tax Identification Number.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which, in the case of a tendering holder who is an individual, is his or
her social security number. If the Company is not provided with the current or
an adequate basis for an exemption, such tendering holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, delivery to
such tendering holder of Exchange Notes may be subject to backup withholding in
an amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it pursuant to the Exchange Offer. If, however, Exchange Notes
and/or substitute Old Notes not exchanged are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the transfer of Old Notes
to the Company pursuant to the Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter of
TransmittaL
7. Determination of Validity.
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Old Notes, which
<PAGE>
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for which, may,
- 10 -
<PAGE>
in the view of counsel to the Company, be unlawful. The Company also reserves
the absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer set forth in the Prospectus under the caption "The Exchange
Offer" or any conditions or irregularity in any tender of Old Notes of any
particular holder whether or not similar conditions or irregularities are waived
in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, any
employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor
any other person shall be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. No Conditional Tender
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of their
Old Notes for exchange.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
must contact the Exchange Agent at the address indicated above for further
instructions. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing mutilated, lost, stolen or
destroyed certificate(s) have been followed.
10. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent, at the address and telephone number indicated
above.
- 11 -
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYER'S NAME: AMERICAN TISSUE INC.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part I-PLEASE PROVIDE TIN: ___________________________________
Form W-9 YOUR TIN IN THE BOX AT Social Security Number or Employer
Department of the RIGHT AND CERTIFY BY Identification Number
Treasury SIGNING AND DATING
Internal Revenue Service BELOW.
Payor's Request for Taxpayer
Identification Number ("TIN")
-----------------------------------------------------------------------------------
Part 2-TIN Applied for:
-----------------------------------------------------------------------------------
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) the number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me).
(2) 1 am not subject to backup withholding either because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding, and (3) any other information
provided on this form is true and correct.
SIGNATURE ______________________ DATE ____________________________
-----------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have
been notified by the IRS that you are subject to backup withholding
because of underreporting of interest or dividends on your tax return
and you have not been notified by the IRS that you are no longer
subject to backup withholding.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
(31%) of all reportable payments made to me thereafter will be withheld until I
provide a number.
SIGNATURE _____________________ DATE _____________________
- --------------------------------------------------------------------------------
- 12 -
NOTICE OF GUARANTEED DELIVERY
for
Offer to Exchange
12 1/2% Series B Senior Secured Notes due 2006
for any and all outstanding 12 1/2% Series A Senior Secured Notes due 2006
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Exchange Offer of American Tissue Inc., a Delaware
corporation (the "Company"), made pursuant to the Prospectus, dated
______________ (the "Prospectus"), if certificates for the Company's outstanding
12 1/2% Series A Senior Secured Notes due July 15, 2006 (the "Old Notes") are
not immediately available or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach The Chase Manhattan Bank (the "Exchange Agent") on or prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. This Notice of
Guaranteed Delivery may be delivered or transmitted by telegram, telex,
facsimile transmission, mail or hand delivery to the Exchange Agent as set forth
below. See "The Exchange Offer-Procedures for Tendering Old Notes" in the
Prospectus. In addition, in order to utilize the guaranteed delivery procedure
to tender Old Notes pursuant to the Exchange Offer, a completed, signed and
dated Letter of Transmittal (or a manually signed facsimile thereof) must also
be received by the Exchange Agent on or prior to 5:00 p.m., New York City time,
on the Expiration Date. Capitalized terms used herein but not defined herein
have the respective meanings given to them in the Prospectus.
Delivery To: The Chase Manhattan Bank, Exchange Agent
By Mail or Hand/Overnight Delivery:
The Chase Manhattan Bank By Facsimile Transmission:
Corporate Trust Securities Window (For Eligible Institutions Only)
Room 234, North Building (212) 638-7380 or 7381
55 Water Street Confirm by Telephone:
New York, New York 10041 Carlos Esteves: (212) 638-0828
(212) 638-0454
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, Such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
related Letter of Transmittal, the undersigned hereby tenders to the Company the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures described in the Prospectus under the caption "The Exchange
Offer-Guaranteed Delivery Procedures."
Principal Amount of Old Notes Tendered:*
- -------------------------------------------------------------------------
Certificate Number
(if available) Principal Amount of Old Notes Tendered*
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof
Name(s) of Registered Holder(s): __ Area Code and Telephone No.: ______________
___________________________________ If Old Notes will be delivered by book-
___________________________________ entry transfer to DTC, check the box: |_|
DTC account No.: __________________________
<PAGE>
- --------------------------------------------------------------------------------
An authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned, and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X __________________________________ ____________________________________
X __________________________________ ____________________________________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number _____________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below.
Please print name(s) and address(es)
Name(s): ________________________________________________
Capacity: _______________________________________________
Address(es): ____________________________________________
_________________________________________________________
GUARANTEE
The undersigned, a firm or institution that is a member of the Medallion
System, hereby guarantees that the certificates representing the principal
amount of Old Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at The Depository Trust Company pursuant to the procedures set
forth in "The Exchange Offer-Guaranteed Delivery Procedures " section of the
Prospectus, together with one or more properly completed and duly executed
Letter(s) of Transmittal (or a manually signed facsimile thereof) with any
required signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than three business days after the Expiration Date of the
Exchange Offer.
________________________________________ ___________________________________
Name of Firm Authorized Signature
________________________________________ ___________________________________
- 2 -
<PAGE>
Address Title
________________________________________ Name: _________________________________
Zip Code (Please Type or Print)
Area Code and Tel. No.: ________________ Dated: ________________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND
BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
- 3 -
AMERICAN TISSUE INC.
OFFER TO EXCHANGE
12 1/2% Series B Senior Secured Notes due 2006
for any and all outstanding 12 1/2% Series A Senior Secured Notes due 2006
Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
American Tissue Inc. (the "Company"), a Delaware corporation, is offering,
upon and subject to the terms and conditions set forth in the Prospectus dated
_______ (the "Prospectus") and the enclosed Letter of Transmittal (the "Letter
of Transmittal"), to exchange (the "Exchange Offer") its 12 1/2% Series B Senior
Secured Notes due July 15, 2006 (the "Exchange Notes") for any and all of its
outstanding 12 1/2% Series B Senior Secured Notes due July 15, 2006 (the "Old
Notes" and, together with the Exchange Notes, the "Notes"). The Exchange Offer
is being made in order to satisfy certain obligations of the Company contained
in the Registration Rights Agreement dated July 9, 1999 between the Company and
the initial purchaser of the Old Notes referred to therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer,
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Chase Manhattan Bank, the
Exchange Agent for the Old Notes.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m, New York City time, on ________, unless extended by the Company (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing Old Notes should be delivered to
the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
<PAGE>
If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the Exchange
Offer or to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under "The Exchange Offer-Guaranteed Delivery Procedures."
The Company will not pay any fees or commissions to brokers, dealers or
other persons for soliciting exchanges of Old Notes pursuant to the Exchange
Offer. The Company will, however, upon request, reimburse brokers, dealers,
commercial banks and trust companies for reasonable and necessary costs and
expenses incurred by them in forwarding the Prospectus and the related documents
to the beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Old Notes not tendered for exchange will remain outstanding and will not
retain any rights under the Registration Rights Agreement dated July 9, 1999
between the Company and the initial purchaser of the Old Notes referred to
therein.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Chase
Manhattan Bank, the Exchange Agent, at its address and telephone number set
forth on the front of the Letter of Transmittal.
Very truly yours,
American Tissue Inc.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF THE COMPANY
WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
AMERICAN TISSUE INC.
OFFER TO EXCHANGE
12 1/2% Series B Senior Secured Notes due 2006
for any and all outstanding 12 1/2% Series A Senior Notes due 2006
To Our Clients:
Enclosed for your consideration is a Prospectus, dated ________ (the
"Prospectus"), and the associated Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of American Tissue
Inc. (the "Company"), a Delaware corporation, to exchange its 12 1/2% Series B
Senior Secured Notes due July 15, 2006 (the "Exchange Notes") for any and all of
its outstanding 12 1/2% Series A Senior Secured Notes due July 15, 2006
(collectively, the "Old Notes"), upon the terms and subject to the conditions
described in the Prospectus and the Letter of Transmittal. The Exchange Offer is
being made in order to satisfy certain obligations of the Company contained in
the Registration Rights Agreement dated July 9, 1999, between the Company and
the initial purchaser of the Old Notes referred to therein.
This material is being forwarded to you as the beneficial owner of Old
Notes carried by us in your account but not registered in your name. A tender of
such Old Notes may only be made by us as the holder of record and pursuant to
your instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on _________ , unless extended by the Company (the
"Expiration Date"). Any Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. Except as set forth in Instruction 6 to the Letter of Transmittal,
any transfer taxes incident to the exchange of Old Notes pursuant to the
Exchange Offer will be paid by the Company.
3. The Exchange Offer expires at 5:00 p.m., New York City time, on
_______ , unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form enclosed herein.
The Letter of Transmittal is furnished to you for information only and may not
be used by you to tender Old Notes.
Old Notes not tendered for exchange will remain outstanding and will not
retain any rights under the Registration Rights Agreement dated July 9, 1999
between the Company and the initial purchaser of the Old Notes referred to
therein.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by the Company
with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for any account as indicated below:
Aggregate Principal
Amount of Old Notes
-------------------
12 1/2% Series A Senior
Secured Notes due July
15, 2006.................................
-------------------------------------
|_| Please do not tender any Old Notes
held by you for my account.
-------------------------------------
Dated: __________________________, 1999
-------------------------------------
Signature(s)
-------------------------------------
-------------------------------------
-------------------------------------
Please print name(s) here
-------------------------------------
-------------------------------------
Address(es)
-------------------------------------
Area Code and Telephone Number
-------------------------------------
Tax Identification or
Social Security No.(s)
None of the Old Notes held by us for your account will be tendered unless we
receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
